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Getting a personal loan online to tide over the current financial crisis could prove to be a tad difficult as many fintech digital lenders are turning extra cautious, especially towards new borrowers.
Firms point out that while demand for personal loans has gone down in the current lockdown, the extended moratorium on term loans till August 31 is also making them more prudent in their policies.
Demand-supply side issues
According to Gaurav Chopra, Founder and CEO of IndiaLends and President, Digital Lending Association of India, there are issues on both demand and supply sides since the Covid-19 pandemic broke out.
“Lenders are concerned about the ability of people to repay loans. A major part of lending used to happen through physical means for banks but that has dried up. The six-month moratorium has also put a question mark on how far borrowers will be able to repay. Also, many NBFCs have not been granted moratorium by their banks,” he said, adding that demand is also muted as consumers do not require personal loans for holidays and weddings.
Demand for personal loans is mostly coming from those facing financial distress from job losses, salary cuts, and medical or education expenses.
Demand for loans
A survey by IndiaLends revealed that 72 per cent respondents would be willing to opt for a personal loan in the immediate future to meet high-priority expenses such as debt repayment, to meet essential, medical and educational needs, and for home repairs and renovation.
“Most lenders are being cautious. It is easier to evaluate existing customers while new customers are difficult to assess,” Chopra said, adding that the case is the same for banks, NBFCs and fintechs.
Madhusudan Ekambaram, CEO, KreditBee, said until the start of March, it used to get 75,000 to 80,000 new loan applications every day and lend out 45,000 loans on a daily basis.
“We are servicing our existing customers but not really new customers as we have decided to wait till August-September to scale up lending after the moratorium ends. A lot of lenders have tightened up although there is a lot of demand for personal loans to get cusumer durables,” he said, adding that due to the extension of the moratorium, credit underwriting norms are now being tightened even more by both banks and NBFCs, and assessment metrics are being re-looked at.
Repayment capacity buffers will change quite a bit going forward, he noted.
New challenges
Anuj Kacker, Co-founder, MoneyTap, also said the second moratorium has thrown a new set of challenges for the lending institutions. “Initially, the idea was to start lending from June 1 when the moratorium ended. But if someone has taken a moratorium due to cash flow issues, then the lender can't give the borrower more money until their moratorium period gets over,” he said, adding that even though the demand for credit has gone up, the lending has become slow.
Existing customers are borrowing from their line of credit, he said and noted that the borrowing is at a reduced level as expenses have gone down during the lockdown.
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