India’s credit landscape isn’t just evolving – it’s accelerating at an unprecedented pace. Over the last decade, we’ve built an ecosystem where access is faster, broader, and truly inclusive – fintech innovation, instant credit, and digital onboarding have become everyday realities. We have seen digital lending grow at an unprecedented 132 per cent CAGR in the last few years, welcoming millions of new borrowers into the formal financial fold through instant loans, BNPL and credit cards.
But there’s a paradox at play. While technology has turbocharged disbursals, debt recovery mechanisms remain frozen in time. Today’s collection systems – manual, fragmented, and enforcement-led – belong to a bygone era. In an economy defined by digital-first, borrower-centric experiences, the old playbook doesn’t just feel outdated, it’s fundamentally misaligned with borrower expectations and regulatory mandates.
If credit is the engine of progress, then collections are its critical sustenance system – and right now, that needs a radical overhaul.
AI rewriting rulebook
For years, Indian collections have relied on high-frequency calls and low digital penetration, with borrowing intelligence often ignored. Agents are tasked with volumes, not context. The result? Low efficiency, borrower frustration, and reputational risk for lenders.
However, AI is now reshaping this narrative. With access to behavioural and transactional data, machine-learning models can segment borrowers far more accurately than traditional scorecards. The promise isn’t just in predicting the borrower’s intent to pay but performing real-time sentiment analysis to figure out the right tone, right message for the right channel and identifying the need of assistance based on borrowers’ dispositions.
It is enabling lenders to predict if a customer merits a gentle nudge over Whatsapp, an IVR, or a human call. The AI-driven precision is transforming collections from a confrontational tool to a calibrated-compassionate process.
Early engagement, tailored communication, and context-driven strategies – all powered by AI allow lenders to reach out sooner, treat borrowers with respect, and resolve delinquencies preemptively. What was once a manpower-intensive system is now ready to become scalable, intelligent and human-centric.
Enforcement to empathy: The shift that matters
At its heart, the biggest shift in collections isn’t just technological; it’s behavioural. Collections are moving from enforcement and intimidation to empathy and engagement.
Every overdue EMI conceals a story – a disrupted income, a sudden hospital bill, or just a new borrower learning the ropes. By treating debtors as default risks rather than individuals, the system perpetuates its own inefficiencies. When empathy enters the equation, outcomes transform.
Global benchmarks show that respectful engagement and transparent communication can lift repayment rates by over 30 per cent. Communication grounded in understanding builds trust, and trust drives repayment. For lenders, it means safeguarding customer relationships and brand equity. For borrowers, it rekindles their confidence in the formal credit economy.
Ananth Shroff, Founder, CEO, DPDzero
Empathy doesn’t mean waiving dues; it means recognising that tone, timing and transparency matter as much as the act of collecting money from the borrowers. In a maturing economy like ours, this is what a sustainable collections system looks like.
Small-ticket loans, big-picture impact
India’s borrowing patterns tell an important story about its economic evolution. More than 80 per cent of new retail loans are now unsecured and small-ticket, driving consumption, mobility, and entrepreneurship. Personal loan and BNPL products under ₹1 lakh are powering aspirations nationwide. Unsecured lending by NBFCs has surged, growing at 28.1 per cent compared with just 11.5 per cent growth in secured loans.
But rapid credit penetration comes with new challenges. Many first-time borrowers simply lack financial literacy – sometimes unaware of credit discipline, repayment cycles, or the long-term impact of missed payments.
Here lies the opportunity: collections can evolve from a gatekeeping mechanism to an engine of financial inclusion. Every borrower conversation isn’t just about recovery; it’s about education, about maturity, about nurturing long-term solvency. When engagement builds awareness – of credit scores, repayment history, future borrowing potential – the industry lays the groundwork for a financially responsible India.
From disbursal obsession to dignified collections
For years, India’s lending narrative has celebrated scale – record disbursals, digital onboarding and new-to-credit customers. But sustainable growth demands a shift – from celebrating disbursal to ensuring viability. The true test of our credit ecosystem isn’t in how fast loans are handed out, but in how responsibly they come back.
Responsible recovery means early engagement, context-aware communication, and ethical interventions backed by data. It’s about treating borrowers fairly, upholding privacy, and always preserving dignity and trust. In this sense, collections are no longer the “end of the credit cycle” – they’re an integral part of the customer’s journey and the entire credit value chain. This is going to determine whether India’s credit expansion endures or collapses.
Road ahead: Building trust at scale
India’s personal loan market is now valued at hundreds of billions of dollars. The average ticket size for fintech-disbursed personal loans is just ₹9,861 as of early FY24 signalling mass-market penetration. But alongside expansion comes the imperative for caution. RBI’s latest data shows that GNPAs have reduced to 2.58 per cent as of March 2025, while warning that true stress may lurk beneath.
As access widens, responsibility must deepen. AI-driven systems will make collections more precise; the next step is making them more compassionate. By merging predictive analytics with empathetic engagement, the future of debt collections won’t just minimise defaults and maximise recoveries – it will strengthen borrower trust and financial inclusion.
At the end of the day, credit rests on a foundation of confidence – confidence to lend, to borrow, and to recover in ways that are fair, transparent, and humane. For India’s credit revolution to persist, collections must evolve – trading confrontation for collaboration, and enforcement for empathy.
Debt collections, ultimately, are more than reclaiming dues. It’s about fortifying trust – between the lenders and borrowers. And that’s the promise that will define the future of a truly inclusive financial Indian economy.
(The author is the Founder, CEO of DPDzero)
Published on December 8, 2025
