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An Inc42 Plus Story

Can Lending Startups Master The Art Of Loan Recovery Without Crushing Defaulters?

Suprita Anupam

Inc42 Staff

27 Oct'20 18 min read

While the government has clarified that lending startups cannot charge compound interest during the moratorium period, the Supreme Court has paused the NPA hearings until further notice

A significant number of digital lenders have opted for unethical and even illegal recovery practices and charging hefty illegal penalties, legal and financial experts have alleged

Will the lending tech startups that are leveraging predictive analytics, behaviour-based risk models, and invoice recording platforms help change the recovery game and solve the supply and demand-side headaches?

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!

Last month, a family of five in western India committed suicide citing huge debt and harassment from lenders.

This year, with two months still left on the calendar, the number of suicides has doubled from the last year. And the financial crisis, debt and harassment by recovery agents have been at the core of many of these suicides, be it, farmers, entrepreneurs or others.

In post lockdown coupled with moratorium, longest economic recession and lowest ever consumer spending, the stories of #OperationHaftaVasooli have exponentially risen across the country with lending startups using aggressive tactics to achieve some semblance of a recovery.

While banks and large NBFCs prefer to outsource loan recovery to agents, most of the startups which act as either small NBFCs or as distribution partners of banks/NBFCs have to get their own hands into the mud for their loan recovery, and most rely on tactics such as calling contacts and other known associates when borrowers are unable to repay on time.