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Mint
5 days ago
- Business
- Mint
How much debt is too much? India's EMI addiction gets too tempting to curb
'Zero cost EMI', 'Buy now, pay later' and 'Instant loan in 5 minutes' – walk into any Indian e-commerce app or fintech lending platform today, and you'll find these tempting offers staring back. What once was a rare financial tool has now become a lifestyle — and a trap. India is in the middle of a silent credit revolution. Fuelled by smartphone penetration, fintech innovation, and the promise of 'frictionless' borrowing, millions of young Indians are swiping their way into EMIs, micro-loans, and Buy Now Pay Later (BNPL) schemes without a second thought. But this revolution comes with a dark underbelly — one filled with hidden interest rates, app-based harassment, spiraling debt cycles, and long-term financial damage. In India's rapidly digitising economy, credit is no longer a privilege — it's a push notification. From buying smartphones to booking vacations, 'easy EMIs' have lowered the barrier for spending. BNPL platforms let users buy essentials (and non-essentials) with just an Aadhaar and PAN. This may sound empowering — and in many ways it is — but the ease of access also means ease of abuse. As Kunal Varma, Co-Founder and CEO of Freo, puts it 'The availability of easy EMIs and small-ticket credit has changed the way young Indians borrow money. But this better access to credit has also made it easier to borrow money without thinking, often without fully knowing how much it costs. Ease shouldn't mean sacrificing your long-term financial health." This psychological shift is subtle but powerful — credit feels less like a responsibility and more like a lifestyle extension. Even though the financial environment is easy, many customers do not know what they are getting themselves into. In the fine print, you may find hidden fees, requirements for your bank to auto-debit, late payment fees, and consequences for your credit score. A purchase of ₹ 10,000 with BNPL might look great, could quietly become a nightmare repayment of ₹ 14,000. Bhushan Padkil, SVP & Head, Direct‑to‑Consumer Business, TransUnion CIBIL, explains 'Opting for EMIs or Buy Now Pay Later plans can make purchases more manageable and accessible. However, it's important to know that lenders consider your total ongoing credit obligations and repayment patterns when evaluating your creditworthiness. By keeping a close eye on your repayment schedules and regularly reviewing your credit report, you can make the most of these options and build a strong foundation for long-term financial health.' Frequent borrowing may seem harmless, but it chips away at your creditworthiness. Miss a payment or max out your app-based credit line, and it could affect your chances of getting a home loan or even a job in the future. App-based lending can create an immediate dopamine response for many borrowers, especially Gen Z/young professionals who experience instant gratification with delayed consequences. Defaults unfortunately can lead to even greater pressure. Aggressive recovery tactics are not out of the ordinary: social media threats, public humiliation through access to someone's contact list, and ongoing harassment through continuous calling. There has been some intervention from regulatory bodies; however, enforcement is akin to whack-a-mole in terms of new apps appearing every other day. At its core, this is as much a psychological issue as it is financial. The gamification of credit against a backdrop of limited credit literacy may trigger uninformed decisions and unnecessary suffering. There is, however, a growing sense of responsibility among serious players in the fintech ecosystem. According to Rohit Mahajan, Managing Partner and Founder, plutos ONE, 'Fintech lenders are rapidly scaling, but long-term sustainability depends on ethical practices and borrower empowerment. Guided by RBI's digital lending framework, leading platforms are ensuring transparency through clear disclosures, consent-based data use, and fair interest rates.' This pivot — from hypergrowth to responsible innovation — is vital if the ecosystem wants to avoid a systemic collapse or a regulatory clampdown. The RBI has already taken note, issuing guidelines on digital lending, APR disclosures, and embedded finance practices. But the scale and speed of India's unsecured lending boom still pose a risk to the broader financial system. Kushal Rastogi, Founder & CEO of Knight Fintech, warns, 'India's credit ecosystem is evolving; banks are eager to deploy capital, while borrowers seek quick, fair access to funds. But true financial inclusion must be built on accountability. As regulations tighten around APR disclosures and risk controls, smarter, tech-enabled lending is the way forward. This shift is driven through embedded finance, co-lending frameworks, and UPI-based digital disbursements helping lenders serve new-age borrowers while maintaining control over risk, compliance, and how credit is used.' If left unchecked, today's credit boom could echo past bubbles — only this time, the damage may spread across millions of app-driven, under-informed borrowers. Before tapping, read: Know the interest rate, payback terms, and late charges before applying for any credit. Don't overwhelm yourself with credit: Even if you initially view several EMI purchases as harmless, these can accumulate quickly. Continuously monitor your credit: One missed payment, even if it is small, can really affect your credit score and your creditworthiness in the future. The loan industry in India has entered a tremendous transition that is empowering and risky. If you are not careful, what starts as a 'Buy Now' will quickly become a 'Cry Later.' The fintech revolution should be one that helps the masses, not traps them. It requires understanding, responsibility and thoughtful decisions in addition to regulations and technology. Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
Mint
11-06-2025
- Business
- Mint
How can first-time borrowers build a CIBIL score from scratch?
