RBI’s BNPL Tightening: What Triggered the Crackdown
India’s buy-now-pay-later (BNPL) story, once fintech’s fastest-growing credit segment, hit regulatory turbulence in late 2024. The Reserve Bank of India (RBI) issued new guidelines restricting prepaid-card-based credit, mandating transparent KYC, and forcing fintechs to operate under regulated NBFC or bank partnerships. Through Bnpl Regulatory Framework, the intent was clear: reduce shadow lending and protect first-time borrowers from hidden risk.
By 2025, several popular BNPL products — including Paytm Postpaid, Slice Card, and Uni Card — were temporarily paused or restructured to comply. The RBI’s June 2025 Digital Lending Framework 2.0 tightened further: fintechs must disclose partner NBFC names, interest rates, and ensure loan origination happens from regulated entities only.
While these measures addressed consumer risk, they exposed deeper questions about the quality of BNPL portfolios accumulated during 2021–2024 — a period of high growth and low underwriting scrutiny. Now, as defaults surface, the industry is undergoing its first large-scale stress test.
Insight: Regulation slowed BNPL’s speed, but it may have saved its credibility.Portfolio Quality Under Stress: Defaults, Recoveries, and Credit Behaviour
According to the 2025 RBI Financial Stability Report, fintech-NBFC BNPL portfolios showed a gross NPA rise from 3.5 % to 6.8 % over 18 months. Through Digital Lending Norms, this reflects delayed repayments by small-ticket borrowers, particularly in Tier-3 and student segments.
Three structural reasons for stress:
- Over-issuance during boom years: Between 2021 and 2023, Indian BNPL platforms onboarded 30 million new users, many with limited bureau footprints. Thin-file underwriting inflated exposure.
- Rising delinquency post-regulation: When limits tightened, many repeat users faced credit-line cancellations, triggering higher roll-overs and partial repayments.
- Collections friction: As auto-debit mandates came under scrutiny post 2022, manual collection reliance grew, raising cost-per-account recovery by 20–25 %.
Data from Experian India (2025) indicated that small-ticket BNPL loans (<₹5,000) had the highest stress — NPA levels 9 % +, versus 2.8 % for personal loans. Recovery rates averaged 78 % within 180 days, thanks to digital-first collection partners and bureau reporting.
Interestingly, the credit discipline effect is visible: active BNPL users now exhibit 15 % higher repayment punctuality on re-scored loans compared with 2023 cohorts. Fintechs are cleaning portfolios and recalibrating user eligibility.
Tip: A BNPL default doesn’t vanish — it follows the borrower into formal credit history.Fintechs Recalibrate: Risk, Capital, and Partnerships
Fintechs once valued for growth are now valued for governance. Through Fintech Nbfc Partnerships, the RBI’s co-lending structure means only regulated NBFCs can originate credit, with fintechs acting as sourcing and servicing partners. This has changed incentives across the board.
Key shifts underway in 2026:
- Risk Sharing Re-designed: Startups now operate on fixed-fee or profit-share models, limiting balance-sheet exposure but reducing yield volatility.
- Capital Efficiency Focus: Venture investors increasingly reward fintechs with > 2 % ROA and < 5 % delinquency, not just GMV growth.
- Data-Driven Underwriting: Firms use alternate data — UPI flows, salary credits, telecom patterns — to predict intent, not just income.
- Collections Innovation: Platforms like KreditBee and ZestMoney deploy AI chatbots for early recovery nudges, improving DPD 30 metrics by 12 % since Q4 2025.
Regulatory reforms are also reshaping capital access. RBI’s NBFC-Light framework allows smaller lenders to operate under lower capital thresholds but tighter reporting. BNPL fintechs align with multiple NBFCs to diversify funding risk. “Compliance as a moat” has become the new pitch-deck phrase.
Insight: For BNPLs, survival isn’t about more users — it’s about fewer mistakes.The New BNPL Playbook: Sustainable Credit in 2026
Through Credit Risk Analytics, the post-crackdown BNPL landscape is more disciplined. Key strategic pivots stand out:
1. Credit Bureau Integration 2.0: All BNPL loans now report to bureaus. Startups collaborate with CIBIL and Experian for near-real-time score updates. Transparent borrower histories improve both pricing and recovery.
2. Embedded BNPL: Large e-commerce and mobility players now host licensed BNPL products directly inside checkout journeys. This “embedded compliance” model reduces regulatory risk and builds user trust.
3. AI-Driven Portfolio Watch: Predictive AI systems flag high-risk cohorts early, using behavioural data like late-night UPI activity or salary-credit anomalies. RBI’s sandbox studies show up to 30 % lower NPA probability in portfolios using hybrid ML credit scoring.
4. Sustainable Credit Design: Players are launching “Responsible PayLater” plans — capped limits, interest-free grace periods, mandatory repayment education, and credit-health dashboards.
By mid-2026, India’s BNPL market is projected at US $18 billion in loan disbursements (up 12 % YoY) but with far cleaner books. The RBI’s tighter rails may have slowed expansion, yet they’ve improved system credibility — exactly what long-term investors wanted.
Tip: Growth without guardrails is hype; growth with governance is history in the making.The next chapter for BNPL in India won’t be about lending faster — it’ll be about lending smarter.
Frequently Asked Questions
1. Why did RBI crack down on BNPL players?
Because many fintechs offered credit through prepaid cards without proper NBFC licences or transparent KYC, raising consumer-protection concerns.
2. How has regulation changed BNPL operations?
BNPL fintechs must now partner with licensed NBFCs or banks, disclose credit terms, and report loans to credit bureaus.
3. What’s the impact on defaults?
Portfolio NPAs rose briefly to around 6–7 %, but better risk models and bureau reporting are improving recovery and borrower discipline.
4. Will BNPL still grow in India?
Yes — growth is moderating but healthier, with embedded BNPL within large merchant ecosystems and focus on credit quality.
5. What lessons can fintechs learn?
Compliance isn’t a cost; it’s the foundation for scale, investor trust, and sustained lending margins.