In FY25, fintech NBFCs sanctioned a record 10.9 crore personal loans worth ₹1,06,548 crore; while accounting for just 12% of total personal loan value, they drove 74% of all loan volumes in India. Every one of those crores of loan accounts carries a non-zero probability of a missed EMI. India’s origination infrastructure has scaled magnificently. Its dispute resolution infrastructure has not.”
That is not gradual market expansion; it is a credit explosion, and every one of those millions of new loan accounts carries a non-zero probability of becoming a missed-EMI case. India’s digital lending infrastructure Aadhaar, UPI, Account Aggregators, and AI-driven underwriting has solved origination at a scale few markets can match. But origination was only ever half the problem. The other half, dispute and default resolution at the same scale, has no comparable infrastructure behind it, and that gap is now the single biggest structural risk sitting inside India’s fintech growth story.
The volume problem is structural, not cyclical
India’s courts are sitting on more than 56 million pending cases, with district courts alone carrying over 85% of that backlog. Against just 21 judges per million people, a fraction of the recommended benchmark of 50, the judiciary is not positioned to absorb the surge in financial disputes that digital lending has set in motion. For lenders and NBFCs, this isn’t a future risk to be stress-tested in board presentations; it is a present-day collections reality.
The traditional escalation path missed EMI triggers a recovery agent, agent triggers legal notice, legal notice triggers court filing was designed for a credit ecosystem of a different era and a different scale. It doesn’t hold up against a portfolio of digital borrowers spread across hundreds of districts, speaking dozens of languages, many of whom are first-time credit users with limited familiarity with formal recovery processes.
Why purpose-built ODR, not generic dispute tech, is the answer
The response to this challenge has to be Online Dispute Resolution (ODR) but not ODR as a generic category. The same way UPI grievances and account aggregator disputes have been routed to dedicated, purpose-built ODR infrastructure, loan recovery and debt resolution need their own structured system, built specifically for the realities of BFSI.
BFSI-specific ODR is meaningfully different from the consumer e-commerce dispute platforms that the term often brings to mind. Debt resolution disputes carry a distinct combination of regulatory stakes, compliance obligations, and recovery-economics dynamics that generic platforms aren’t architected to handle. Multilingual borrower outreach, alignment with the RBI Fair Practices Code, resolution workflows that generate defensible audit trails, and data handling compliant with the Digital Personal Data Protection (DPDP) Act these aren’t optional add-ons for a financial services context. They are the core of what the platform needs to do.
A platform designed to resolve a consumer’s complaint about a delayed e-commerce delivery operates in an entirely different risk environment from one handling a missed-EMI case between a borrower in a Tier 3 city and a regulated NBFC. Lenders who try to retrofit the former for the latter will find themselves exposed operationally and regulatorily.
The business case for lenders is direct, not aspirational
There is a tendency in fintech to frame compliance and ethics-adjacent solutions as CSR or brand value investments. ODR for debt resolution is neither. For NBFCs and lenders, it is a direct lever on three metrics that matter: recovery rates, NPA reduction, and cost-to-collect.
Structured online negotiation resolves missed-payment cases faster and at significantly lower cost than legal escalation. It reduces the time a case sits unresolved, which directly affects the lender’s ability to reclassify and recover. It also reduces the regulatory and reputational risk that comes with aggressive or non-compliant recovery practices — an area of increasing RBI scrutiny, particularly under the Digital Lending Directions.
Beyond recovery economics, ODR generates something that legacy collections approaches cannot: a documented, time-stamped compliance trail. In a regulatory environment where the expectation of auditability is increasing, that trail is an asset on its own. It demonstrates that the lender followed a fair, transparent process, one that regulators can examine and borrowers can understand.
Guardrails decide whether ODR helps lenders or exposes them
As with any infrastructure that moves fast in a regulated sector, the risk is not the category itself but the quality of implementation. Generic or poorly governed dispute tools can drift into one-sided settlement pressure, fail to meet legal enforceability standards, or be structurally incapable of handling the data sensitivity requirements under the DPDP Act.
This is precisely why the distinction between purpose-built regulated-lending ODR and consumer dispute tooling matters. The former is built with fairness and auditability as foundational design principles, not as features layered on after the fact. It is built to hold up if examined by a regulator, challenged in a court, or scrutinised by a borrower’s legal representative. The latter was built for a different problem and optimised for a different risk profile.
Lenders adopting ODR need to ask not just whether their platform resolves disputes, but whether the resolution process can withstand regulatory scrutiny, whether the outcomes it produces fit within existing legal frameworks for settlement and recovery, and whether the borrower experience meets the standards the RBI has outlined for fair practices in digital lending.
The window for early movers is open but not indefinitely
India cannot litigate its way through fintech-scale dispute volumes, and lenders cannot collect their way through it via legacy escalation either. The math doesn’t support either path. What the scale, speed, and compliance demands of India’s digital credit ecosystem require is ODR infrastructure that was designed with precisely those demands in mind from the ground up.
The NBFCs and lenders who invest in purpose-built debt resolution infrastructure now will not just stay ahead of regulatory expectations; they will set the operational standard that the rest of the market eventually has to follow. As RBI scrutiny of recovery practices increases and Digital Lending Direction compliance becomes more stringently enforced, institutions without a structured, auditable ODR framework will face growing exposure.
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The case volumes are already outpacing what legacy collections and an overstretched judiciary can absorb; the RBI’s compliance expectations are already tightening, and the infrastructure to resolve disputes responsibly at scale already exists and is already being used by lenders who moved early. What remains open is a narrowing window of choice: act now and shape the standard, or wait and have it imposed.
Views expressed by: Mayank Khera, Co-Founder & COO, Credgenics
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