Fintech start-ups chug along the loan growth path as banks, NBFCs falter

Many customers are migrating from both public and private sector banks to avail credit through this route

At a time when credit growth at banks and non-banking financial companies (NBFCs) is losing steam, new age fintech lenders are showing no signs of slowdown fatigue. Instead, these app-only lenders have seen significant rise in their disbursals as more number of applicants are opting for loans from them. Top executives from fintech industry say not only does demand for loans remain robust, even fund flow from banks and NBFCs have improved after the market began facing a liquidity issues following the IL&FS crisis.

"During the past 6-7 months (post the IL&FS crisis), we have seen increased pace of loan demand. Quarter on quarter, we are growing at close to 25 per cent. So, there is no slowdown," said Ketan Patel, executive director and CEO at online lending platform CASHe. "Also, out of our 17 lenders, not a single one has reduced its withdrawal limit. Instead, they are more than willing to lend more."    

CASHe, which operates through its NBFC Bhanix Finance and Investment Ltd, has seen the download of its app touching 250,000 as of now, from 100,000 at the end of last fiscal. The online lending platform provides personal loans in the range of Rs 5,000-200,000, with an average tenure of 15-180 days to customers. It expects a turnover of Rs 1,000 crore by end of this fiscal.

Another digital lending start-up, IndiaLends, which operates as an intermediary between the financial institution and customer, is also witnessing greater push from its lenders to grow the retail loan pie.

"Post IL&FS crisis last year, we have seen increased flow of fund from our lending partners with a mandate to improve the retail loan book. So, our loan disbursals have gone up by 20 per cent in Q2 over the preceding quarter," said cofounder of IndiaLends, Mayank Kachhwaha.

While no separate credit disbursal data specific to fintech firms is available, according to industry body, the Digital Lenders Association of India, the digital credit industry including MSME, consumer loans among others, is pegged at around $5 billion (over Rs 30,000 crore). Of this, the unsecured personal loan market is pegged at around Rs 6,000 crore.

Despite this, industry experts said that growth of digital lending platforms in the midst of a slowdown indicates the growing maturity of the industry.

According to a Reserve Bank of India (RBI) report, credit disbursals by commercial banks grew 12.2 per cent as on August 2, 2019, whixh is lower than 14.2 per cent reported in the same period last year.

Meanwhile retail loans from banking sector have already been showing sluggish growth since April this year. For instance, while retail loans grew 15.7 per cent in April this year as compared to 19 per cent one year ago, credit card loan growth slowed to 26.4 per cent from 35 per cent a year earlier. Similarly, the loan growth for agriculture and allied sectors has also slowed down in recent months.

"If you compare the loan growth in the formal financial services sector, it has slowed down in contrast to digital lending segment. The only argument of low base for digital lenders also doesn't work, as many customers are also migrating from both public and private sector banks to avail credit through this route," added Kachhwaha of IndiaLends.

No wonder, with such an optimistic growth outlook, investors are making a beeline for infusing capital in these digital lending platforms. In the second quarter of this fiscal, there were a total of 23 deals with a fund infusion of about $350 million in the Indian fintech landscape, reflecting the slow but steady structural shift in consumer preferences.