India's Loan Apps: Debt Traps & Tragic Outcomes

Loan harassment has become a pervasive issue in India's rapidly expanding credit ecosystem, with digital lending platforms often employing coercive recovery practices. Despite strict guidelines from the Reserve Bank of India (RBI), enforcement on the ground remains weak, leaving borrowers vulnerable to intimidation and threats. Many new-age platforms expedite loan approvals with minimal checks, leading individuals into unmanageable debt spirals, often juggling multiple loans from various apps. This situation is exacerbated by lifestyle inflation and the illusion of control offered by minimum payments on credit cards and buy-now-pay-later schemes.

The consequences of such aggressive recovery tactics have been severe, with police investigations linking several suicides to harassment by instant loan apps in states like Telangana and Karnataka. Academic research corroborates these findings, detailing threats and data privacy violations targeting borrowers and their families. While RBI's Digital Lending Guidelines mandate transparency and data protection, smaller lenders and unregulated apps continue to operate with little oversight, and the redressal system for borrowers is faltering, with a significant surge in complaints.

Reasons for default range from job loss and high EMIs to medical emergencies, but many borrowers utilize credit to bridge essential income gaps for healthcare, education, or household expenses. The ease of borrowing has outpaced the ease of protection, turning a missed EMI into a potential nightmare. Experts emphasize that borrowers need dignity and safety, which can only be achieved when rules are rigorously enforced in real life, not just on paper.