1. Convenience: Easy to use, often with a simple approval process.
2. Accessibility: Provides credit to underserved communities and those with little credit history.
3. Flexible Repayment: Offers a structured, often interest-free repayment plan.
4. Market Demand: Increasing consumer preference for deferred payment options.
Advantages (+):
1. Inclusive Credit Access: BNPL models expand financial access, particularly benefiting those without traditional credit avenues.
2. E-Commerce Boost: Tailored for online shopping, BNPL has bolstered e-commerce growth.
3. Consumer Spending: Encourages consumer spending by breaking up payments into manageable amounts.
Disadvantages (–):
1. Financial Risk: Consumers may overextend financially due to the ease of obtaining credit.
2. Regulatory Scrutiny: The growth has led to increased regulatory attention to protect consumers and the financial system.
3. Short-term Impact: Lenders curbing small ticket loans can reduce BNPL’s penetration rate in the short term.
RBI’s Role:
The Reserve Bank of India (RBI) has taken a cautious stance towards BNPL due to the rapid growth and potential risks associated with unsecured lending. Increased regulatory oversight, such as higher risk weights on consumer credit, aims to ensure financial stability and responsible lending practices. RBI’s directives may lead to a recalibration in the sector, with lenders possibly increasing their internal surveillance mechanisms and reassessing the risk of small ticket loans.
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