Currently, a new trend is growing very fast in India’s digital fintech sector. From choosing clothes on shopping websites to ordering food from food apps, there is a convenient option for payment everywhere. This is called Buy Now Pay Later (BNPL). Starting with a small purchase of just Rs 500, this facility looks great. It is equally rapidly trapping the youth in the debt trap. Due to this facility, spending without thinking is becoming a habit of the youth. According to the Digital Lending Trends Report of ‘Product Growth’, an organization that monitors the digital loan market in India, the entire digital loan market of India is worth Rs 29 lakh crore. This figure clearly shows that this habit of bringing goods home without paying immediately has increased a lot among the youth.
At present about 19 crore people in India have active loan or credit facilities. Out of this entire number, there are 12 crore to 14 crore people who are only using facilities like short term loans or BNPL. The annual interest on this loan ranges from 12 percent to 24 percent. This is slightly less than a normal credit card. For this reason, college going students and youth starting a new job like it. They do not have any income or credit card. That’s why they get trapped in it easily. They find it very easy to pay small amounts of Rs 500 or Rs 1000 in installments.
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Get loan in minutes
The reason behind such growth of BNPL is the country’s new digital banking system and the technology of fintech companies. Digital KYC and account aggregator system has now become operational in India. This means that one out of every two customers who visit the app gets the loan limit very easily. Due to this easy technology, youth living in small towns are using this small loan the most. The monthly earnings of these youth are between Rs 15,000 to Rs 50,000. They take this loan to meet their daily needs and hobbies. Due to the strengthened digital system, now it takes only 2 to 3 hours for companies to approve the loan.
danger of not being able to repay the loan
Digital loans have completely changed the way youth spend. Earlier people used to do shopping considering money but now the thinking of ‘spend first, think later’ is dominant. To attract these customers, companies give offers ranging from Rs 200 to Rs 500 and 40 to 60 percent people take the loan again within 6 months. Because of this, the digital loan market is growing at a rate of more than 40 percent every year. It is a matter of concern that the number of people not returning the money on time has also increased from 2 percent to 5 percent. This means that youth are spending more than they earn and then getting into debt.
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Reserve Bank’s strictness
The Reserve Bank has now made the rules related to digital loans very strict. Now it is necessary for the loan money to come directly into the customer’s bank account and there will be no interference from any third app in between. Companies will have to clearly inform the customer about the full cost of the loan and any hidden fees. RBI has also tightened data security, due to which no app can now take phone data without any need. Now only licensed companies can give digital loans, due to which fake apps have been completely banned.
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