India's new FDI rule sours Xiaomi, Oppos fin-tech plans

The Chinese phone brands plan to expand credit to prospective buyers may go into cold storage.

Indian government's decision to scrutinise Chinese investments closely over fears of possible hostile takeovers has caused Chinese smartphone manufacturers some jitters. Especially for Xiaomi and Oppo who are seeking to expand beyond selling hardware for bigger share of the India's competitive financial services market.

The Chinese phone brands plan to expand credit to prospective buyers may go into cold storage as the government's foreign direct investment (FDI) policy state that without a shadow banking license or without partnership with Indian financial companies, no entity can lend directly to consumers.

While Xiaomi had launched its online lending service MiCredit in India last year, Oppo had followed suit with Oppo Kash in March. The Chinese phone brands are also keen to establish their own non-banking financial company (NBFC) in India to help improve their margins.

However, the chances of them getting NBFC approvals from the Reserve Bank of India appear less likely now as the FDI rules have also been modified to add an extra layer in the approval process.