As digital lenders turn cautious, getting a personal loan is no more a child’s play

Getting a quick personal loan online to tide over the current financial crisis could prove to be difficult as many fintech digital lenders are turning cautious, especially towards new borrowers.

Firms point out that while the demand for personal loans has also 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 and supply side

According to Gaurav Chopra, Founder and CEO of IndiaLends, and President, Digital Lending Association of India, there are issues both on the demand and supply side since the Covid-19 pandemic broke out.

“Lenders are concerned about the ability of people to repay loans. A major part of the 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 got the moratorium from their banks,” he said, adding that demand is also muted as consumers do not require personal loans for holidays and weddings.

The need for personal loans arises due to financial distress from job loss, salary cuts, medical ailments, or education expenses.

A survey by IndiaLends had 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, essentials, medical, education fees, and home repairs and renovation.

“Most lenders are being cautious. It is easier to evaluate existing customers while new customers are difficult to assess,” said Chopra, 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 are waiting for August to September to scale up the lending after the moratorium ends.

“A lot of lenders have tightened up, although there is a lot of customer demand for personal loans and for customer durables,” he said, adding that due to the extension of the moratorium in two different phases, 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 further noted.

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 further said, but noted that the borrowing is at a reduced level as expenses have gone down during the lockdown period.

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