EJ Explains: Why 'Buy Now Pay Later' is under the RBI's lens

Buy Now, Pay Later (BNPL) mantra for consumerism seems to have hit the right chord with the young shoppers but seems to be off-key with the regulator. Reports indicate that the RBI has demanded data on the 'lending' and debt levels from the new BNPL segment.

Reports indicate that the central bank has sought details of shadow banks’ BNPL arrangements with e-commerce players.

Why one may ask is the RBI getting involved with personal shoppers? Shoppers using BNPL take on short-term, often interest-free loans to pay for their purchases and sign on to a scheduled repayment plan to pay back the debt.

The surge of spending under BNPL has sparked concern with regulators around just how much debt risk BNPL could be creating and what arrangements are being executed between the shadow banks and e-commerce players.