Digital Lending (A Way Forward)

Abstract

Digital Lending refers to the use of technology and digital platforms to provide financial services, particularly loans, to customers. Online lending platforms, mobile apps, and other digital channels like Paytm, Lendingkart, Paisabazaar are some of the leading digital lending platforms in India. The Indian government has been promoting digital lending to increase financial inclusion and access to credit for underserved populations.

Apart from that digital lending platforms are enhancing healthy competition in the lending market which helps to lower the interest rates for borrowers and enhances risk management by utilizing advanced technologies such as big data, Artificial Intelligence (AI), and machine learning to analyse the creditworthiness of borrowers, this can help to reduce the risk of loan defaults and improve the overall efficiency of the lending process.

Digital lending in India has grown rapidly in recent years, with many new players entering the market and traditional financial institutions also adopting digital lending platforms. However, there are also concerns about the lack of regulation and oversight in the digital lending sector, which can lead to predatory lending practices and high-interest rates for borrowers. Initially, the digital lending platforms were largely unregulated but due to a lack of transparency and other drawbacks of this system the Reserve Bank of India (RBI) introduced guidelines for digital lending in India to ensure consumer protection and mitigate the risks of fraud and misleading lending practices.