Paytm said that it does not share user data with any of its investors or with any foreign entity and stores data locally in India with no access to any external party. The company was responding to a reference made in the Rajya Sabha by Narendra Jadhav, who claimed that China’s Alibaba holding a stake in Paytm poses a “very serious threat to our national security“.

In the Rajya Sabha earlier this week, Jadhav alleged that Alibaba, through Paytm, had applied for an NBFC license to possibly capture a major chunk of the domestic lending market by resorting to “predatory pricing and capital dumping“. According to Jadhav, Chinese multinationals, if allowed to dominate the Indian financial services sector, “will gain access to private and financial data of millions of individuals and corporates. This could inevitably expose India to a serious geopolitical risk and make our country vulnerable to external influence thereby compromising national security.”

“Paytm goes a step beyond in ensuring utmost security of users’ data by processing and storing all the information in servers located within India. The company respects the user’s need for data privacy and security,” the company said a statement. In fact, the company has been pushing for mandated localisation of financial data for other players as well — a few days ago, Paytm asked the central government to push for storage of payment system data within the country and not allow mirroring of the data overseas.

Chinese players in Indian financial space

Alibaba is reportedly also investing in financial services through its partnerships with Aditya Birla Group’s NBFC arm, IDFC Bank and Kotak Mahindra Bank, reports CNBCTV18. That apart, last year, another major Chinese firm Xiaomi, along with (Chinese) venture capital firm Shunwei Capital invested $8 million in the Microlending platform KrazyBee. Xiaomi’s Founder and CEO Lei Jun spoke of the company’s plans to enter the financial sector, however, details remain murky.

To curtail the advancement of these companies in the financial sector, Jadhav in an interview has proposed that regulations to set up NBFCs should be made as stringent as they are for starting private banks. “Currently, private bank licenses are given on a few conditions. For instance, in order to start a private bank you need to have at least 26% ownership by Indians and, no investor can hold more than 10% stake in the bank. I have proposed that similar restrictions be imposed on NBFCs,” he told the Indian Express.

However, there might be a different trouble for Indian e-commerce players and retailers, as the Economic Times reports that Chinese sellers may soon be able to compete directly with Indian sellers, on a large scale, as Alibaba and Paytm have initiated a plan to lure Chinese vendors to sell on Paytm Mall.