India’s EMI crisis: From default to discipline

India is facing a silent yet massive crisis: over 10% of EMIs bounce every month, amounting to over ₹1.25 lakh crore in unpaid payments.

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Kundan Shahi, founder and CEO of Zavo

Contrary to popular belief, this default wave isn’t driven by fraud or a lack of intent. Instead, it stems from a fundamental mismatch between borrower needs and inflexible repayment systems. The traditional collections model in India remains a one-size-fits-all one, where the response to missed payments is often post-default harassment, recovery calls, and penalties. This approach has proved ineffective. With 22% of platform defaults stemming from these outdated methods, borrowers end up stuck in a cycle of increasing debt, stress, and alienation.

Borrowers, particularly in India’s younger generations, are no longer responding to the old fear-based systems. They seek flexibility over punishment. About 78% of Gen Z and millennial borrowers have expressed that they value flexibility in repayment plans and incentives, rather than the traditional penalty-driven approach. These borrowers want options, grace periods, and structures that adapt to their real-world financial situations. They want systems that recognize their effort to stay disciplined, not just punish them for minor missteps.

In short, borrowers need a system that helps them before they default, not one that punishes them after. In this environment, platforms like Zavo— India's largest community of EMI payers, founded in 2024 by Kundan Shahi— are stepping into redefine the narrative.