💸 VC cash dries up for digital lenders

PLUS: India’s ₹1 lakh Cr RDI fund to launch in November

Author

Ruchirr Sharma
September 25, 2025

 

Good morning. One day closer to the weekend when those who haven’t watched Ba***ds of Bollywood can binge the show 📺️ 🤙 

Ruchirr Sharma & Shatakshi Sharmaa  

TABLE OF CONTENTS

VENTURE CAPITAL

Source: ETBFSI

India’s digital lending boom is hitting a funding wall. Venture capital inflows into the sector have plunged 50% year-on-year, dropping to $462 million between Jan–Aug 2025 from $1.1 billion last year, according to Tracxn data.

Only 50 of this year’s 154 fintech deals went to digital lenders once the darlings of India’s fintech scene.

Why the slowdown?

  • Regulatory pressure: The RBI has tightened rules on unsecured and short-duration consumer credit, raising risk weights on such loans.

  • Investor caution: Startups are no longer being valued like tech disruptors, but like traditional NBFCs - with stricter focus on profitability, net worth, and asset quality.

  • Self-sufficiency: Several leading players like Kreditbee and Fibe are profitable, relying on internal accruals instead of fresh equity.

  • Funding shift: Large deals are now being driven by private equity, not VCs, with public markets emerging as an alternative - Kissht and Aye Finance have filed for IPOs.

The shakeout is also driving consolidation: Amazon bought consumer lender Axio, while Temasek’s Fullerton took control of Lendingkart.

Meanwhile, VCs are eyeing specialised fintech plays from insurtech to regulatory tech - over “generic lending.”

Big picture: Digital lenders aren’t out of the game. Many posted strong profits in FY24, though defaults are rising. Investors argue the tougher funding environment is a healthy reset, pushing the sector toward sounder unit economics and stronger credit discipline.

For now, though, it’s clear: easy money for easy loans is over.

INNOVATION

India is preparing to roll out its ₹1 lakh crore Research Development and Innovation (RDI) Fund by November, a first-of-its-kind initiative where public money will be channelled into private sector R&D.

How it will work:

  • The Department of Science & Technology will route capital via VCs, AIFs, IITs, and the Technology Development Board instead of making direct investments.

  • Support will include long-term, low-interest loans to corporates and equity contributions in startups.

  • There’s no cap on ticket size even large conglomerates can apply, provided they cover 50% of the project cost.

  • Approvals are being designed for speed within weeks of application.

Focus areas:

  • Sunrise sectors like AI, deep tech, biotechnology, medical devices, and energy.

  • The fund also aims to accelerate quantum technologies, building on progress made under the National Quantum Mission.

Why it matters:

  • In advanced economies, private players contribute ~70% of R&D spending. In India, it’s only 30–35%.

  • The fund hopes to close this gap by de-risking early-stage innovation and providing patient capital.

  • With global geopolitics opening space for indigenous technology development, India sees this as a chance to boost technological independence.

The big picture:
If executed well, the RDI Fund could shift India’s innovation model from government-driven science to industry-powered breakthroughs, strengthening both startups and big corporates in the race for global tech leadership.

GENERAL OVERVIEW

🗞️ Bite-sized summaries

🤝 Trade talks progress - India and the US are engaged in trade negotiations across multiple levels, aiming for an early, mutually beneficial agreement. Commerce Minister Piyush Goyal is in the US with senior officials, following positive discussions in New Delhi with American negotiators. The talks come after the US imposed steep tariffs on Indian goods linked to Russian crude imports. Both nations have held five rounds of negotiations on a proposed Bilateral Trade Agreement, targeting to double trade to $500 billion by 2030. The US remains India’s largest trading partner, accounting for 18% of exports and 10.7% of total merchandise trade.

🏏 USA cricket suspended - The International Cricket Council (ICC) has suspended USA Cricket’s membership, citing repeated governance failures, lack of compliance with membership criteria, and reputational damage to the sport. Despite the suspension, USA’s national teams will remain eligible to compete in ICC tournaments and prepare for cricket’s return to the 2028 Los Angeles Olympics. The ICC will oversee the management of USA teams and implement reforms to restore membership. USA Cricket had been warned in 2024 to fix compliance issues but failed to do so, even after co-hosting the T20 World Cup. Governance restructuring will be key to reinstatement.

HEADLINES

🧑‍🍳 What else is cookin’?

What’s happening in India (and around the world 🌍️)

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That’s all for today folks - have a lovely day and we’ll see you tomorrow.