India Raids Fintech Firms Allegedly Hosting Chinese Loan Sharks

Delhi’s Finance Minister Nirmala Sitharaman told parliament that the government was taking action against what she coined as dubious online loan companies last month, many of which she claimed to have originated from “one particular country”. She also vowed action against those who assisted the instantly-approved loan firms.

India’s apex financial intelligence agency, the Enforcement Directorate (ED), has seized more than $2 million from bank accounts belonging to the country’s biggest financial technological firms. The fintech firms are accused of illegally hosting Chinese accounts involved in “extorting” Indian borrowers, as per an official statement on Monday.

Those targeted include the Bengaluru-based offices of Razorpay Pvt Ltd, Cashfree Payments and Paytm Payment Services Ltd under the Prevention of Money Laundering Act. The raids reportedly began on September 3 and are ongoing.

PayTM and Cashfree Payments have announced that they are cooperating with authorities, while the former also clarified that the funds seized belong to its payment gateways and not to any of the group’s entities.

For its part, the ED said in its September 3 statement that the raids are part of an ongoing crackdown on instant loan apps, many of which it claimed are controlled by Chinese nationals and companies.

The ED accused Indian fintech firms of facilitating “illegal business” through their respective payment gateways. The investigative agency also alleged that the entities used “forged documents” of Indians to create fronts for their operations which are controlled from overseas.

Around 18 police complaints have been lodged by Indian borrowers of late, who claimed that they have been “harassed” by representatives of the loan sharks after they borrowed money.

The raids take place amid growing concern in India over the increasing number of instant loan apps that have popped up since the onset of the COVID pandemic.

India’s opposition Congress Party claimed last week that 52 people committed suicide over the last two years after being harassed by instant loan company reps due to their inability to pay back the borrowed amount.

The party further criticized the government for not regulating the digital loan apps, citing reports from last year that claimed that more than 1,100 such apps were operational in the country.