Various state police Criminal Investigation Departments (CID) and the Enforcement Directorate (ED) will launch investigations against financial technology (fintech) lenders who received Chinese investments.
The fintech companies, numbering over 24 and including Bubble Loan, Flip Cash, Go Cash and SnapIt Loan, have been asked to stop processing payments and transactions, sources told The Economic Times.
Moneycontrol could not independently verify the report.
The ED and police CIDs have also sent written notices to payment gateways such as Razorpay and Paytm, asking them to “stop dealings with such companies,” one source added.
An official said the notices directed payment gateways to “cancel accounts of several Chinese-backed fintech entities,” adding that they are also being questioned for “reasons behind opening accounts for such dubious firms.”
“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,” the official noted.
Paytm did not respond to queries, the report said.
Razorpay said it has “banned several of these apps in the past few months and proactively reported any suspicious merchants to law authorities and help them with KYC and other details.”
“There has been no action or investigation against Razorpay in this regard. Razorpay has already banned 300-400 apps in the last three months,” a spokesperson for Razorpay said.
Notably, 95 percent of the fintech apps use Razorpay as their payment gateway, which “alerted” suspicion from the ED and state CIDs, an official said, adding that they had received a list of Chinese apps based on complaints and authorities are ensuring that due diligence such as merchant KYC was followed by Razorpay while onboarding these apps.
“There is also an investigation into money laundering charges against these apps,” the official added, acknowledging that “prevailing anti-China sentiments is “also playing a part.”