The government is asking blocked lending apps to submit legal documents

Loan applications blocked due to Ministry of Electronics and Information Technology (MeitY) notices have been asked to submit necessary documents to prove that their practice was within legal limits, a senior government official said on Thursday.

Earlier this week, MeitY issued an order to block some 138 betting and 94 Chinese loan applications for alleged involvement in money laundering and “threatening the nation’s financial security”. The action started after a nodal officer of the Ministry of the Interior alerted the IT department. App ban orders were issued on an urgent and emergency basis.

The official said the concerned apps have approached the government.

“The order has been issued and they (platforms) have been given an opportunity. This is as per the normal procedure. Further action will be taken depending on the document submitted by them,” the official said on condition of anonymity.

According to the Information Technology (Intermediary Guidelines and Digital Media Code of Ethics) 2021 rules, intermediaries must hand over the information under their control or provide assistance to the authorized government body within seventy-two hours of receiving the order.

Despite ministry sources initially saying the crackdown was on illegal platforms with Chinese links, many Indian apps were blocked from being downloaded.

While many Internet Service Providers (ISPs) have blocked access to these sites, Google is reviewing the policy that restricts apps from the Play Store.

“Google has received a government request to restrict apps from the Play Store in India. It will evaluate the order and restrict applications as necessary after a thorough review,” a source said on Wednesday.

Mobile loan apps that offer instant personal loans ranging from a few hundred rupees to around 10,000 rupees are also known as “Chinese loan apps” because of their low-funding business model. Investigative agencies have found that many applications illegally offer loans with terms ranging from seven days to one month. Several borrowers have complained that the platforms blackmail them if they miss repayment deadlines.

The Reserve Bank of India, in its regulatory framework issued in August 2022, stipulated that the disbursement of loans can only be made by entities regulated by it or authorized by law. He also said digital loans should be credited directly to borrowers’ bank accounts, not through a third party. The central bank has proposed legislation to protect borrowers from activities such as predatory lending, harassment and extortion.