India aims to imitate several aspects of Beijing’s decades-long push for infrastructure and investment-led growth. But imitating China’s unrestrained digital lending boom in the consumer economy is definitely not on the governmental agenda. The Reserve Bank of India recently announced guidelines for app-based loans, which clearly demonstrate a willingness to rein down the sector following its excesses during the pandemic.

The RBI aspires to achieve a better balance between the risk for debt traps and the ability of digital lending to democratise credit. According to industry sources, the usual fixed cost of originating, servicing, and collecting a loan is 5,000 rupees ($60) for banks and a few hundred rupees for online platforms. Apps can advertise small-ticket lending across the vast country more effectively than traditional lenders as mobile internet becomes all-pervasive.