Digital lending boom raises risks if credit poorly underwritten: RBI DG

RBI Deputy Governor Swaminathan J cautions that while digital lending and platform-based models expand financial access, weak credit underwriting could deepen borrower distress

Rapid growth in digital lending and platform-based models, driven by their speed and convenience, has brought significant benefits to borrowers, but it also carries risks if credit is not responsibly underwritten, cautioned Swaminathan J, deputy governor, Reserve Bank of India (RBI).

 

“Digital lending and platform-based models have expanded quickly because they offer speed and convenience. That is a real benefit. But credit is not like any other routine transaction. Credit can strengthen livelihoods. But, if poorly underwritten, it can also deepen distress through over-indebtedness,” he said. 

He also highlighted that while digitalisation is expanding reach and speed in finance, it is also increasing vulnerabilities. The task, therefore, is to ensure that digital finance scales what is beneficial—usable financial inclusion, responsible innovation, and a financial system that supports resilience and sustainability. 

 

Speaking at a conference in Pune on March 6, Swaminathan said, “Digital finance and sustainability sit at the intersection of regulation, technology, business incentives, and human behaviour. Progress requires collaboration across regulators, financial institutions, fintechs, researchers, and civil society.” 

He also highlighted that while innovation is welcome, fairness is essential. “Transparent pricing, explainable decisions, respectful collections, and strong redress mechanisms, all should be built into digital credit models,” he said.

 

A key concern he flagged was the gender gap in digital finance. Bridging this divide will require more than improving device access or connectivity, he said. It will require building women’s financial and digital capabilities, while strengthening privacy and safety in digital financial journeys.