Fintech Firms With China Links May Get Added to the List of Banned Entities

• The government has now turned its lens on several fintech apps with Chinese links.
• These app-based lenders are likely to get added to the list of banned entities.
• Sources said that the kind of data one provides (which includes income tax, Aadhaar card) to fintech firms is riskier than what one would share on social media networks.

After banning as many as 224 mobile applications over China links and security issues, the government has now turned its lens on several fintech apps with Chinese links, two people directly aware of the development said.

The moves are part of India’s plan to decouple the economy from China after border clashes in June that killed 20 Indian soldiers and an undisclosed number of Chinese troops.

Several app-based lenders are in the process of being added to the list of banned entities being compiled by the Union government, which has already banned a host of Chinese apps, including TikTok and PUBG Mobile.

"The potential implications of a data compromise from fintechs such as lending apps are quite grave since it involves sharing sensitive financial data of the user to the lender," said one people cited above, requesting anonymity."

"The kind of data one provides to fintech firms is riskier than what one would share on social media networks. Data on income tax, Aadhaar card, and other details are taken by these app-based lenders," the person added.

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The government is reportedly concerned with the fact that several fintech companies have links to Chinese companies, and have Chinese nationals as members of their board of directors.

For instance, a Thane-based company, which operates a lending app, has a Chinese director. Similarly, another Bengaluru-based company, which runs a lending app, has two Chinese directors, according to documents reviewed by Mint.

“The central bank does not regulate such entities because there are no public deposits involved. RBI can, however, alert the central government and the respective state governments if it finds something suspicious," said another person aware of the development.

Of late, the RBI has indeed been looking at the digital lending closely. In June this year, the central bank warned banks and non-banking financial companies working with digital lending platforms over non-transparency.

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Manu Zacharia, a cybersecurity researcher, said, "China has a national campaign to gain access to data of citizens across the world, and I won’t be surprised if some companies have links to the government there."The

This move by the Centre is a reaction to the fear that China, through its state-owned companies and investment arms, might try and take advantage of the ongoing global economic meltdown by making opportunistic purchases in strategic interests in various countries. The key trigger was the fact that the People’s Bank of China had increased its shareholding in HDFC Bank just the previous month.

India is trying to prevent Chinese firms from accessing data not only to protect citizen’s privacy but also to address potential security risks.

According to a report by Research and Markets, while the adoption of fintech worldwide grew at 64% in 2019, it grew in India and China by 87%. India also reportedly has the second-highest number of fintech startups in the world, after the US. The industry is expected to grow by 12% during 2020-2025.

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