The Ministry of Corporate Affairs (MCA) in India is set to strike off as many as 400 Chinese companies involved in online loans and online job businesses across 17 states over the next three months, according to a report by Moneycontrol, citing an anonymous government official.
The states affected include major regions such as Delhi, Mumbai, Chennai, Bengaluru, Uttar Pradesh, and Andhra Pradesh.
The decision follows extensive investigations into incorporation-related and financial frauds. The MCA has also initiated probes into an additional 30-40 Chinese companies, including manufacturers of mobile screens and batteries.
An official quoted in the report stated that nearly 600 Chinese companies were scrutinized, and it was concluded that between 300-400 of these companies would be struck off. The targeted companies predominantly include those dealing with loan apps and online job services.
The MCA’s investigations have been driven by increasing concerns over the activities of digital lending apps linked to Chinese firms. These apps have been accused of engaging in predatory lending practices, charging exorbitant interest rates, and employing aggressive tactics to harass borrowers.
Reports have indicated that some of these companies while having an Indian director on record, operate with Chinese bank accounts and show no recorded transactions. Additionally, some companies are untraceable at their registered offices, while others have diverted investments into unrelated businesses, indicating potential financial fraud.
Under Section 248 of the Companies Act, the process of striking off companies takes three months. Initially, a notice is sent to the company, providing them time to respond. If there is no response, a second notice follows after one month. Should the company fail to respond to both notices, it will be struck off the registry.
The MCA’s crackdown is part of a broader effort to regulate the burgeoning digital lending sector in India. The proliferation of such apps has raised alarms due to the exploitative practices some engage in, often leaving borrowers in dire financial straits. This scrutiny aims to protect consumers and maintain the integrity of the financial system.
The ministry’s action also underscores India’s heightened vigilance against financial and incorporation-related frauds, particularly involving foreign entities. The move to strike off non-compliant companies serves as a warning to other entities operating outside regulatory frameworks and engaging in dubious practices.