Digital lending apps submit papers to show regulated play

They are also expected to submit certificates showing that they are regulated by the Reserve Bank of India (RBI), the sources said.

This comes after a meeting between government officials and fintech founders on Tuesday during which the latter had sought clarity on why regulated online lending apps were being banned.

Fintech companies likely to be affected by the order also met officials of the Ministry of Electronics and IT (MeitY) on Wednesday to discuss the way forward, a person aware of the consultations told ET.

During the discussion, some of these fintech firms were questioned about their investors and capital structure, and were also asked to submit supplementary documents.

“Some of the companies that met yesterday have submitted their shareholding documents. The ministry had asked some of these companies whether they were regulated by the RBI or not. As proof of that, regulatory certificates are being sought. Once those documents come in, MeitY will consult with the RBI on further steps,” a government official said on condition of anonymity.

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ET reported on February 8 that MeitY, the Ministry of Home Affairs (MHA) and the RBI are expected to hold discussions over the next few days to chart out the next steps on the app ban.Google, which operates its Play Store for Android apps, has also received the ban order and is in consultation with MeitY on the final list, ET reported citing sources.

Another person aware of the matter said that MeitY had sought documents to verify details such as the board composition of these lending platforms and the ultimate beneficiaries of the companies operating these apps.

“It seems that through discussions and various questions, MeitY is trying to find out whether any of the apps have Chinese partners or investors. The ministry is basically trying to cull out the good ones from the bad actors,” said a third person who was aware of the discussions that took place on Wednesday.

Uncertainty continues
As uncertainty continues on the final list of digital lending apps likely to be banned, senior executives of fintech companies have been taking stock of the situation across several meetings held by industry associations.

“The meetings are largely to understand the way forward. Since there is so much confusion, no official stance has been crystallised upon yet (by the industry bodies),” said one of the sources quoted earlier.

During a press conference on Wednesday after its monetary policy announcement, RBI governor Shaktikanta Das said the central bank had asked non-banking financial companies (NBFCs) to submit a list of apps being operated by them. This was subsequently passed on to the government.

“Based on the list, the government has made its move,” he said.

The RBI’s submission of a whitelist to the government follows a September 2022 high-level meeting chaired by finance minister Nirmala Sitharaman, which was attended by secretaries of finance, economic affairs, revenue, financial services, electronics and information technology, in addition to an RBI deputy governor and executive director.

At the meeting it was decided that RBI will prepare a whitelist of legal digital lending apps, and that MeitY would ensure that only the whitelisted apps are hosted on app stores.

Further, it was also decided that all ministries and agencies will “take all possible actions to prevent operations of such illegal loan apps”.

ET reported earlier this week, citing a government source, that the ban was on account of three broad categorisations – first, the list of apps include those that may have ultimate or partial ownership with Chinese entities; second, lending apps which are not regulated by the RBI and which may be storing data in Chinese servers, and lastly, apps being run by companies against which customer complaints of recovery harassment have been made.

On Monday, ET was the first to report that the government order banning 94 lending apps on Sunday also included apps of Indian firms.

Aptoide issue
MeitY’s diktat also includes apps listed on alternative app stores such as Aptoide which are used to sideload them on Android smartphones.

Most of these fintech firms have shrugged off their associations with these third-party app stores.

One of the apps featured on MeitY’s ban list – mPokket – said that the domain name mentioned in the document was a “clear instance of impersonation and has no affiliation” with the company whatsoever.

“Aptoide is a third-party app store with which we have no official or unofficial partnership. We suspect that it may be a proxy app on Aptoide and are looking into it further. Blocking of such apps protects both the consumer and lenders,” the company said in a statement on Wednesday.