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Exclusive: Fintech lenders set to restart giving fresh loans, but exercise extreme caution

Digital lenders say they need banks to ease their lending strings more; small businesses need some liquidity support to restart

June 24, 2020 / 10:46 AM IST

Lending start-ups are taking baby steps to restart loan disbursals as India slowly unwinds after weeks of a nationwide lockdown.

Industry insiders say that while recovery of existing loans is still a priority, some bit of lending is essential to ensure that small businesses restart, so that they are able to repay loans.

Delhi-based lending player Paisalo Digital and Bengaluru-based Kreditbee have already started lending from the first week of June. Gurugram-based lending company Aye Finance will start it next month.

“We will start giving out fresh loans from July,” said Aye Finance managing director Sanjay Sharma. “We will be extremely cautious while lending, but we believe certain sectors like general trade, grocery shops and others have done well during lockdown.”

Lending fintechs are undertaking this at a time when banks are still wary of giving out fresh loans. Some entrepreneurs point out that it is becoming challenging for them to raise fresh debt from larger lenders for onward lending, as they are tightening their lending screws. Even co-lending is becoming a challenge, they said.


There will be an issue of liquidity in the space, but the sense in the industry is that NBFCs which are in a comfortable financial position need to unlock some bit of lending to help restart the cycle.

While Aye was disbursing close to Rs 200 crore monthly during the pre-COVID days, the number would now be around Rs 40-50 crore, Sharma said.

Aye Finance is an SME-focused lender. It currently has 1.6 lakh active loans, and a portfolio of around Rs 1,800 crore.

Paisalo says the idea is to help players restart their businesses slowly. It extends income generation loans to kirana stores, papad makers, sandwich makers, food processers and others.

Paisalo Digital is a listed lender with a market capitalisation of around Rs 900 crore and has assets under management worth Rs 2,000 crore. It gives small business loans between Rs 10,000 and Rs 2 lakh.

“In case of banks, borrowers reach out to them. In case of NBFCs, we reach out to borrowers. We understand borrowers better; hence, I think players like us are in a better position to cater to the credit needs of small businesses as they slowly restart operations,” said Santanu Agarwal, deputy chief executive officer, Paisalo Digital.

Kreditbee is only catering to the needs of existing customers. It offers personal loans, loans for the self-employed as well as for consumer durables.

While it was giving out a million loans every month in the pre-COVID days, currently the disbursals have come down by roughly 90%, said KreditBee founder Madhusudan Ekambaram.

“We have a base of 28 lakh active borrowers, of whom roughly one-fourth have availed the moratorium while others were repaying even during the lockdown period…we are open to start lending only with borrowers not affected negatively by COVID,” he said.

While there are early signs of recovery, industry insiders continue to remain sceptical. Multiple lending players are tightening their credit screws. One top executive at a fintech lending start-up pointed out that there would be multiple borrowers applying for loans, and lenders have to be judicious about approvals and rejections.

Sharma of Aye Finance said that the big problem for fintech lenders is that banks are being extremely cautious. If they don’t ease up a bit, even good borrowers will suffer. If banks lend money to NBFCs on favourable terms, they can do onward lending to consumers.

“I feel disruptions in the organised sector were more. The micro-business sector has lower operational costs, and they will be able to turn around faster. Someone needs to pump in liquidity into this space,” said Sharma.

Abhishek Agarwal, chief executive officer of CreditVidya, said that liquidity in the economy will continue to be a challenge at least till August since most lenders will remain very careful during the next few months. Even those players who are now lending are just testing waters and will keep an eye out for repayment trends, he added.

“The biggest challenge now is appraisals. How do you segregate moratorium and non-moratorium customers is the question,” he said. Those players who were not targeting businesses in the essentials category cannot change their lending strategies overnight to target such players, he said.

Business challenges have opened up multiple acquisition and merger opportunities. Industry insiders pointed out that larger NBFCs have received acquisition proposals from smaller players. Very recently, InCred acquired Bengaluru-based fintech lender Qbera for an undisclosed amount.

“These deals will not be about the valuation, it will be about digital assets and good founders who can add value to the company acquiring them,” said a top executive at an early stage venture capital fund.

Madhusudan said that a lot of acquisition offers are doing the rounds. Some players could have niche lending capabilities, some could have cracked some new data underwriting methods, and well capitalised players are on the look-out for such assets.
Pratik Bhakta
first published: Jun 24, 2020 10:46 am

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