Rise of BNPL and festive EMIs: How Diwali lights up India's credit boom

RBI tightens digital lending rules as 'buy now pay later' products and zero-cost EMIs gain popularity

Easy credit schemes like ‘buy now pay later’ (BNPL) and zero-cost loans have increased in popularity in the festival season to buy products as varied as smartphones and clothing, according to finance industry experts, who urged caution and discipline in usage.

 

“Every Diwali, digital payments and consumer credit see a surge, not just in volumes but in innovation,” said Reeju Datta, cofounder of Cashfree Payments, a payment gateway provider. “BNPL and zero-cost EMIs (equated monthly instalments) have become the new festive wallet for millions, turning aspirations into instant, trusted experiences.”

 

Datta said the number of people availing of EMIs for ecommerce transactions has increased by almost 50 per cent this festival period compared to the period before.

 

 

Credit-on-UPI usage has increased almost 50 per cent in festival season from the previous year, said Anup Agarwal, cofounder of Kiwi, referring to a feature that allows users to access a pre-sanctioned credit line (a digital loan) directly through the Unified Payments Interface for making purchases or transfers.

 

Average ticket sizes are around Rs 18,000, with electronics, travel and ecommerce accounting for 40 per cent of EMI spends. Consumers aged 25–35 are major consumers of easy credit, which has expanded in Tier-II and Tier-III cities, said Agarwal.

 

Changing borrowing patterns

According to data from  InstaMoney, the digital lending arm of LenDenClub, loans for medical emergencies accounted for the largest share of festival-period borrowing at 28.04 per cent. It was followed by advance salary (21.20 per cent), home renovation (11.88 per cent), and family functions (10.17 per cent). Borrowing for education (9.58 per cent) and home appliance purchases (3.34 per cent) also saw notable demand. 

Borrowing pattern

 

The average ticket size of these loans stood at Rs 14,934, with men comprising 86.4 per cent of borrowers and women 13.6 per cent. LDC recorded 40 per cent more disbursals this festive season compared to last year and expects an uptick of 25–30 per cent in this festival cycle.

 

These trends underline how consumer credit is becoming a vital part of household cash flow management during peak spending periods.

 

Data note

RBI steps in

The Reserve Bank of India (RBI) has introduced various measures to ensure the rapid growth of easy credit doesn’t become a debt trap. Its measures include:

 

Digital Lending Guidelines 2025 mandate all loans be disbursed and repaid directly between borrowers and regulated entities (banks/ non-bank lenders). The RBI has banned wallet-based ‘shadow BNPL’ models.

 

• Transparency rules require clear disclosure of interest rates, principal, fees and penalties. 
• Higher capital requirements for lenders encourage cautious underwriting. 
• Grievance redressal through the RBI and the Banking Ombudsman.

 

“The RBI’s safeguards reflect a calibrated effort to ensure that India’s burgeoning consumer credit phenomenon thrives within a secure, transparent, and equitable framework,” said B Shravanth Shanker, advocate-on-record, Supreme Court.

 

BNPL is shifting from wallet-based to regulated credit lines, with tighter disclosure and underwriting norms moderating festive credit expansion, said Alay Razvi, managing partner at law firm Accord Juris. 

 

Experts call for financial discipline

Experts said BNPL and zero-cost EMIs require such financial discipline measures:

 

• Tracking repayment schedules carefully. 
• Borrowing within affordable limits. 
• Avoid overlapping instalments that may strain cash flow.

 

Akshay Mehrotra, managing director & group chief executive officer of Fibe, said young people must know that “treating these facilities as effortless credit may occasionally lead to overlapping payments or minor delays.”

 

“Platforms play a crucial role in ensuring customers use credit safely through clear disclosures, reminders, and simplified repayment visibility,” said Nicky Sehwani, Chief business officer of InstaMoney, the digital lending arm of LenDenClub.

 

Looking ahead

With stricter regulations, fintech innovation, and consumer awareness, experts believe festive credit can remain a responsible and empowering tool. “BNPL and EMIs fuel festive cheer but the RBI’s emphasis on transparency and responsible lending ensures the joy of Diwali doesn’t come with a debt hangover,” said Rohit Jain, managing partner at Singhania & Co.