Govt asks blocked lending apps to submit documents proving legality

The loan apps blocked over the notice from the Ministry of Electronics and Information Technology (MeitY) have been asked to submit necessary documents to prove that their practices were in legal boundaries, a senior government official said on Thursday.

MeitY earlier this week issued orders to block around 138 betting and 94 Chinese loan apps for alleged involvement in money laundering and posing "threat to the financial security of the nation." The action started after a nodal officer of the Ministry of Home Affairs alerted the IT ministry. The blocking orders for the apps were issued on an urgent and emergency basis.

The official said the concerned apps have reached out to the government.

"The order has been issued and they (platforms) have been given an opportunity. This is as per the standard procedure. The further action will be taken depending on the document they submit," the official told reporters on the condition of anonymity.

As per Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, the intermediaries must provide information under its control or assistance to authorised government agency within seventy two hours of receiving an order.

Even as the ministry sources first said the crackdown was on illegal platforms with Chinese links, several Indian apps were blocked for downloading.

While many internet service providers (ISPs) have blocked access to these websites, Google is reviewing a directive to restrict apps on its Play Store.

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

The mobile lending apps, which offer instant personal loans from a few hundred rupees to about Rs 10,000, are also known as “Chinese loan apps” due to their business model of small financing. Investigative agencies have found that many of the apps illegally offer loans for terms ranging from seven days to a month. Several borrowers have complained about the platforms blackmailing them if they miss the due dates of repayment.

The Reserve Bank of India in its regulatory framework released in August, 2022 mandated that the loan disbursal should only be carried out by entities regulated by it or those permitted under the law. It also said the digital loans must be credited directly to the bank accounts of borrowers and not through any third party. The central bank had recommended a law to safeguard borrowers from activities like predatory lending, harassment, and blackmailing.