I'm planning to take a personal loan to fund a certification course, but I've never taken any loans or used a credit card before. I'm not sure if I even have a CIBIL score. I want to understand what a CIBIL score is, how it's calculated, what factors influence it. For someone like me who's just starting out and has no credit history, never taken loan, how can I work towards building a CIBIL score? I want to make sure I build it gradually and avoid any early missteps and understand it better. If you're planning to take a personal loan for a certification course but have never used a credit card or taken a loan before, you're likely what lenders call 'new to credit.' This means you don't yet have a credit history, and probably don't have a CIBIL score either. That's completely normal for first-time borrowers — and a good reason to understand how credit scores work before taking the plunge. A CIBIL score is a three-digit number ranging from 300 to 900 that shows how well you've handled borrowed money in the past. Lenders use this number to assess how likely you are to repay a loan. The higher your score, the better your chances of getting a loan at a good interest rate. The score is calculated using several factors. These include whether you make repayments on time, how much of your available credit you use, how long you've been using credit, and how often you apply for loans or cards. These inputs are combined to reflect your creditworthiness as a borrower. For someone like you who's just starting out, the most important thing is to begin creating a credit record. Once you've started using a credit product, it's crucial to pay every bill or EMI on time. Payment history is the biggest factor in your credit score. Even a single missed or late payment can harm your score significantly. To avoid this, set up automatic payments or calendar reminders so you never miss a due date. Another key part of your score is something called credit utilisation—that is, how much of your total credit limit you actually use. It's ideal to keep this below 30%. So, if you have a credit card with a ₹ 10,000 limit, aim to spend no more than ₹ 3,000 during a billing cycle. Even if you pay it off in full, using most of your credit regularly may signal that you're too reliant on debt. Avoid applying for multiple credit cards or loans in a short period. Too many inquiries can make it look like you're in urgent need of money, which can turn lenders cautious. Apply for new credit only when truly necessary and when you're confident about qualifying. Lastly, keep an eye on your credit report. You're entitled to one free report per year from each credit bureau. Checking it regularly helps you ensure that all information is accurate and alerts you early if there's any error or fraud in your name. Bhavesh Jain, MD and CEO, TransUnion CIBIL
Indian Express
03-06-2025
- Business
- Indian Express
Unsecured loans seen key to meeting retail credit demand in India
Unsecured loans given by fintech firms will be instrumental in meeting demand for retail credit in India over the coming years, with the absence of collateral for many households that are in the 'early stages of the asset formation cycle' making it unlikely that secured loans will be able to completely fulfill the rising demand. 'Today, only 65 per cent of India's personal bank credit is secured, compared to 90 per cent in the US. Fortunately, India's robust credit bureau data ecosystem has enabled unsecured lending to thrive in recent years,' Boston Consulting Group (BCG) and QED Investors said in their Global Fintech Report 2025, released Monday. As per the report, Indians' demand for consumer loans is rising rapidly due to robust economic growth – India's GDP expanded by a faster-than-expected 7.4 per cent in the final quarter of 2024-25 – and 'changing cultural attitudes toward debt'. Demand for loans from the middle class is also expected to rise in tandem with the segment itself, which is projected to make up 40 per cent of the population by 2031 from 31 per cent at present, the report said. This is already reflected in data – according to credit information company TransUnion CIBIL, 61 per cent of fintech customers were less than 30 years of age compared to 36 per cent for the rest of the industry. To be sure, growth in unsecured loans has slowed appreciably in the last couple of years following tightening of regulations by the Reserve Bank of India. As on April 18, while overall bank credit was up 10.3 per cent year-on-year, credit card outstanding and the 'other personal loans' category – both of the unsecured variety – were 10.6 per cent and 9.0 per cent higher, respectively. These figures are sharply lower than where they were before the RBI took action on November 16, 2023 to dampen what it termed as 'very high growth' in certain segments: as on November 17, 2023, banks' credit card outstanding was 34.2 per cent higher and 'other personal loans' were up 24.3 per cent. Amid the tightened regulatory norms that asked lenders to set aside greater capital than before for consumer loans, excluding certain types such as housing and education, among others, Indian fintechs have continued to grow, albeit at a slower pace. In terms of live unique customers, fintech firms saw a growth of 40 per cent in 2023 and 15 per cent in 2024 compared to 16 per cent and 9 per cent, respectively, for the industry, TransUnion CIBIL data showed. These firms are particularly dominant when it comes to small loans and were responsible for nearly nine out of every 10 loans of less than Rs 50,000 that were made in October-December 2024. While BCG and QED Investors said in their report that 'demand for unsecured credit remains' in India, the latest quarterly results for some of the country's most prominent players in the space are not encouraging. In the quarter ended March 2025, Paytm distributed personal loans to the tune of Rs 1,422 crore, down 19 per cent from October-December 2024, as its lending partners tightened risk policies. 'Personal credit, unless something bigger changes, we will not see much larger growth,' Founder and Chief Executive Officer Vijay Shekhar Sharma said in a post-earnings analyst call on May 6, 2025. Paytm is not alone, with Mobikwik posting a 41 per cent fall in digital lending disbursals in FY25 after it discontinued its Zip buy-now-pay-later product in December 2024 'due to low lender appetite'. According to BCG and QED Investors' report, lending 'remains a significant opportunity' for fintechs as they only account for around 3 per cent of global lending revenues of $2 trillion. And if unsecured personal loans are excluded, the penetration by fintechs is less than 1 per cent, with banks at an advantage due to the access they have to low-cost funds in the form of deposits. '…very few fintech lenders have truly weathered a complete credit cycle; in that sense, the industry is still untested,' the report said.
