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The Moratorium Conundrum: Lending Startups To Restructure Accumulated EMIs And Credit Offerings Amid Rising NPA Fears

An Inc42 Plus Story

The Moratorium Conundrum: Digital Lenders Suffer Pandemic Blues

Suprita Anupam

Inc42 Staff

05 Oct'20 14 min read

The moratorium brought immediate relief to millions of consumers and businesses, but it was bought at the expense of lenders who had to agree to not get payments from borrowers

Taking a broad perspective, lending startup founders estimate that around 5%-20% of their outstanding books are under moratorium and hence the impact will be huge in terms of NPA

Calling out the implementation issues, some startups suggested that the moratorium should have been mandatory for all lenders instead of an opt-in system which has created avoidable issues

Playbooks

India's Digital Lending Reset

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!

‘One man’s meat is another man’s poison’

As well-intentioned as it may be the Reserve Bank Of India and the central government’s primary measure to bring relief to the middle-class populace and small businesses has badly dented the other side of the coin. And by that, we mean the very lenders that were asked to support this audience that had been badly hit by the pandemic’s economic impact.

According to reports by the All India Manufacturers’ Association (AIMO) and big data analytics firm Spocto, between 35% and 78% of MSMEs have either downed their shutters or are in the process of shutting shop in India right now. India has currently over 65 Mn MSMEs and even if we go by the more conservative estimate, this results in the closure of 22.75 Mn MSMEs. The startups, too, have been among the worst affected businesses with about 37 highly funded startups including Swiggy, Ola, Zomato, PaisaBazaar have laid off over 12K employees.