In July, Rathnesh Tripathi, a 26-year-old Mumbai-based digital marketing executive, needed Rs 10,000 ($134.6) in credit. After maxing out his ICICI bank credit card, he browsed through several loan apps on the Google Play Store. He eventually picked Dhani Services, the lending arm of the conglomerate Indiabulls Group.

The Dhani app has over 50 million downloads on the Play Store, and its OneFreedom card offered a very attractive 0% interest for a credit line of up to Rs 5 lakh ($6,728.5). All Tripathi had to do was pay back in three instalments over two months. Or as the company put it: “Ho jao free, Pay in three” (Become free, pay in three). Dhani was also offering a 2% cash back on all spends. It sounded too good to be true.

That’s because it was.

Tripathi realised that in order to avail a credit line of Rs 10,000, he needed to pay a monthly subscription fee of Rs 353 ($4.8). The subscription included other services Dhani offers, like free doctor consultations, a free stock-trading account, and discounts on medicines purchased on the app, and cash back (you can also individually subscribe to these services). However, Tripathi had no intention of using any of these services.

There were more surprises to come. Tripathi realised that he could use only Rs 1,000 or 10% of his credit limit in a day. That wasn’t enough to serve his needs. But having already paid the subscription fee, Tripathi made a mobile recharge of Rs 51 ($0.7). Even this tiny transaction was broken down into three EMIs of Rs 17 ($0.2) each, payable over 60 days. “I don’t need credit to buy a Rs 50 or Rs 100 recharge. The idea of paying it in three EMIs was so cumbersome,” he said. This was unlike other loan apps, which issue a credit line that gives a consolidated bill at the end of a billing cycle.

And since the EMIs were payable over 60 days, Tripathi had to pay the monthly subscription for two more months. Eventually, after using OneFreedom for mobile recharges worth just Rs 166 ($2.23) in total, Tripathi would end up paying Rs 1,171 ($15.7).

Image credit: Rathnesh Tripathi

OneFreedom basically put a spin on the age-old business of giving credit. Its premise of charging a subscription fee to avail a 0% interest rate has brought it 1.32 million paid users and it says it is on track to record a $100 million in revenue by the end of March 2022. But the monthly subscription fee is masking the true cost of the credit availed by users. And every transaction being spun off into three EMIs just adds more complexity to the product. Dhani is ultimately entangling users in a costly and complex proposition.

A Dhani spokesperson said that the average utilisation of credit lines for buckets higher than Rs 3 lakh ($4,037) is 20%.

AUTHOR

Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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