The State of Credit: Exploring opportunities, challenges, and the future of digital lending in India

Digital lending is rapidly changing how we access credit. Technology has expanded the reach of lenders to even the remotest corners of the country. As per estimates in a report by EY and the Digital Lenders Association of India (DLAI), digital lending disbursements stood at about ₹21.6 trillion in FY22, it is expected to more than double to ₹47.4 trillion by FY26. This growth presents both opportunities and challenges for lenders and borrowers alike.

Launch of ‘The State of Credit’

Mint, in partnership with Lentra, has released ‘The State of Credit,’ an anthology featuring insights from 14 banking and finance leaders. The book was unveiled at an industry event in Mumbai on February 6, with Sunil Mehta, Chairman of IndusInd Bank, presiding as the Chief Guest for the evening.

Featured columnists include prominent names like Thomas John Muthoot, Chairman, Muthoot Pappachan Group, Umesh Revankar, Executive Vice Chairman, Shriram Finance, Srikrishnan Harihara Sarma, Managing Director (MD) and Chief Executive Officer (CEO), Karnataka Bank, Rajiv Sabharwal, MD and CEO, Tata Capital, Pralay Mondal, MD and CEO, CSB, Ambuj Chandna, Former President and Head, Consumer Bank – Products, Kotak Mahindra Bank, Ankur Handa, Co-Founder and President, Lentra, Dr Rajan Pental, Executive Director, Yes Bank, Ratan Kesh, Executive Director and COO, Bandhan Bank, Shalini Warrier, Executive Director, Federal Bank, Arjun Chowdhry, Group Executive – Affluent Banking, NRI, Cards and Payments, Axis Bank, Rahul Shyam Shukla, Group Head – Commercial and Rural Banking, HDFC Bank, Sachin Chaudhary, Executive Director and Chief Operating Officer (COO), Sammaan Capital Limited and Kiran Moras, COO, Lentra. The foreword has been written by Rajnish Kumar, Non-executive Chairman, BharatPe.

“Digital lending has allowed millions of Indians access to credit at the touch of a button. The coffee table book, ‘The State of Credit’, is an anthology of 14 articles from industry thought leaders alongside interesting data sets, presents a picture of the digital lending landscape today and its future,” said Shayan Ghosh, Editor – BFSI, Mint. Shayan has curated this edition.

Digital Lending: A Win-Win for Lenders and Borrowers

The core event of the evening, a panel discussion, titled ‘Digitising Lending: Pushing New Frontiers in Customer Experience’, brought together four senior experts from the BFSI sector to delve into the future of digital lending in India.

Akash Lal, Senior Partner with McKinsey & Company, spoke about how digital lending has come as a win-win for lenders and borrowers alike. “Digital lending can be seen from two perspectives – traditional financial institutions that have made the transition to digital lending and new-age digital natives like FinTechs,” he said.

Sunil Mehta shared that from 2015-16 when State Bank of India (SBI), which he represented then, was trying to collaborate with FinTechs and a host of young entrepreneurs who had come to Bangalore to present their tech solutions that SBI could adopt. He asked a company with a shortlisted solution to go through the RFP process, but they turned down the offer citing financial and time constraints.

Technology’s Role in Expanding Credit Access

FinTechs have helped in expansion of credit to all parts of the country by bringing more borrowers into the lending system – the number is almost 2X that of the traditional players.With such high numbers coming into the system, what role can technology play in this growth story?

“All of this is a heavily networked decisioning system. Over the last five years–80 per cent of our revenue comes from originations–our vision is to collect as much data as possible from the outside world that is permissioned to be collected and mesh the whole thing. This makes it easier for a rule engine to look at the whole data and arrive at some kind of a rule-based decision,” said D. Venkatesh, CEO and Founder of Lentra.

FinTechs Driving Change in Lending

Sunil Mehta, Chairman of the Board at IndusInd Bank, shared an anecdote from 2015-16 when he was with SBI, illustrating how FinTechs have disrupted traditional banking by demanding faster and less bureaucratic collaborations.

“That was a game changer. It actually taught us that the young FinTech players who are coming up with the right solutions are not willing to go through the bureaucracy or the maze. They need to get instant responses and then support you in what you are delivering,” Mehta said.

“FinTechs have changed the way we use technology, and the credit goes to young entrepreneurs, who have provided easy solutions for banks to adopt,” he added.

Challenges: Data Security and Regulatory Concerns


There is a lot of discussion around data security and the potential threat that digital lending brings. The moment you borrow from a bank, they have access to all your data and can reach you via multiple modes – calls, messages, etc, which is considered an intrusion of privacy. The panel was hopeful that the Digital Personal Data Protection (DPDP) Act will cover for this, and improve the overall customer experience when it comes to lending.

“I hope the DPDP Act has the necessary checks and balances. Today, that is one of the biggest challenges because our laws are still for the physical world. The digital world laws are very weak. But, I think customer consent would be the key otherwise the spirit of the Act goes down drastically,” said Ramesh Narayanaswamy, Chief Technology Officer, Aditya Birla Capital.

Balancing Digital and Human Elements

While digital lending enables instant loan approvals, some experts believe that human intervention is still necessary in certain cases. Harsh Dugar, Executive Director of Federal Bank, noted that while personal loans can be processed entirely online, other categories may still require manual verification to mitigate fraud risks.