Digital Lending, Debt Traps and the Next Step in Our Advocacy ; Moneylife Foundation / Sucheta Dalal

Over the past year, our credit counselling initiative has witnessed a sharp increase in the number of people seeking guidance after becoming trapped in cycles of debt arising from digital lending apps. Many borrowers approached us after taking multiple unsecured loans, often without fully understanding the true cost of borrowing or the long-term consequences. In many cases, new loans were being taken simply to repay earlier ones, leading to a spiral of mounting debt and financial distress.

Recognising that these were not isolated incidents but part of a broader and rapidly expanding problem, the Foundation undertook a detailed study of the digital lending ecosystem. Drawing on anonymised counselling cases, regulatory developments and publicly available data, the report examines borrowing patterns, lending practices and the safeguards currently available to borrowers.

The report identifies several recurring patterns that deserve closer regulatory attention, including:

Borrowers were often able to obtain loans from multiple digital lenders within a short period, with little assessment of their overall indebtedness or repayment capacity. Many borrowers took fresh loans simply to repay existing ones, creating a cycle of repeated borrowing and growing debt. The total cost of borrowing was frequently much higher than borrowers initially understood, owing to interest, processing fees and other charges. Existing affordability checks and creditworthiness assessments appeared inadequate to prevent excessive borrowing in many cases. Current regulatory safeguards do not sufficiently address the risks posed by borrowers accessing multiple loans across different digital lending platforms.

To address these concerns, the report recommends several measures to strengthen consumer protection, including improved affordability assessments, greater transparency in loan pricing, limits on simultaneous borrowing and an overall cap on borrowing costs.

The report, 'Digital Credit without Limits', is now available to access and download from the Foundation's website: https://www.mlfoundation.in/memorandum/digital-credit-without-limits/613.html

You can also read a summary of the study and its key recommendations here: Moneylife Foundation Study Urges RBI To Cap Borrowing Costs and Limit Multiple Digital Loans

Looking Ahead: A Discussion on Digital Lending

The issues highlighted in the report extend well beyond individual borrowers. They raise broader questions about responsible lending, financial inclusion and consumer protection in an increasingly digital credit ecosystem.

We are therefore planning a discussion around the report later this month or in early September, where we intend to bring together regulators, consumer advocates, practitioners and members to examine the findings and discuss possible policy responses. We will share details with members once the programme is finalised.

Our Counselling and Guidance Sessions

Alongside our credit counselling initiative, we continue to receive a steady stream of queries through our counselling sessions on cooperative housing society matters conducted by Mr Shirish Shanbhag and our guidance sessions on banking, insurance, investments, consumer issues and medi-claim matters conducted by Mr Abhay Datar. These interactions not only help individuals navigate difficult situations but also provide valuable insights into the challenges that ordinary consumers face.     If you are facing an issue relating to housing societies, banking, insurance, consumer rights or debt-related matters, do consider writing to us (foundation@moneylife.in) or registering for one of our counselling sessions (call or message: +91 7045156415). Many of our most significant initiatives have begun with a single question from a member.     Recent Videos You May Have Missed   Apart from our research, advocacy and counselling initiatives, Moneylife continues to publish videos on issues that matter to consumers, investors and citizens. Here are some recent videos you may find useful.   India's Infrastructure Boom: Built to Show, Not Built to Last? Viksit Bharat Dream Vs Human Capital Deficit India's Ghost Projects: Empty Stations, Airports & Schools SMS की गलती और सब कुछ खत्म! Cyber Criminals सबसे पहले आपका Email क्यों चुराना चाहते हैं?     Stay Connected – Join Our WhatsApp Channel!   We've launched an official WhatsApp Channel to share updates on our events, seminars, workshops, counselling sessions and any other general updates directly with you.   Join here: https://whatsapp.com/channel/0029VbBWAyKGpLHIIk6yYa3t   If you don’t see updates right away, please note that notifications are turned off by default. Just tap the bell icon in the channel to turn them on — that way, you won’t miss any important announcements. You can also continue to follow our Telegram channel for updates: https://telegram.me/moneylife_foundation   Check our Free Helplines and Guides or Templates as well as our YouTube Channel, where you will find a wide repository of videos on various topics.   Video recordings of all our webinars are available on our YouTube channel and will come to your inbox regularly if you hit the subscribe button. But if you want to be notified about future events through our mailing list, you do need to be a member.     Moneylife TV & Helplines Catch up with our financial literacy work through Moneylife TV and Moneylife News Bites. Moneylife Foundation's WhatsApp number (+91 7045156415) and WhatsApp Channel. Telegram channel. Instagram   Financial Literacy Videos in Indian Languages: Credit cards Online frauds Fallacy of gold loans and more in Marathi, Gujarati, Punjabi and Tamil, all on our YouTube channel (https://www.youtube.com/moneylifetv).   Get guidance and counselling through our Legal Helpline or Credit Helpline.   Sucheta Dalal Founder-Trustee, Moneylife Foundation     Trustees: Walter Vieira, Sucheta Dalal, Debashis Basu.   Moneylife Foundation is registered with the Charity Commissioner of Mumbai, is an Affiliate member of OECD's International Network on Financial Education, is a Supporter Member of Consumers International, Development Partner of Advocates for International Development (A4ID), and is a winner of the 10th MR Pai Memorial Award.     Donations are eligible for tax benefits under Sec 80G of the Income Tax 1961 (50% tax exemption) and MLF is registered under the Foreign Contribution (Regulation) Act, 2010. 80(G) Reg No: ITBA/EXM/F/EXM44/2025-26/1086010414(1) dated 13.2.26 effective til AY2031-32 | FCRA Registration No: 08378138

New Report: Digital Credit without Limits