India's household financial landscape shows concerning trends as net financial savings have fallen sharply to about 5.2% of gross domestic product in 2023-24, down from nearly 7.7% in pre-pandemic years, according to a white paper by Client Associates titled The New Indian Household Balance Sheet. As reported by Mint, this decline is driven by rising borrowings that are eating into household surpluses, with household financial liabilities climbing to 6.2% of GDP, a decade high. The deterioration is attributed to rapid growth in home loans, personal credit, and credit card spending, creating a challenging financial environment for Indian households.
Amid this financial stress, buy now and pay later (BNPL) has become a new habit for Indian consumers, as reported by Mint. BNPL operates as a short-term loan allowing immediate purchases with repayment in instalments or interest-free deferred payments. According to Jagadeesh Mohan, founder of EMI Saver, the merchant absorbs interest and processing fees on behalf of customers, protecting brand value while opening access to products for buyers who couldn't otherwise afford them. The service is available through apps like LazyPay and Mobikwik, as well as e-commerce platforms such as Amazon and Flipkart through their Pay Later features.
While BNPL appears interest-free initially, late payments can trigger annualized interest rates of 24-48% or higher, as explained by Ritesh Srivastava, founder of FREED Care. The system offers repayment flexibility through lump sum payments or EMIs, with processing and convenience fees often buried in checkout flows. According to Mint, failed auto-debit mandates can attract additional bank penalties like bounce charges when linked bank accounts don't have sufficient balance. The behavioural cost becomes apparent when borrowers don't immediately feel repayment impact due to 30-45 day holiday periods before payments begin.
BNPL usage affects credit scores similarly to credit cards and loans, with on-time payments helping build credit while late payments cause immediate damage. As reported by Mint, the Reserve Bank of India has integrated short-term digital credit into the formal credit reporting system to prevent over-leveraging. Srivastava recommends that monthly repayments should fit within budget constraints and BNPL should never be used to repay existing loans. He warns that EMIs exceeding 40-45% of take-home income represent a red flag, suggesting borrowers prioritize clearing high-interest balances first.
