Five Emerging Startups Riding India's New Lending Tech Wave

SUMMARY

As part of the digital lending playbook Inc42 Plus has handpicked five emerging startups that stand out in the crowd through their product offerings, distribution models, technology for lending and more.

While NPAs are a real thorn in the sector, startups are helping build non-banking financial data through distribution channels and other transactional data

Paperless loans specific to categories such as MSMEs, freelancers and homes are seeing the most innovation through automation, smart distribution and transparency in approvals

India’s digital lending sector is currently in a reset mode as the contracting GDP, moratorium, & Covid-19 has forced companies to adopt digital, review credit models & more. This playbook takes a deep dive into the challenges and new pathways adopted by digital lending startups for survival and scale!“People are much more serious about paying home loans’ EMIs than paying credit card EMIs. There are instances where people preferred to skip paying their credit cards’ EMIs, yet they paid EMIs of their home loans. The data too proves the point. The NPA in the case of home loans is less than 1%,” said Chokhani.“We have had zero default rate in pre-Covid era and still have almost zero default rate. The slight variation is because a few deaths occurred amid the pandemic,” Chopra said.“We want to solve the problem by reducing the costs of SME lending from the cost of origination to underwriting, which should be low so that process is digital as well,” Rupifi’s Jain explained.“With Recordent we are trying to build a similar file for MSMEs, a set of non-banking data that would help lenders to assess their creditworthiness,” Patro said.

Going through the previous chapters of our lending tech playbook, we have seen the massive impact of the lockdown and the moratorium on digital lenders and NBFCs. But since September, the market is on the recovery track and investor confidence in the lending tech is growing. However, that does not mean that all the demand-supply friction has been solved. Due to the unavailability of data and high risk involved in lending to some business sectors, lenders and digital lending startups have had to revisit a lot of the rules of the game.