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BharatPe, a major fintech company in India, launched peer-to-peer (P2P) lending for individuals in August, offering returns up to 12%. The platform already had P2P lending for merchants in place, giving it a head start in this field. BharatPe has partnered with existing licensed P2P players such as LenDenClub and LiquiLoans for this service, but has fixed certain parameters to protect its own investors. Suhail Sameer, chief executive officer of BharatPe, speaks with Mint about the P2P business. Edited excerpts:


Tell us about the BharatPe peer-to-peer offering (the 12% club)?

“12% Club" has been launched in partnerships with RBI-registered P2P NBFCs (non-banking financial companies). The P2P offering will allow individual customers to invest and earn up to 12% interest through the 12% Club app. Also, consumers can avail of loans at 12% interest rate, if their credit score is sufficiently high. 12% Club was launched about six weeks back and we have witnessed a great response. We have 600,000 users on the merchant side. On the consumer side 12% Club has 73,000 members and it is scaling fast. The app has already facilitated P2P investments and loan disbursals of $12 million.

What is the gross rate (lending rate)?

It is a narrow range based on your CIBIL score, or on how much data BharatPe/ P2P NBFC has about the loan seeker. Gross rates on average tend to be 24%, but it may vary from 18 to 27 %. This gives the NBFC partner enough cushion to cover for any default, given investors are earning up to 12% on their investment.

What is tenor of these loans?

According to RBI rules, 36 months is the maximum tenor. All NBFC partners we work with don’t usually give more than 15 months; for our merchants it is three months, six months or 12 months. Essentially, most of them are working capital loans. For example, if you are a new merchant taking your first loan, our NBFC partner would normally give a loan of three-six months’ tenor. But if you are a repeat borrower, the NBFC partner may give you loan of 12-month tenor, as you have proven that you can repay in time.

What about default rate?

The average default rate depends on the segment you are playing in. The default rate for loans given out by BharatPe’s partner P2P NBFCs is below 3%, whereas the industry average tends to be 5-6%. We work with P2P NBFC partners such as LenDenClub and LiquiLoans. They decide what class of loans are allowed, what risk to take, and take our advice, because eventually, even though the liability is fully with the P2P NBFC partners and not with us, the consumer or merchant is using our platform, and I don’t want him to lose trust on our brand.

Your customers don’t select individual borrowers, right?

There is a bunch of borrowers and a bunch of lenders (investors). The P2P NBFC algorithm does the matching based on risk and then it goes ahead with disbursements. So, each investor is effectively lending to at least 100 people and each borrower is effectively borrowing from at least 30-40 people if not more, depending on the size of the loan. Therefore, whenever an individual borrower defaults, the impact on the portfolio, even on full default cannot be more than 1%. As per norms, the exposure to an individual borrower for a single investor can never be more than 5% of the investment amount. Our partner NBFCs restrict it at 1%.

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