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Why the fintech lending industry will have a tough time in the months to come

Industry insiders say repayments by low-income group borrowers will see massive defaults in the wake of the COVID-19 induced economic contraction. The good news is that the salaried, white-collar segment is holding on, while some businesses are showing signs of life.

September 14, 2020 / 10:56 AM IST

With the loan moratorium ending in August and the first 10 days of September done, early repayment trends for certain unsecured loans are looking bleak, say fintech lenders.

While the high-income salaried segment still seems to be better off, loans to blue-collar workers, weekly wage earners and freelancers could see large-scale defaults, they added.

Data shared by Mumbai-based CreditVidya show that within the unsecured portfolio, there could be defaults of 35-50 percent in the mass market segment (borrowers earning between Rs 10,000 and Rs 20,000 per month) and 20-25 percent in the mid-market segment (salaries up to Rs 60,000). The affluent segment, with incomes above Rs 60,000, could see defaults of 10-15 percent.

“Consumer confidence in the country continues to be low, and there is no doubt that fintech lending firms are going to be disproportionately impacted by this. The retail credit space does not look good,” said Abhishek Agarwal, Chief Executive Officer, CreditVidya. He expected lenders to tighten their credit lines and focus more on collecting dues.