DIGITAL LENDING APPS AND BORROWER PROTECTION IN INDIA: A CRITICAL LEGAL STUDY OF PRIVACY, PREDATORY PRACTICES AND REGULATORY ACCOUNTABILITY

Abstract

The transformation of banking from physical branches to digital platforms has not stopped with electronic payments. One of its most significant contemporary developments is the emergence of digital lending, through which individuals can apply for and receive credit using mobile applications and online platforms. Digital lending has made credit faster, more accessible and technologically convenient. At the same time, it has created a new category of legal vulnerability. A borrower who urgently requires a small loan may obtain money within minutes, but may simultaneously expose personal information, digital identity, financial behaviour and device-related data to an ecosystem that the borrower may not fully understand. This paper critically examines the legal regulation of digital lending applications in India with particular reference to borrower protection, data privacy, transparency, unfair lending practices, recovery methods and regulatory accountability. It analyses the emerging relationship among banks, Non-Banking Financial Companies (NBFCs), Lending Service Providers (LSPs), Digital Lending Apps (DLAs) and borrowers. The paper argues that digital lending cannot be evaluated merely from the perspective of financial innovation. Credit delivered through technology remains a legal relationship involving consent, contractual fairness, privacy, dignity and accountability. The research examines the Reserve Bank of India's regulatory framework on digital lending together with the Information Technology Act, 2000, Consumer Protection Act, 2019 and Digital Personal Data Protection Act, 2023 and its implementation framework. It concludes that the future of digital credit in India must be based upon the principle of responsible digital lending, where speed of credit is balanced with transparency, privacy, human dignity and effective remedies.