India Gazette
30-05-2025
- Business
- India Gazette
India's fintech sector poised for next phase of growth with product diversification, smarter risk management: Report
New Delhi [India], May 30 (ANI): India's Fintech sector continues to grow rapidly and is now entering a new phase focused on product diversification, smarter risk management, and deeper financial inclusion, according to a report by TransUnion CIBIL The report mentioned that as of December 2024, Fintech lenders, defined as digitally driven NBFCs, had an outstanding loan balance of Rs 1.3 trillion, marking a significant 32 per cent year-on-year growth. Though they currently contribute only about 1 per cent of total industry loan balances, their dominance in small ticket personal loans (STPLs) is striking. Nearly 89 per cent of personal loan originations under Rs 50,000 were issued by Fintech lenders. The report said, 'Business loans and property loans being popular products opted by FinTech consumers continue to present opportunity for product diversification.' The report highlighted a strategic shift among Fintechs toward offering more secure loan products, such as loans against property and business loans. These segments saw an increase in their share of overall balances, indicating Fintechs' intent to meet broader credit demands. In fact, business loan originations by Fintechs now make up 12 per cent of all such industry loans. TransUnion CIBIL also pointed to a growing base of younger and rural borrowers among Fintech customers, a trend that strengthens financial inclusion. It said, 'FinTech lenders are attracting younger and rural consumers, thus promoting financial inclusion. FinTechs have reduced average loan amounts across risk tiers.' However, the average loan amount disbursed by Fintechs has declined across all risk categories. Even customers with top credit scores received loans below Rs 50,000 on average. One of the key suggestions in the report is the need for Fintechs to diversify further, particularly by expanding into higher-ticket personal loans, consumer loans, and secured products. While customers are exploring these segments, their loyalty to Fintech brands beyond STPLs remains low. The report said, 'Foraying into personal loans of higher ticket size could also help in addressing consumer preferences.' In terms of risk, early delinquencies in STPLs remain stable, but there is a noticeable increase in overdue accounts in business loans and loans against property. The report stressed the need for stronger portfolio risk monitoring and smarter debt collection strategies to ensure sustainable growth. To navigate the evolving lending landscape, the report recommended using advanced data analytics, like its CreditVision algorithms, which provide a trended view of borrower behavior. This can help Fintechs make better lending decisions and manage risks effectively. Overall, the report paints a positive outlook for India's Fintech sector, provided it adapts swiftly by broadening its product base and tightening its credit risk frameworks. (ANI)
Hans India
29-05-2025
- Business
- Hans India
India's fintech lenders draw younger, more rural customer base: Report
The fintech sector lenders are drawing a younger and more rural customer base, with 61 per cent of borrowers being under the age of 30, and 24 per cent residing in rural areas, a report showed on Thursday. The share of prime and above-prime consumers in fintech originations has also increased steadily, reaching 62 per cent in December 2024 from 60 per cent in December 2023 and 55 per cent in December 2022. Notably, however, average ticket sizes have declined across all risk tiers, according to the report by TransUnion CIBIL. India's fintech lending sector is undergoing a transformation, driven not just by volume, but by a fundamental shift in borrower demographics, as they increasingly serve younger and more rural populations. This marks a significant evolution in the fintech customer base, reflecting the sector's growing role in democratising access to credit across India's diverse population. According to the report for the quarter ending December 2024, fintech lenders now serve over 23.3 million consumers — up from 20.2 million in December 2023 and 14.4 million in December 2022. Outstanding balances reached Rs 1.3 trillion, with fintechs accounting for 1.03 per cent of total retail credit balances, highlighting lenders' expanding role in India's credit ecosystem. These trends highlight a significant opportunity for fintech lenders to deepen their reach in underserved segments, positioning them well for sustained growth in India's evolving credit landscape. 'The fintech lending sector has played a vital role in reshaping India's financial landscape by delivering faster and more accessible credit through innovative digital technology,' said Bhavesh Jain, MD and CEO, TransUnion CIBIL. This progress has expanded financial inclusion, reaching millions across diverse demographics and geographies. 'As the sector continues to evolve, sustained growth will rely on broadening product offerings and adopting data-driven approaches to provide more personalised financial solutions,' he maintained. Fintechs are also seeing stronger customer retention in the personal loan segment, especially in ticket sizes above Rs 50,000. As of December 2024, 48 per cent of borrowers in this segment had prior credit relationships with the same lender, higher than the 43 per cent who had that relationship in December 2023. 'FinTechs continue to reach ever more people, especially younger and unaddressed segments. As the industry grows, it is important that lending practices stay customer-centric and respond responsibly to evolving risks,' said Sugandh Saxena, CEO, FinTech Association for Consumer Empowerment (FACE).
