Digital lending, the origination and servicing of credit through mobile applications and online platforms rather than physical bank branches, has become one of the fastest-growing segments of India’s financial sector. This study, “Digital Lending in India: Growth, Regulatory Framework and Its Role in Financial Inclusion,” examines three linked aspects of that growth: the scale and pace of market expansion, the regulatory response of the Reserve Bank of India (RBI), and the sector’s contribution to financial inclusion. Drawing on RBI notifications, National Payments Corporation of India (NPCI) transaction data and industry research, the study finds that India’s digital lending market expanded from about Rs. 0.15 trillion in FY21 to about Rs. 2.2 trillion in FY26, a period during which the RBI moved from the Digital Lending Guidelines issued in 2022 and the DLG framework issued in 2023 to the consolidated Digital Lending Directions, 2025. Over the same period, the RBI’s Financial Inclusion Index rose from 53.9 to 70.0, and monthly UPI transaction volume crossed 24.5 billion. The study argues that this growth has been largely additive rather than substitutive, extending formal credit to MSMEs and first-time borrowers, while noting that unregulated lending applications, assetquality stress in unsecured retail credit and uneven borrower literacy remain unresolved risks. The study is descriptive and analytical, based entirely on secondary data, and concludes with suggestions for strengthening enforcement, borrower literacy and differentiated prudential norms for small-ticket digital credit.

Mayuri Devidas Sarode, Dr. Ujwala Narkhede, "Digital Lending in India: Growth, Regulatory Framework and Its Role in Financial Inclusion" International Journal of Scientific Research and Engineering Development, V9(5): Page(1016-1031) September - October 2026. ISSN: 2581-7175. www.ijsred.com. Published by Scientific and Academic Research Publishing.