India’s fresh ban on China-linked apps signals rising business risk

India has banned 232 apps and websites, many with links to China, in a fresh illustration of the risks of doing business for Chinese tech companies in a market with around 1.4 billion consumers.

Local news agency ANI News tweeted that India’s Ministry of Electronics and Information Technology (MeitY) had started to ban and block the batch of betting and loan lending apps “with Chinese links on an ‘urgent’ and ‘emergency’ basis”.

MeitY did not respond to a request for comment on Tuesday.

India has previously blocked almost 300 China-backed apps since a lethal border clash broke out between rival armed forces in May 2020, citing potential threats the apps posed to “national sovereignty and integrity”. This includes a ban on TikTok, the hit short video app owned by Beijing-based ByteDance, which had 200 million daily users in the country before it was shut down.

The latest ban covers a range of lending and betting platforms and comes as India tightens its regulation of the country’s digital lending sector. However, the move raises fresh questions about the long-term future of Chinese-linked apps in the South Asia nation.

The official Chinese newspaper China Daily reported that “business [for India] with China may not return to normal until trust is repaired”, citing New Delhi’s scrutiny of WeChat, the super app owned by Tencent Holdings, and other Chinese apps.

China, on the other hand, maintains tight control of its cyberspace via the Great Firewall, which has kept most foreign apps, including Google and Facebook, off limits for domestic users. Beijing has also cracked down heavily on online peer-to-peer lending schemes and loan apps in the name of financial stability.

In India, lending apps have mushroomed in recent times thanks to the country’s rising internet penetration level and low coverage of banking services. However, many online lenders charge relatively high interest rates and engage in aggressive bad loan recovery practices.

Suicide cases related to people heavily in debt to online lenders have been highlighted by local media and Cashless Consumer, an advocacy group focusing on the country’s fledging fintech sector, prompting authorities to take action.

“The 2020 suicide episodes related to loan apps, coupled with Covid-19 related economic stress at the individual level, was a major eye opener on [the practices of] instant loan apps, which are known for high rates and abusive recovery practices,” said Srikanth L, founder of Cashless Consumer, adding that complexity of the digital landscape and limitations on law enforcement have made mobile loan-related offences a persistent issue in the country.

The Indian central bank said in late 2021 that almost half of the online loan apps available across various app stores in the country were operating without authority.

With India’s digital lending market expected to grow from US$270 billion in 2022 to more than US$1 trillion by 2030, local and foreign lending apps have jumped on the bandwagon.

Local financial publication The Economic Times reported, citing a government source, that the new apps being banned also include non-Chinese or local Indian firms. The websites of several local services, including LazyPay which is backed by South Africa’s Naspers, have been taken down as part of the ban. South China Morning Post