As Diwali and Navratri draw near, banks and fintech firms are now lining up new credit offerings to attract shoppers. From Buy Now Pay Later (BNPL) schemes with longer repayment windows to UPI-linked credit lines available directly on payment apps, lenders are making it easier than ever for consumer to open their wallets this festive season.

Jayant Upadhyay, COO, Olyv, says, "This festive season, BNPL players are offering more than the conventional EMI. With features such as UPI credit line access, micro-credit for small purchases, and instant checkout financing, BNPL is revolutionising the way consumers experience digital payments. It’s less about promotions now and more about seamless, personalised access to credit."

Actually, this year's credit push is being shaped not by lenders' marketing but by two significant policy developments: The Reserve Bank of India's stance on BNPL regulations and the rollout of GST 2.0, which will make many goods cheaper from 22 September 2025. For every consumer, this means that everyday products, such as packaged foods, toiletries, personal care items, and several categories of electronics, will see a lower tax incidence. For instance, many food items currently taxed at 12% will be reduced to 5%, while products in the 18% slab will remain unchanged but benefit from greater clarity. Automobile prices will become competitive in the current tax system.

The RBI, however, has taken a watchful stance on BNPL, which has seen rapid adoption over the past three years. The central bank's Payments Vision 2025 aims to increase digital payment transactions, enhance security, and promote innovation in the payment ecosystem, with a specific focus on exploring guidelines for BNPL services as part of its vision to regulate key intermediaries and ensure the safe growth of digital payments. This could mean stricter KYC checks and a grievance redressal system. Additionally, in May 2025, the RBI issued a master circular on digital lending, which requires greater transparency in loan terms and interest disclosures.

Debt trap

The very mix of cheaper products and flexible credit could pose risks. Financial planners warn that the combined effect of GST 2.0 and the expansion of BNPL/UPI credit lines may lead households to overconsume. With lower prices creating a sense of affordability and instalment schemes spreading payments over time, shoppers may take on multiple small debts and may not realise the cumulative burden. If repayments are missed, penalties and high interest costs can lead them to a debt trap.

Upadhyay said that BNPL can, in some cases, reduce the cost of a purchase through offers or discounts, but more often, its value lies in helping consumers manage payments over time. This makes it essential for users to remain aware of the actual product price, even as they benefit from the flexibility.

"For households managing festival expenses, this flexibility can provide significant relief. At the same time, it’s important for consumers to remain mindful of repayment timelines, because when used responsibly, BNPL can truly deliver affordability with less financial stress," added Upadhyay.

Balance with caution

For shoppers, the festival season 2025 could be one of the most affordable and credit-accessible in recent times. However, experts caution that while the system is designed to stimulate demand, shoppers must be cautious not to overspend. Regulators, meanwhile, are working to strike the right balance, encouraging innovation and consumption while closely monitoring debt-related risks.

Reeju Datta, Co-founder, Cashfree Payments, said, "Looking ahead, with innovations like UPI credit lines and the Unified Lending Interface (ULI) coming together, India is laying the foundations for a more inclusive and responsible credit ecosystem, one that could redefine how everyday Indians access credit well beyond seasonal peaks. The real test lies in sustainability, and banks and fintechs are already working towards it with sharper data-led underwriting and risk models. If executed well, these innovations will not just power festive growth, but also set the tone for how digital credit becomes a permanent, transformative layer of India’s payments landscape."