True Credits Raises $30 Mn In Debt Funding To Offer Payday Loans

SUMMARY

True Balance’s app was initially launched to help users manage phone calls and data usage and eventually started offering bill payment and payday loans through True Credit.

The company claims to have offered over INR 700 Cr in loans to 7 Mn Indians with loan ticket sizes ranging from INR 1,000 to INR 50,000.

The Reserve Bank of India’s (RBI) working group reported on a large number of illegal digital lending apps (DLAs) in the country and made recommendations to governing them.

True Credits, a non-banking financial company (NBFC), operated by True Balance, raised $30 Mn in debt funding from investors across India and Korea, raising a total of $55 Mn in FY2021. Northern Arc, Arthmate, Shine Star, E clear and Hinduja, and other Korean investors were the participants in the round.

True Balance India, a wholly-owned subsidiary of Balancehero Co. Ltd., Korea, is an RBI-authorised lending platform. Founded in 2014 by Cheolwon ‘Charlie’ Lee, True Balance’s app was launched in India in 2016.

After the inception, the platform started offering a range of financial products to its customers including the facility to pay utility bills and get instant payday loans. According to the company, it has disbursed loans worth more than INR 700 Cr to 7 Mn Indians so far with ticket sizes ranging from INR 1,000 to INR 50,000. The loans are issued through True Credits, an RBI-licensed NBFC.

True Balance’s app helps users manage phone calls and data usages. It uses an alternative credit scoring system (ACS) and machine learning-based underwriting models to offer loans to low-credit borrowers. Even though the company isn’t profitable yet, it aims to break even by the end of this financial year.

Digital Lending Apps (DLAs) in India

Last week, the Reserve Bank of India’s Working Group on digital lending through online platforms and mobile apps said that 600 of the 1,100 lending apps on app stores are operating illegally. A cursory glance at an application store platform like Apple’s App Store or the Google Play Store will reveal many predatory lending apps that are available for Indian users. Many users have registered complaints against this app we found on the Google Play Store, but it is unsure whether it operates illegally.

User complaints include the platform charging exorbitant interest rates, not registering settlements even after they are completed, and threatening to access users’ contact lists and sending messages to numbers on it.

In light of these complaints, the RBI Working Group made recommendations mostly focused on enhancing customer protection and ensuring that the digital lending ecosystem remains safe and secure.

RBI Recommendations

In the report, the working group made recommendations to subject all DLAs to a verification process by a nodal agency to be set up in consultation with stakeholders. “A nodal agency should be set up which will primarily verify the technological credentials of DLAs of the balance sheet lenders and LSPs operating in the digital lending ecosystem. It will also maintain a public register of the verified apps on its website,” said the report.

The report also recommended that all loan servicing, repayments and other transactions should be executed directly in the bank account of the balance sheet lender and disbursements should always be made into the bank account of the borrower.