Delhi HC digital lending concerns came to the forefront after the Delhi High Court asked the Reserve Bank of India (RBI) to clarify whether digital lending applications are violating the data protection rights of borrowers. The court examined allegations that several app-based lenders collect sensitive personal information without clear or informed consent.
The issue arose during a hearing on a petition that questioned the data collection practices of digital loan platforms. According to the petition, some apps access contact lists, device data and personal details that may not be essential for loan processing. Such practices, the petitioner argued, could breach the constitutional right to privacy.
The High Court sought a clear response from the RBI on whether these actions breach existing data protection standards. The court also asked how the central bank ensures compliance with its digital lending rules. Judges stressed that financial data requires a higher level of protection because misuse can cause serious harm to borrowers.
Digital lending has expanded rapidly across India, driven by the demand for instant and paperless credit. While this growth has improved access to loans, it has also raised concerns about transparency and accountability. Complaints related to data misuse and aggressive recovery tactics have increased in recent years.
The RBI has issued guidelines to regulate digital lending platforms. These rules require explicit user consent, limited data access and fair lending practices. However, the court indicated that gaps in enforcement may still exist, which makes stronger oversight necessary.
Legal experts believe the case could have a major impact on the fintech sector. A firm stand by the court may force digital lenders to improve data handling practices. It could also push regulators to tighten monitoring systems.
The RBI is expected to submit its response before the next hearing. The court’s decision may shape future policies aimed at protecting borrowers while allowing innovation in digital lending.
