Modi now brings cheer to digital lending firms

Source: The Economic Times, Jan 02, 2017

BENGALURU: While Prime Minister Narendra Modi’s November 8 speech announcing the currency ban move served as a bonanza for digital payment and mobile wallet companies, his New Year eve speech has opened up opportunities for digital lending players, including startups in the space.

The PM had announced the inclusion of non-banking financial companies (NBFCs) in the credit guarantee scheme for small, medium and micro enterprises (SMEs) and also extended the scheme for loans up to Rs 2 crore. The credit guarantee scheme for SMEs was so far open only for banks, and the inclusion will help new-age NBFCs such as Capital Float and Lendingkart reach out to more borrowers.

“This is the first time that the government has opened the credit gua rantee scheme for NBFCs, and this is abig move. NBFCs are reaching (out) to SMEs in every nook and corner and covering us under the scheme will help in reaching out to more borrowers,” said Harshvardhan Lunia, cofounder of Lendingkart, which has so far lent to 7,500 SMEs.

“So far, NBFCs had to take the entire risk only by themselves, and some were still conservative in lending to borrowers who may not have been eligible under conven tional norms,” said Lunia.

The current credit guarantee scheme includes term loans or working capital facility up to Rs 100 lakh per SME borrower, extended without any collateral security or third-party guarantee. It was so far applicable only to scheduled commercial banks and some regional rural banks.

The guarantee cover available under the scheme is to the extent of a maximum 85% of the sanctioned amount.

“Extension of credit guarantees to NBFCs will help innovative players like us to penetrate under-served, new-to-credit borrower segments,” said Capital Float cofounder Sashank Rishyasringa. “Such guarantee schemes from the government have significantly helped digital lenders scale up in other economies like the UK. It shows confidence in the NBFC sector’s ability to drive financial inclusion,” he said.


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