Credit and Finance for MSMEs: Online non-banking financial company (NBFC) LoanTap is targeting to disburse Rs 1,000 crore loans in the financial year 2021-22 up from over Rs 600 crore so far along with onboarding over 82,000 fresh customers, CEO and Co-founder Satyam Kumar told Financial Express Online. The digital lending startup, which offers business loans, personal loans, etc., and had tied up with Bank of Maharashtra in February this year for co-lending to MSMEs, had a default rate of less than 1 per cent before Covid which inched up to 2 per cent in terms of days past due post-pandemic. LoanTap has raised over Rs 170 crore in funding so far from investors including 3one4 Capital, India Quotient, Shunwei Capital, Avana Capital, Kae Capital, etc.
“We have maintained a cash-positive balance sheet since our inception in 2016. We were able to manage and keep our cash burn very low which eventually helped us to achieve our targets. Till date, we have disbursed over Rs 600 crore of funds across 35000+ customers. Money is a raw material for us and therefore we aim to raise debt-and-equity rounds to create a larger loan book that can cater to more customers, especially in untapped markets,” said Kumar.
To provide relief to businesses and individuals impacted due to the pandemic last year, the Reserve Bank of India had in March allowed lending institutions to provide a moratorium on installments of term loans due between March 1 and May 31, 2020. The period was further extended till August 31, 2020. RBI had also permitted banks to undertake one-time loan restructuring of certain categories of loan accounts facing Covid stress without classifying them as NPAs.
“Restructuring should have been announced from the beginning as most of the people were having money to repay back but they were not sure about the future situation as to how their cash flow will stack up. The industry was running at 27-40 per cent of moratorium whereas we were running at 11 per cent of moratorium. We are able to manage credit loss of about 5 per cent,” added Kumar.
The online lending market has been under the RBI and government scanner for some time to crack down on fraud Chinese lending apps operating in India. Following the ban on over 250 apps of Chinese origin ranging across categories such as social network, gaming, e-commerce, news, business, photo, and video editing, and more, the government had last month blocked 27 lending apps under Section 69A of the Information Technology Act, 2000.
In a circular dated June 24, 2020, RBI had reiterated to banks and NBFCs to disclose names of digital lending platforms engaged as agents on the website while lending platforms were required to disclose upfront the name of the lending institution on whose behalf they are lending. Further, a press release was also issued on December 23, 2020, cautioning people against unauthorised digital lending platforms with an appeal to verify the antecedents of the service provider. The central bank had also constituted a Working Group on January 13, 2021, to study all aspects of digital lending activities including lending through online platforms and mobile apps by RBI regulated and unregulated entities. The group had to also come out with recommendations pertaining to regulatory and customer protection measures.