A rising trend of digital lending in India is leading young borrowers into long-term debt cycles, with mounting financial and mental health repercussions driven by aggressive recovery practices and inadequate safety nets.
A Lucknow engineer’s first brush with an instant loan app began as a modest stopgap, but it soon became something far harder to escape. Rishabh Shukla said the borrowing felt routine at first: a small sum, quick approval and easy repayment terms. Yet when one payment was missed, he took out another loan to cover the first, and the pattern hardened into a long-running debt cycle that damaged his CIBIL score and made formal credit harder to obtain, India Today reported.
His experience sits within a much wider shift in India’s consumer finance market. According to the article, digital lenders now dominate much of the personal-loan space, while a survey by debt-resolution platform Expert Panel found that nearly six in 10 distressed borrowers who sought help were already making only minimum payments or had stopped paying altogether. Around 60% said their monthly EMIs matched or exceeded total household income, and 40% said they were taking fresh loans or using credit cards to service existing debt.
Mumbai-based recovery agent Suresh Gowda told India Today that many of the borrowers he meets are young workers whose incomes have not kept pace with living costs, peer pressure or the social media-driven urge to spend. He described a common pattern in which relatively small loans, often worth Rs 7,000 to Rs 15,000, can linger for years because repayments eat into already tight salaries. That squeeze has been sharpened by inflation, with government data showing consumer prices rising sharply over the past decade, making today’s pay cheques stretch less far than the numbers suggest.
The article also points to the darker side of recovery. Borrowers described repeated calls, visits to homes and workplaces and threats directed at relatives and employers. Expert Panel said harassment complaints were among the most common issues raised in counselling. Its director, Anurag Mehra, argued that the problem is no longer just missed EMIs but the erosion of dignity and mental health, particularly when financial shocks such as illness, job losses or family emergencies trigger a spiral of borrowing.
That distinction matters because much of the debt is not being used to buy homes or build businesses. The survey found that medical emergencies were the leading trigger, followed by family and personal expenses, job losses and day-to-day household needs. Manoranjan Sharma, chief economist at Infomerics Ratings, said household debt is becoming more fragile because unsecured personal and consumption loans now account for a growing share of retail borrowing. He said the answer lies in stronger safety nets, tighter lending standards, better affordability checks and more structured debt-resolution mechanisms.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
