“I have four elderly people in my household. I am the only earning person. My wife doesn’t earn. And I have a kid as well,” Krishna said, describing the pressures that pushed him toward such borrowings.
For him, the path into payday credit did not begin with fringe apps, but with more established loan-search platforms. After trying portals such as Paisa Bazaar for loans and finding that mainstream lenders rejected him, he began getting offers from payday lenders.
What began as a stop-gap soon turned into a rollover cycle—he took one loan to close another, with fresh offers arriving as each due date approached.
By January 2026, the arithmetic had collapsed. Krishna said his monthly repayment burden had climbed to more than ₹3 lakh a month even though his take-home pay was below ₹2 lakh a month, a mismatch that captures how quickly these short-tenure loans can spiral once borrowers begin stacking them. To be sure, all his lenders had spelt out clearly terms including interest rate but the speed at which it ballooned is what was dizzying.
A few days after deciding he could no longer keep pace with the stack of loans, Krishna enrolled with debt-resolution platform SingleDebt. By then, his total dues across lenders had climbed to a staggering ₹49 lakh.
The IT professional turned to the platform after months of intimidation from recovery agents had begun to consume his working life. Some agents showed up at his home and one lender emailed his workplace, copying the chief financial officer of his organization.
SingleDebt, he said, offered to structure payments, route harassment calls through its auto-forwarding feature and respond to legal notices on his behalf.
Shifting playbook
The Reserve Bank of India (RBI), the country’s central bank, has spent the past four years trying to tighten oversight on digital lending after a wave of complaints linked to instant-loan apps, coercive recoveries and opaque pricing practices began to emerge.
The first major scrutiny started around 2020-21, when dozens of apps—many linked to Chinese operators—were removed from app stores following allegations of harassment, unauthorized access to phone contacts and extremely high-cost short-term loans. This followed a round of cautioning by the central bank. RBI subsequently tightened outsourcing and digital-lending norms for banks and non-banking finance companies (NBFCs), culminating in the digital lending guidelines issued in September 2022.
Those rules required upfront key fact statements, clear disclosure of annual percentage rates (APRs), direct flow of funds between the regulated lender and borrower, and greater accountability for lending service providers handling customer acquisition or collections.
RBI later expanded those norms into its broader digital lending framework and, unrelated to its earlier crackdown on usurious lenders, in October 2024, directed DMI Finance, Navi Finserv, Arohan Financial Services and Asirvad Micro Finance to temporarily stop sanctioning and disbursing loans over what it called “material supervisory concerns,” including pricing and lending practices.
The restrictions were later lifted in phases after the companies addressed concerns raised during RBI’s supervisory review. Navi Finserv’s restrictions were lifted in December 2024, while curbs on Arohan Financial Services, DMI Finance and Asirvad Micro Finance were removed in January 2025.
Nonetheless, interviews with borrowers, debt-management firms, collections platforms, lawyers and fintech executives suggest the market adapted rather than disappeared.
Before RBI tightened digital-lending rules in 2022, many instant-loan apps relied heavily on mainstream app stores for distribution. Borrowers searching terms such as “instant cash loan,” “salary loan,” or “loan without Cibil” on Google Play would often encounter hundreds of lightly regulated lending apps, several linked to Chinese operators or shell entities tied to Indian NBFCs.
Distribution is the new play
The crackdown pushed predatory loan apps off mainstream app stores, but it has not stopped them from reaching borrowers. A growing set of high-cost lenders linked to regulated NBFCs continue to acquire users through Instagram, Facebook, YouTube and Google Search ads, while using web apps, mirror sites and fresh app listings to stay visible.
The shift, therefore, is in distribution, not the product.
Borrowers looking for emergency cash are still being funnelled into small-ticket loans with steep upfront charges and very high annualized costs, often after being routed from a social media ad or search result to a mobile web page or direct download link rather than a Play Store listing.
“The shift for such payday loan apps is in distribution of such apps outside the established app store ecosystem,” said Tanish Sharrma, co-founder of debt-resolution platform BillCut. According to him, many operators now run multiple apps simultaneously, re-list products under new names, or move borrowers toward APK downloads (the raw file format used by Android to distribute and install apps), browser-based onboarding and WhatsApp-led acquisition funnels once scrutiny increases on app stores.
Ritesh Srivastava, founder of debt-settlement platform Freed, said distressed borrowers are still routinely discovering such products through social-media advertising and search-driven marketing. “If you are desperate, you will find it,” he said, describing how borrowers searching for emergency liquidity are targeted with “instant approval,” “low Cibil accepted,” and “money in 10 minutes” messaging.
A handful of apps surfaced repeatedly in Mint’s review of instant-credit advertisements across Instagram, Facebook and Google Search.
