7 Reasons Why Investors Should Be Optimistic About Digital Lending in India

In this article, we'll provide 7 convincing arguments for why Indian digital lending is a promising market for investors.

Investors refer to the practice of lending money over the internet and a computer as "digital lending." Investors are eager to get their hands on this industry since it is expanding in India at an unheard-of pace.

Although many investors in digital lending have enjoyed some excellent returns, how trustworthy is it? This article will explore that question and provide 7 compelling arguments for why investors should choose this industry over conventional banking.

What is Digital Lending?

The act of lending money to a borrower digitally—typically online—is known as digital lending. Digital lending is anticipated to be the next big thing after being extensively implemented in India.

A digital loan or debt arrangement between two parties is characterised as one party providing money to another party in return for an agreed-upon interest rate.

Companies like Paytm, which provides loans to its consumers at a cheaper rate than conventional lenders, have embraced digital lending. As more individuals explore for methods to save money and receive interest on their savings, this kind of digital lending has grown in popularity in India.

People who desire to invest their money in different financial instruments including shares, bonds, commodities, and other assets are often lenders. The borrowers are often businesses or people who want money for either personal or professional purposes.

Reasons why Indian investors should have faith in digital lending

It is anticipated that the rapidly expanding digital lending market in India would continue to expand. Here are seven reasons why investors should have hope for this sector.

1. Lending is a low-risk investment

Many individuals invest in stocks and other financial instruments, but they don't want to risk their money. They may now generate money while they sleep by investing in digital lending.

Digital lending is a novel kind of investment that is gaining popularity among people. It is seen as a low-risk investment since there is no entrance fee, in contrast to other investments like shares or mutual funds where there is.

Investors may invest in loans offered by reputable firms like Paytm and Mobikwik via digital lending. These loans are then utilized for a variety of things, including travel, small company requirements, healthcare, and education.

2. There are no barriers to entry for new players

In India, the digital lending market is expanding quickly. The entrance obstacles for new players have been eliminated with the introduction of Lending Circles. Peer-to-peer lending and communal investing have been revived by the notion of lending circles. With no constraints on how much they may lend or borrow, lenders are now free to invest their money.

Individual investors are free to put their money in a lending circle without any constraints on how much they may lend or borrow. The idea is straightforward: Investors pool their funds with others and earn interest, while borrowers get loans with reasonable interest rates.

3. The lending market is growing rapidly

Due to digital lending, the lending business is expanding quickly in India. Around 10 lakh private investors have reportedly made investments in digital lending as of this point.

Digital lending is a method of borrowing when the lender is not physically present. The processing of the loan does not need the borrower to go to a bank or any other financial institution. After completing their applications, borrowers may get their loans immediately since all transactions are completed online.

By 2025, the digital lending industry in India is anticipated to reach $4 billion, with a projected annual growth rate of 20%.

4. The government has created a conducive environment for lending

The RBI's money lending rules were published in April 2018 with the goal of making lending simple and available. According to the rules, borrowers may borrow up to Rs 50 lakh without providing any collateral or security. This is the first time that a sum of money this size has been approved without any kind of security or collateral from the RBI.

With the RBI's restrictions on money lending, digital lending is expanding in India. This is largely due to the government's assistance in fostering an atmosphere that is favorable to both digital lenders and borrowers.

The RBI money lending guidelines are a step toward developing an environment in India that is favorable to digital lending. By providing information on the potential risks involved in investing in these loans, they have given individual investors more power.

5. Digital lending is a great opportunity to help those who cannot access traditional financial services

For people who lack access to traditional financial services because of poor credit histories or low credit scores, digital lending is a fantastic opportunity. It gives these people simple access to loans and other financial services.

In India, digital lending has assisted many people with low credit scores in getting back on their feet and improving their financial situation. Some of these people even started their own businesses as a result of receiving loans from online lenders.

6. India's population and the economy will drive growth in the lending industry

India's lending market is expanding quickly. The population and economy of the nation will propel the lending industry growth. Individual investors' ability to properly manage their funds will also be aided by digital lending.

Digital lending is predicted to play a significant role in the Indian lending industry's projected 10% yearly growth. Over the last ten years, the industry has grown quickly, and internet lenders have been successful in snatching up a substantial portion of the market.

7. There are multiple channels of lending including digital, peer-to-peer, and traditional channels

Lenders have access to a variety of channels in the digital lending industry. Peer-to-peer lending platforms, conventional lending platforms, and digital lending platforms are some of these channels.

Due to how simple it is for people to borrow money online and get cash in a matter of minutes, digital lending services are becoming more and more popular in India.

Peer-to-peer loans are being paid out in greater numbers now than in previous years. This demonstrates that by using technology, private investors have the chance to borrow money at attractive rates.

Final Thought

India's market for online loans is booming. Both the number of digital lending organizations and the total number of borrowers have grown significantly. This makes digital lending an extremely profitable industry, especially given the rising usage of mobile phones.

In this article, we've examined the causes of confidence around digital lending in India and compiled a list of seven justifications for investors' optimism.