The Enforcement Directorate and CIDs have launched probe against more than two dozen China-backed loan apps and directed Paytm and Razorpay to stop processing their transactions and payments.
Mumbai: The Enforcement Directorate (ED) and Criminal Investigation Departments (CID) of various state police forces are set to launch probes against more than two dozen China-backed fintech lenders, such as SnapIt Loan, Bubble loan, Go Cash and Flip Cash, having directed payment gateways to stop processing their transactions and payments, multiple people aware of the developments told ET.
The ED and CID units have written to payment gateways, including Razorpay that clears a bulk of these transactions, to stop their dealings with such companies. A similar communication has also gone to Paytm, one of the sources cited above said.
“ED and several state CIDs have issued notices to payment gateways to cancel the accounts of several Chinese-backed fintech entities. These companies are also being questioned about the reasons behind opening accounts for such dubious firms,” an official in the know said. “There is a big flaw here. Payment gateways, in a hurry to generate more cash flows, went and opened accounts for these Chinese entities. They have to do the know-your-customer (KYC) checks to figure out the money trail.”
Paytm declined to comment, while Razorpay said it banned several of these apps in the last few months.
“As a financial services business, we proactively block and report any suspicious merchants to the law authorities and help them with KYC and other details to assist law enforcement,” a spokesperson for Razorpay said in a mailed response. “There has been no action or investigation against Razorpay in this regard. Razorpay has already banned 300-400 apps in the last three months.”
According to a source aware of the matter, about 95% of the money lending apps use Bengaluru-based fintech Razorpay as their payment gateway, which has invited the scrutiny of the ED and state CID units.
“They received a list of Chinese applications based on complaints received by state police departments across the country. There is also an investigation by ED to probe money laundering charges against these apps. The fact that over 95% of these transactions were through a single gateway alerted the authorities,” said an official aware of the matter.
The authorities are ensuring whether due diligence, such as merchant KYC, was followed while onboarding these apps by Razorpay. The company has also received a list of dubious apps to be taken down instantly, the person added. “The prevailing India-China sentiment is also playing a part as most of these apps are owned by Chinese individuals and entities,” said an official.
The Tiger Global-backed Razorpay has among the most comprehensive payment and tech stacks in the country. This enables end-to-end digital onboarding of small merchants, including individuals and freelancers, almost instantly.
Razorpay has seen lending-based transactions on its platform increase 65% in 2020 against a growth of 51% in 2019, as per data published by the firm.
2 Comments on this Story
varadharajan balasubramanian23 hours ago
the Government always wakes up late after several thousand people suffer silently.
Prem Bhanu1 day ago
Guilty must be punished. Indian democracy should not be taken lightly & taken for a ride.