Borrowers searching for terms mentioned above are frequently routed to web flows linked to entities including Solomon Capital Pvt. Ltd (app name: Bharat Loan), Devmuni Leasing & Finance Ltd (Loan112/Rupee 112), R K Bansal Finance Pvt. Ltd (Ram Fincorp), DSG Investments Pvt. Ltd (Flot Loans), and Unifinz Capital (Lendingplate).
In some cases, the lender identity is not prominently disclosed upfront, despite RBI rules requiring regulated entities and their lending partners to identify themselves clearly to borrowers.
Krishna, the solutions architect quoted earlier, said that loan offers and refinancing pitches increasingly arrived through WhatsApp messages. “Once you take a loan from one payday lender, your profile gets circulated within that ecosystem,” he said. “As your due dates approach, more lenders start approaching automatically with new offers.”
Hidden details, costs
In a reply to Lok Sabha in March 2023 on a question on exorbitant interest in digital lending, then minister of state of finance Bhagwat Karad said: The RBI “has deregulated interest rates on loans and advances and the same are governed by Board-approved policy of the regulated lending institutions and the terms and conditions of the loan agreement.” The onus, in other words, is on the boards of the lending NBFCs.
On interest and other terms, the lenders “are required to disclose upfront the effective annualized rate charged to the borrower of a digital loan as a part of the Key Fact Statement (KFS) and it should be based on an all-inclusive cost and margin including cost of funds, credit cost and operating cost, processing fee, verification charges, maintenance charges, etc., and exclude contingent charges like penal charges, late payment charges, etc.,” the reply continued.
“Any fees, charges, etc., which are not mentioned in the KFS cannot be charged… to the borrower at any stage during the term of the loan,” the minister concluded.
Of the five loan apps that Mint tracked, four are not compliant with this framework. Their KFS sheets do not fully factor in upfront processing fees and GST into the net payable amount, understating the borrower’s true cost of credit; only Flot Loans appeared to disclose all costs.
That matters because once you include those charges, the borrower’s actual out-of-pocket cost rises and the resulting APR is higher than the headline figure shown in the KFS. In the table accompanying this story, the published APRs are what are claimed in the KFS sheets, not the actual cost for the borrower.
A further review of borrower-facing loan offers and key fact statements showed that products were mostly presented with the trappings of formal finance—grievance contacts and stated loan terms. However, the economics were far costlier than a conventional personal loan.
Several loan structures reviewed involved upfront deductions of 8%-15% through combinations of processing fees, platform charges and convenience fees, despite repayment obligations remaining tied to the full sanctioned amount. When combined with short repayment windows, as short as 15-30 days, the effective annualized borrowing cost could be huge.
Ram Fincorp offers one example: even as the brand has appeared on mainstream lending marketplaces, a sanction letter Mint reviewed showed a 26-day ₹30,000 loan with ₹3,540 in upfront charges, ₹41,340 in total repayment and an APR of over 600%.
Nothing illegal about it
By itself, a high APR is not illegal in India. RBI does not prescribe a hard cap on pricing for NBFC loans—instead, it requires lenders to disclose pricing transparently and frame board-approved interest-rate policies based on factors such as cost of funds and borrower risk.
In Krishna’s recollection of an early offer, a loan of ₹1 lakh came with roughly 10% deducted as processing fee plus taxes, leaving a disbursal of about ₹85,000, while interest ran at 1% a day for 30 days.
For mainstream banks and established NBFCs, processing fees on unsecured personal loans are typically far lower. Publicly disclosed lending schedules show HDFC Bank charging a flat processing fee of up to ₹6,500 on personal loans, while ICICI Bank and Axis Bank generally charge up to 2% of the sanctioned amount. Bajaj Finance discloses processing charges of up to 3.93%, while even higher-risk personal loan products from large NBFCs and fintech lenders usually fall within a 2%-5% range.
Mint sent detailed questionnaires to the high-cost lending entities mentioned above on their lending practices, borrower acquisition methods, pricing structures, collections standards, use of lending service providers and compliance with RBI’s digital lending framework. The publication is yet to receive any response.
A Mint reporter visited the office of Flot, short for Flexible Loan on Time, in Sector 6, Noida, a busy area teeming with corporate offices, and was met by two customer service executives. According to them, most loans on the MyFlot app are for around ₹45,000 for a 45-day period. "Interest rates are 0.8% to 1% (a day). We accept applications from people with 600-700 or less Cibil score but make sure they are salaried, don't have gambling income, and check for their other loans," one of them said without permitting use of his name. For a ₹45,000 loan, borrowers receive "42,000-something after processing fees and GST charges," he added.
In India, credit scores typically range from 300 to 900; borrowers with Cibil scores above 750 are usually treated as prime or super-prime, while those below 700 start moving into fair or subprime. Scores below 650 are considered weaker credit profile territory.
