India's digital lenders accelerate focus on repeat borrowers as instant loans become standard

As rapid approval times become the norm in India’s digital credit market, lenders are shifting their competitive edge from instant disbursal to securing repeat borrowers, amid increasing regulatory oversight and rising costs for consumers.

For Indian borrowers chasing emergency cash, the headline promise of an “instant” personal loan is increasingly real, but usually only for the right customer. A June comparison published by Mint, citing bank websites, showed sharply different timelines across lenders: HDFC Bank’s Xpress loan was listed at 10 seconds for pre-approved users but up to four working days for others; ICICI Bank advertised two hours for pre-approved customers and 24 to 72 hours for general online applicants; Axis Bank said some pre-approved users could receive funds within minutes, while standard digital processing could take up to 24 hours. Paisabazaar says even same-day credit through its marketplace is limited to pre-approved offers and depends on the applicant’s credit profile. (livemint.com)

That variation matters because instant credit has moved from novelty to mainstream in India’s digital lending market. Redseer said in August that sanctioned digital loans had expanded from ₹0.15 trillion to ₹2.2 trillion in five years. The consultancy argued that speed, onboarding and accessibility are now “table stakes”, with the next competitive battle shifting to repeat borrowing rather than the first loan alone. In other words, rapid approval is no longer the whole story; lenders are now trying to keep borrowers in the system for a second, third and fourth loan. (redseer.com)

One bank pushing the speed message hard is IDFC FIRST Bank. Its FIRSTmoney page says eligible borrowers can apply digitally for ₹50,000 to ₹15 lakh, complete video KYC and, once approved, typically receive the money within 10 minutes. The bank says rates start at 9.99% a year, repayment can run from nine to 60 months and foreclosure charges are nil. Mint reported that the product can be applied for with PAN and Aadhaar details and no document uploads, though applicants still need to show the original PAN card during video KYC. (idfcfirst.bank.in)

Even on that official page, though, borrowers are given a reminder to read every eligibility line rather than rely on the headline speed claim. Different sections of the IDFC FIRST Bank material cited slightly different credit-score thresholds, referring in one place to a score of 710 and elsewhere to a minimum CIBIL score of 730. The bank also frames instant disbursal as conditional on approval and eligibility checks. That is a small discrepancy, but it illustrates a broader point: the advertised turnaround time is only one part of the offer, and eligibility rules can be just as important as technology. (idfcfirst.bank.in)

The Reserve Bank of India’s digital lending rules, issued in September 2022, were designed to make those conditions harder to miss. The central bank says a regulated entity remains responsible even when it uses a lending service provider or digital lending app. It must give the borrower a Key Fact Statement before the contract is executed, and digitally signed documents, including the loan summary, sanction letter, terms and privacy policy, should be sent automatically to the borrower’s verified email or SMS after the transaction. The RBI also says disbursal should go directly into the borrower’s bank account except in limited cases set out by regulation. (systemhealth.rbi.org.in)

That is particularly important because the app on a phone is not always the institution taking the credit risk. Paisabazaar describes its process as fully digital and says offers on its platform come from RBI-regulated credit institutions, but it adds an important qualifier: same-day credit is mainly for pre-approved offers and still depends on the borrower’s profile. Moneycontrol made the same distinction more bluntly, warning that many apps are only technology platforms connecting borrowers to an NBFC or another financial institution rather than lending themselves. (paisabazaar.com)

The bigger trap may be cost rather than timing. Moneycontrol reported in March that some digital loan apps deduct processing fees, platform charges, documentation fees and GST before the money is released, leaving a borrower who accepted a ₹20,000 loan with only ₹18,500 or ₹19,000 in the bank. Repayments, however, can still be calculated on the full sanctioned amount. The publication also pointed to repayment windows as short as two or four weeks, a structure that can make the effective borrowing cost far steeper than the headline interest rate and, in some cases, push people into taking a second loan to clear the first. (moneycontrol.com)

The practical lesson for borrowers is that the fastest loan is not automatically the best one. Market comparisons show that pre-approval status, existing relationships, digital onboarding and documentation can transform a lender’s timeline from seconds or minutes to days. RBI rules mean borrowers should receive a standardised summary before they commit, and consumer reporting suggests they should use it to check the actual lender’s name, the amount that will be credited, the total repayment figure, the tenure and any fee deducted upfront. In a market where speed has become ordinary, the real differentiator is whether the loan remains affordable after the first rush of approval has passed. (livemint.com)