Buy Now Pay Later lets you split a purchase into interest-free installments, usually 3 or 4 payments across a couple of months. In India, the model exploded between 2020 and 2022, powered by players like LazyPay, Simpl, ZestMoney, Slice, and Amazon Pay Later. Then regulation caught up.
What went wrong
Many BNPL products in India were structurally consumer credit wrapped in a marketing veneer. Users didn't always realize they were taking out a loan. Defaults started appearing on credit reports, damaging scores without users understanding why. Some fintechs were effectively issuing credit without being licensed to do so.
RBI's response
In 2022, RBI issued guidelines that restricted how non-banks could load funds onto prepaid payment instruments using credit lines. This effectively shut down a common BNPL model overnight. Players pivoted hard — some partnered with licensed NBFCs, some became NBFCs themselves, some pivoted to credit cards, and some shut down entirely.
The current state
BNPL still exists, but it's cleaner and better disclosed. When you choose BNPL at checkout now, you know you're taking credit from a named NBFC. The interest-free nature only holds if you pay on time — miss a payment and you face real interest and late fees. It's a legitimate product with a place, not a magic "free money" button.
Should you use it
If you genuinely need to split a large purchase and will pay every installment on time, BNPL is a reasonable tool. If you're using it to afford things you couldn't otherwise, you're creating a debt trap for yourself. The consumer protection rule: never BNPL something you wouldn't buy if you had to pay in full today.