Key Takeaways
The annual rate borrowers pay on some short-term loans — it is not illegal even if usurious
Borrowers with sub-prime or fair ratings get loans at stiff interest rates and high processing fees, often without adequate disclosures
Digital NBFCs’ share of personal loans sanctioned in the first three quarters of fiscal year 2026 — equivalent to 19% in value terms
The math
Sample loan offers and borrower stories suggest the market often runs on very small-ticket loans—frequently in the ₹5,000- ₹10,000 range, and sometimes below that. This is backed by aggregate data.
According to industry body Fintech Association for Consumer Empowerment (FACE), digital NBFCs accounted for 78% of sanctioned personal loans in the first nine months of 2025-26, but only 19% by value, showing how the market is driven by very large volumes of very small-ticket credit.
So, how does the economics work for these lenders and distributors?
The play is less about earning a normal spread on one personal loan and more about generating revenue at scale from many small, high-cost loans at the bottom of the credit market.
Kundan Shahi, founder of Zavo, a company that helps users manage their credit, said the economics of such lending look very different at small ticket sizes because the cost of acquiring and underwriting each borrower remains high even when the loan amount is only ₹10,000.
“That is the reason some lenders rely on upfront fees, high pricing and repeat collections to make these loans viable,” he added.
Aditya Kumar, former co-founder of digital lender Niro, said lenders serving thin-file or high-risk borrowers face higher acquisition, servicing and write-off costs, but that does not automatically make the pricing fair. “Whether the loan is ₹10,000 or ₹1 lakh, lenders still have to spend on KYC, underwriting, collections and customer acquisition, so those costs do not come down in proportion to the ticket size,” he said.
Whether the loan is ₹10,000 or ₹1 lakh, lenders still have to spend on KYC, underwriting, collections and customer acquisition, so those costs do not come down in proportion to the ticket size.
“That is why unit economics on small-ticket loans are so tough,” he said. Kumar also warned that some players use those higher costs as cover to charge far more than is reasonable, and that the industry remains predatory because borrowers are often not told clearly what they are actually paying.
That argument is echoed by collections-focused startups as well. Ananth Shroff, co-founder of digital collections platform DPDzero, said recovery costs on distressed small-ticket loans can quickly become disproportionate relative to the loan size itself, particularly once borrowers begin juggling multiple repayment obligations simultaneously.
“The problem starts when borrowers move from one or two loans into stacked borrowing,” he said. “Once someone is servicing five or six short-tenure loans together, collection intensity goes up across the system because every lender is trying to recover first.”
Stress in small-ticket digital credit remains concentrated at the bottom of the ticket-size pyramid. CRIF High Mark and FACE data shows that the sharpest pressure was visible in sub- ₹10,000 loans: as of June 2025, fintech lenders reported 4.1% of outstanding dues in the 31-90 days past due (DPD) bucket and 4.8% in the 91-180 DPD bucket, versus 1.7% and 1.8%, respectively, for other NBFCs in the same loan band.
Deep-stage stress across fintech portfolios also worsened, with loans overdue by more than 180 days rising to 8.6% in June 2025 from 7.1% a year earlier.
Fixing responsibility
The shift in distribution has complicated enforcement. RBI regulates banks and NBFCs, but not app stores or ad-tech platforms directly.
“An app (developer) by (itself) cannot start lending directly to consumers. Only a regulated entity such as NBFC can actually disburse the cash to the borrower’s account…the app is just an acquisition platform,” said Shatrajit Banerji, partner at Cyril Amarchand Mangaldas, a law firm.
Under RBI’s framework, he said, the regulated lender remains responsible for the conduct of lending service providers and outsourced distribution partners.
RBI mandates disclosure norms, key fact statements and board-approved pricing policies for regulated entities but does not prescribe a fixed cap on APRs for NBFC lending. High-cost lending is not automatically unlawful simply because it is expensive.
“RBI cannot say that if an NBFC is giving a loan, prime or subprime, the interest has to be within 9% or 10%...it simply doesn’t set such rates for lenders,” said Banerji. Instead, lenders are expected to price loans based on factors such as cost of funds and borrower risk profile.
But he added that RBI also expects lending practices to remain aligned with fair-practice norms and responsible conduct frameworks. That tension—between market-priced subprime lending and concerns around exploitative repayment structures—has increasingly moved to the centre of India’s unsecured digital credit debate.
Back to solutions architect Krishna: the debt-management programme with SingleDebt to settle and restructure his liabilities has started working. Some smaller loans have been closed, while larger dues remain under negotiation. But the broader financial and emotional fallout continues. Collection calls still surface intermittently, legal notices occasionally arrive, and his credit profile remains damaged.