The Loan Trap Revisited: Towards A Borrower- Centric Legal Regime For Digital Finance In India
- IJLLR Journal
- Jan 27
- 2 min read
Harsh Srivastava, CHRIST (Deemed to be University)
ABSTRACT
The near-instant expansion of digital lending in India has led to the provision of financial access to millions of people but has precipitated new dangers of exploiting the borrowers, such as excessive interest rates and methods of forceful recovery, as well as breaches of data privacy and mental harm. Regardless of these systemic issues, India does not have a unified statutory framework that identifies and safeguards the rights of the borrower in the digital age. The issue of the research, then, is the discrepancy between the constitutional concepts of the dignity and privacy, expressed by the courts, and the piece-meal, lender-focused reality of the regulation.
The paper aims at critically analyzing the current statutory and judicial framework that regulates digital lending in India, evaluating how well this framework protects the rights of borrowers, and how it compares with regulatory frameworks in other countries. The goals are threefold: to map the contemporary Indian legal environment, including the Information Technology Act, the Consumer Protection Act, the Digital Personal Data Protection Act, FEMA, and RBI guidelines; to examine judicial precedents, including Puttaswamy, Shanti Devi Sharma, PC Financial Services, and Supertech to formulate the principles of borrower protection; and to make comparative conclusions relying on such jurisdictions as the United States, the United Kingdom, the European Union, South Africa, Nigeria, and Indonesia.
The research methodologically follows the doctrinal approach based on the statutory interpretation, the analysis of case law, and the comparative study of the law, which are backed by the secondary literature such as scholarly articles, regulatory reports, and international instruments. Normative evaluation and practical critique are both possible with this triangulation.
The provisional finding is that the strategy used in India is still splintered, reactive, and limited in its focus, emphasising on the stability of the systems at the expense of the borrower dignity and psychosocial traumas. Comparative models demonstrate that rights of the borrowers may be codified by using preventive regulation, harmonization and centralized oversight. This paper proposes that the only viable way to go is the introduction of the overall Borrower Protection Act which takes the constitutional values and makes them binding and enforceable in statutes.
Keywords: Digital Lending, Borrower Protection, Financial Regulation, Consumer Rights, Comparative Law
