Risk-averse digital lenders focus on existing borrowers

Digital lending startups, which restarted disbursing loans in June, are focusing on existing customers instead of acquiring new ones amid business uncertainty. Loan disbursal volumes rose to about 50% of pre-covid levels in June, but 80-90% of new loans/top-ups were given to old customers.

“Banks and NBFCs are now taking low-risk bets and focusing on borrowers having a steady income flow. This would mean choosing salaried persons working in MNCs with more job security versus the self-employed. Lenders are pushing existing customers to draw more capital and utilize the full loan amount given to them,” said Bhavik Hathi, managing director, Alvarez and Marsal (India), a management consultancy.

“We have been looking at how we can protect our balance sheets. New customer acquisition has taken a hit as we are cautious about whom we are giving new loans to. However, there is demand from existing customers as they want to hold on to the line of credit given for emergencies in these uncertain times,” said Anuj Kacker, co-founder and COO, MoneyTap, a consumer loan provider.

More than 90% of MoneyTap’s loan disbursals were to existing customers, and new loan approvals are down by half as it tightened rules on customer acquisition in the short term, he said. Around 25% of its customers are opting for a moratorium, down by 10% from May, and MoneyTap believes it will be back to 80% of its disbursement volumes by the first week of September.

For Lendingkart Technologies, which provides working capital loans to small businesses, or MSMEs, 80% of new loan disbursals were to old customers.

“Our first response was to help our existing customers and see if they need any emergency credit line to restart operations. We also started looking at those who operate pharmacies, pharma labs and kiranas, which weren’t impacted much by the pandemic,” said Harshvardhan Lunia, co-founder and managing director, Lendingkart Technologies.

For Bengaluru-based CapitalFloat, disbursals climbed to 50% of pre-covid levels and were skewed towards e-commerce-led ‘buy now and pay later’ models, which is a smaller ticket loan. “Our focus is on existing customers. For new customers, the focus is on people generating cash flows and income,” said Sashank Rishyasringa, co-founder and MD, Capital Float.

Cash and revenue fluctuations faced by borrowers are also forcing lenders to look at providing shorter-duration loans, with smaller ticket sizes.