SUMMARY
MeitY has started blocking 138 betting and 94 loan apps, alleging that these are operated by Chinese entities
The government is blocking these apps under allegations of money laundering and threatening India’s financial security
The Finance Ministry and RBI have been cracking down on loan apps with alleged links to China since early 2022
The Ministry of Electronics and Information Technology (MeitY) has started blocking 138 betting and 94 loan apps with alleged links to China.
According to sources cited by Business Standard, MeitY is blocking these apps alleging money laundering and posing a threat to India’s financial security.
The publication noted that the government received an alert from a nodal officer of the Ministry of Home Affairs, which prompted the crackdown. Sources cited by BS noted that the blocking orders were issued on an ‘urgent and emergency’ basis. These apps were being operated from offshore entities, which were mainly Chinese.
A government official was cited as saying that the action also comes as part of the Centre’s crackdown on online betting activities. The government is looking to completely remove betting from India’s online space, given the crackdown on betting apps.
There is an ongoing debate on whether an online gaming app is a game of chance or a game of skill.
The government is specifically targeting apps which are offering wagers on games of chance, which has led to confusion and litigation in the industry. The matters are further complicated when it comes to taxation, which has only contributed to litigation.
In the Union Budget 2023-24, Union Finance Minister Nirmala Sitharaman said the government would clarify taxation norms for the online gaming industry, proposing to do away with the INR 10,000 TDS limit on online gaming apps as well.
Govt Crackdown On Fake Loan Apps
In the case of the 94 loan apps being blocked, investigative agencies have found that these mobile lending apps illegally offered short-term instant personal loans of up to INR 10,000 for between a week and a month.
The action on the loan apps comes as part of the government’s ongoing crackdown on illegal loan apps with alleged links to China. The Enforcement Directorate (ED) has been investigating crypto platforms, payment apps and loan apps to establish a modus operandi and track the flow of money.
The investigation revealed that these loan apps, operated by offshore entities, siphon money to the said entities via crypto exchanges. These fake apps also use payment apps to disburse loans to customers.
The customers are charged extortionate interest rates and processing fees. The customers are also regularly harassed for repayments. The harassment has led to suicides on multiple occasions.
To build a regulatory framework to safeguard customers, the Reserve Bank of India introduced digital lending guidelines in August 2022.
The RBI mandated that only the regulated entities can disburse loans and these entities are only allowed to disburse loans directly to the borrowers’ bank accounts, removing any escrow accounts lenders might use.
