Abstract

There has been a rapid increase in the demand for credit in our country. There are various means people can avail loans: formal and informal. This article shall aim to provide readers with an in-depth understanding of the rise of digital lending platforms and its role in significant enhancement of financial inclusion. However, the rise of digital lending platforms has also been met with challenges such as consumer privacy, data breaches, trust, financial integrity, adoption barriers and how these factors are paving the way for exploitative lending activities that often result in unsuspecting borrowers being trapped in debt traps. Furthermore, this article shall also aim to explore the ethical controversies and the socio-economic consequences occurring due to the rise of predatory lending activities affecting individuals physically, mentally, and emotionally—leading to stress, financial insecurity, and, in extreme cases, even suicides. To combat such malpractices, the Indian government and regulatory bodies such as RBI are actively taking multiple measures to curb the menace of the predatory lending activities prevalent in our country by introducing a series of statutory frameworks and compliance mechanisms. This article will critically examine these measures, particularly the 2022 RBI Digital Lending Guidelines, along with legislative safeguards provided under various statutes such The Information Technology Act, 2000 (IT Act), The Digital Personal Data Protection Act, 2023 (DPDPA): Regulates the collection, processing, and storage of personal data, The Consumer Protection Act, 2019 etc. The authors will also be finding loopholes in the guidelines and providing recommendations by engaging in a comparative legal analysis, and suggesting India to borrow some best practices and laws of other countries which has helped them to curb the practice of predatory lending activities.

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