Amid COVID-19 pandemic, the Indian government recently announced its decision to scrutinise Chinese investments closely over fears of possible hostile takeovers. India has made prior government clearance mandatory for all forms investments, even indirect ones, from all countries sharing land border with the country.

The new rules could cause trouble for the fin-tech plans of Xiaomi and OPPO. In December last year, Xiaomi launched its Mi Credit service in India to offer online lending to its customers. On the other hand, OPPO had launched the OPPO Kash fin-tech service in March, days before the company went under lockdown due to COVID-19.

Both the companies have partnered with Indian financial companies to provide the funds for services offered on their platforms as they cannot directly lend to consumers without a shadow banking licence in India.

To improve the margins, the companies are keen to establish their own non-banking financial company (NBFC). But the license may be very difficult to come by given that the Indian government has made changes in the FDI (Foreign Direct Investment) rule adding an extra layer in the already slow and difficult approval process.

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As per the report, Xiaomi and OPPO have been waiting for around a year to get an NBFC approval from the Reserve Bank of India. Even if the RBI were to grant an NBFC permit to Xiaomi and Oppo because they applied prior to rule change, they may face delay in getting approval for the fund raise.

Xiaomi is currently the leading smartphone brand in the Indian market, having around 30 percent market share. OPPO, on the other hand, has captured around 12 percent of the Indian smartphone market share. Combined, both the companies have more than 100 million users in India.

Since the profit margin for the smartphones are thin, an NBFC would give Xiaomi and Oppo access to user data and spending patterns which can be used to boost revenue for other services. But given the current situation, it’s unlikely for the Chinese companies to get NBFC license anytime soon.

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(Via)

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