Digital Loan Sharks in India & Regulatory Framework: An Assessment

Abstract

Fintech has been playing a substantial role in transforming the financial services worldwide. Digital technology has led to significant improvement in lending services by offering easily accessible and hassle-free credit options for borrowers. However, the fast pace of innovations in FinTech and lagging regulatory measures have uncovered the negative aspects of digital lending. The dark side of digital lending became prominent in India during COVID-19 pandemic in the form of digital loan sharks. These predatory lenders exploit the gaps and blind spots in existing regulations to target vulnerable potential borrowers. They have been ravaging lives in India with debt traps and harsh loan recovery methods. The purpose of this paper is to explore the risks posed by digital lending model in India, identify the factors leading to financial consumer vulnerability and assess the regulatory & supervisory framework to protect financial customer from digital loan sharks for reliable digital lending space.