China-Russia ties grow stronger, India investigates Chinese lending apps

Friday 19 August 2022 15:16 CET | News

Russia has jumped to become the third largest market for the yuan, according to Reuters, while Chinese digital lending apps are investigated by the Reserve Bank of India, reports.


Russia has jumped to becoming the third largest market for the yuan, according to Reuters, while Chinese digital lending apps are investigated by the Reserve Bank of India, reports.


First, Russia became the third largest market for yuan payments outside of mainland China, an effect of the Western sanctions, as Reuters reports. Prior to the Ukraine invasion in February 2022, Russia did not even make SWIFT’s monthly list. Latest figures show that only Hong Kong and the UK stand above Russia as far as global yuan payments go. 

According to SWIFT, 4% of all yuan payments made in July 2022 involved Russia-based companies and banks. In June 2022, Russia registered 1.42% and in February, zero. Following Russia’s self-named ‘special military operation’, the West started to apply financial sanctions. We encourage you to read more about this subject in our March 2022 analysis.

Russia’s current position in SWIFT’s yuan-usage list supports those who agree that the financial sanctions are doing their job, leaving Russia outside the USD-backed global financial system. However, the latest news also encourages those who say that Moscow and Beijing are closer.

Russia's Mir alternative to SWIFT

Another effect of financial sanctions in general and its SWIFT exclusion, in particular, was Russia developing its own payment system – Mir. Recently, Iran has declared that it will join Mir in the coming months. In August 2022, we learned that 5 Turkish banks decided to adopt Mir payments, following a meeting between Turkey’s president Erdogan and Putin. In July 2022, Nigeria’s Ambassador in Russia showcased the African country’s openness towards accepting Mir cards, Nigeria and Russia being in talks about this being a possibility. 

To explore the link between payment systems and geopolitical decisions resulting from Russia’s invasion of Ukraine, we invite you to read Kledjona Mollaj’s (Be | Shaping the Future UK) expert opinion.

According to Reuters, the Russian rouble is no longer in the top 20 most-used global currencies.

Reserve Bank of India vs fraudulent Chinese lending apps

According to MoneyLife, China-based loan apps made use of regulatory loopholes to trick Indian clients. Since these apps were unlikely to get licences from the RBI, they appealed to using Memorandums of Understanding (MoU) with the (now non-existent) NBFCs (non-banking financial companies) to perform large-scale lending.

According to investigators, Chinese apps and NBFCs by-passed regulation and provided instant personal loans with 7-to-30 days terms. Chinese digital lending apps (many reportedly born mid-pandemic) targeted unemployed people or rural communities. Among accusations, there were talks about charging high fees, employing high-handed collection strategies, and even operating illegally.

Decisions on fixing interest rates and platform fees, etc. were taken by the fintech companies under the instructions of their handlers in China and Hong Kong who profited and amassed a large amount of funds. Scores of Chinese-owned micro-lending apps started operating in India under shady terms. They are attracting customers mostly who are under duress. The modus operandi started with the simple advertisement for downloading an online loan app on social media targeting customers who wished to avail 'hassle-free loans in minutes'. 

Once the app was downloaded, it would seek permissions to access the victims' contacts which were later utilised for all sorts of blackmail by the company. The borrowers were charged exorbitant processing fees and interest rates, pushing many lower-middle-class people into the debt trap, and forcing them to even commit suicide. The Chinese racket threatened the victims, abused, and even blackmailed them to recover their loans. 

In April 2022, the RBI's working group found 600 illegal lending apps. Observers pointed out that the undetected cases could be even more which mushroomed during the pandemic crisis period. There is evidence that these are regionally well-coordinated, and linked to other nodes of illicit Chinese activities. With rising instances of digital fraud, the central bank is now taking a relook at the ‘know your customer' (KYC) norms to identify inadequacies and fill the gaps, according to MoneyLife.

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Keywords: Russia Ukraine War, lending, online fraud, digital banking, Mir
Categories: Banking & Fintech
Companies: RBI
Countries: China, India, Russian Federation
This article is part of category

Banking & Fintech


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