Money & Banking

‘Uptick in credit demand from SMEs after note ban, GST’

Shobha Roy Kolkata | Updated on January 18, 2019

(From left) Gaurav Anand and Lucas Bianchi, co-founders of Namaste Credit Debasish Bhaduri   -  Debasish Bhaduri

Non-performing assets in SME loan book rising, says Namaste Credit’s director

There has been a steady uptick in demand for credit from small and medium enterprises (SMEs) over the last 18 months following demonetisation and GST. However, the supply of credit has been tight, leading to liquidity squeeze.

According to Gaurav Anand, co-founder and director of Namaste Credit, while this liquidity squeeze has not translated into a credit risk for SMEs yet, there is certainly a higher strain on them. Bengaluru-based Namaste Credit is a digital marketplace and provides a technology platform for SME loans.

“There is a strain and non-performing assets in the SME loan book are rising a bit, but it has not risen to a level where we should be concerned. We are hoping for some kind of support from the government,” Anand told BusinessLine.

Credit has impacted SMEs the most due to government reforms such as demonetisation and GST. That has increased the credit requirement of SMEs. On the other hand, supply has become tight due to the liquidity squeeze in the non-banking ecosystem after the IL&FS crisis. If things are not changed sooner and if SMEs are not given breathing room, this may translate into a credit risk, which could prove to be catastrophic for the economy.

“The government should take stock of the situation. They have already lowered GST rates, keeping in view that this sector is impacted they need to give some breathing space. We hope this situation will not snowball into a credit risk scenario where the NPAs will start impacting the segment even more,” he added.

Change in mix of lenders

Namaste Credit has close to 50 lenders, including banks and NBFCs, on its platform. Post-September, while a number of NBFCs stopped lending due to liquidity issues, some of the banks and large NBFCs have been trying to grab a share of the pie, said co-founder, Lucas Bianchi.

“The mix of lenders has changed; our disbursements have remained more or less similar. Post September, banks and large NBFCs have come in a big way to lend to SMEs,” he said.

The company has an average disbursement of around ₹100 crore a month; this is almost triple that of last year. It claims to have a conversion rate of 70-75 per cent against a conversion rate of 15-20 per cent if one goes to a single lender.

According to Anand, when an SME applies for a loan offline, it takes between four to six weeks to get an approval, and the first three weeks are spent assessing whether it is the right SME the lender wants to lend to. Namaste Credit helps crunch the overall duration by two to three weeks.

The company recently raised ₹25 crore ($3.8 million) in a Series A round from Nexus Venture Partners. It plans to use the money to expand to new markets, improve its technology and data analytics platform and scale the business.

Published on January 18, 2019

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