Digital Lending Laws of India: A Comparative Study on China U.S.A. and India

Abstract

The internet-based lending platform that connects individuals seeking loans with those willing to lend money has undergone swift expansion since its establishment in 2005.1 The phrase 'online peer-to-peer lending (P2P)' delineates the process of originating loans between private individuals on internet platforms, where financial institutions serve solely as intermediaries mandated by legal requirements.2 The advent of the digital fintech ecosystem in India has brought about a transformative shift in traditional banking practices, particularly influencing the complex and time-consuming lending processes in the country.3 Emerging digital technologies within the banking and financial sectors, commonly denoted as 'FinTech,' possess the capability to revolutionize established business models in banking.4 Peer-to-Peer lending emerges as a result of financial innovation, taking the form of a virtual marketplace that facilitates the connection between authenticated borrowers seeking unsecured personal and business loans and investors aiming to attain higher returns through lending funds.5 The cashless transaction system is progressively expanding each day, particularly as the market globalizes and the banking sector advances. Consequently, an increasing number of individuals are transitioning from cash to a cashless system.6 Decentralized lending, commonly known as Peer-to-Peer (P2P) lending, offers digital users a pioneering method for borrowing and investing, eliminating the need for involvement from traditional financial institutions.7 By providing quick and uncomplicated access to credit, digital lending platforms may aid borrowers in overcoming financial challenges and/or refinancing high-interest debt, thereby potentially lowering the occurrence of bankruptcy filings.8 Digital lending played a role in addressing the financial requirements of individuals who had otherwise encountered numerous challenges in obtaining the necessary funds within a brief timeframe.9 The cashless system is not only an essential requirement but also a fundamental necessity in today's societal structure.10