• Notification Date: 12-02-2025
• Notification No: N/A

Digital Lenders Apprising RBI for reviving Short-Term Loan Products

The digital lending ecosystem is under pressure on the Reserve Bank of India (RBI) to loosen its new regulation on unsecured loans, specifically unsecured short-term loans. Senior executives of the most influential fintech subscription, which collaborates with non-banking finance institutions (NBFCs), expressed their concerns after most NBFCs ceased to provide such short-term loan products, e.g., one-to-three-month credit products. This change has led many consumers who genuinely need quick loans to turn to traditional moneylenders.

Fintech platforms such as Fibe, Kreditbee, and Moneyview have felt the effects most acutely, with their loan disbursement halved in the first half of FY25. Data from the Fintech Association for Consumer Empowerment (FACE) significantly highlights this trend, showing a notable drop in approvals of loans as compared to the previous year.

While the RBI has not set a cap on interest rates, fintech lenders are aiming to keep their rates below 30% to avoid appearing exploitative. But, they contend, without faster rates, provision of these small loans is no longer financially sustainable.

The sector cautions that a total ban on short-term loans might push customers to more risky moneylenders, and thus provoke even greater financial fragility. For this reason, digital lenders are making it an appeal to RBI to revisit its regulatory stance for short-duration credit products to avoid the customer from falling into a debt trap.