About 45% fintech lenders see no impact of Covid-19 second wave on loan disbursements: FACE Survey

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About 45 per cent of fintech and digital lenders did not witness any significant impact on business during the second wave of the Covid-19 pandemic, according to a new survey.

In fact, they continued to disburse loans at the same or higher levels as they did in the fourth quarter of 2021, it revealed.

The survey by Fintech Association for Consumer Empowerment (FACE) of over 100 members revealed that 56.3 per cent of respondents continued to disburse loans in the second wave of the pandemic but did so cautiously and selectively.

Also read: Fintech start-up Boxop ties up with Mahindra Insurance for Covid treatment

About 31.3 per cent of the respondents disbursed loans at the same rate as that of pre- Covid levels while 12.5 per cent were disbursing loans at higher levels that the January-to-March 2021 quarter.

“Members with large customer-base have observed lesser impact on disbursement business continued to provide support,” the survey revealed, adding that members involved in lending to self-employed customers have seen some impact on lending linked to business closures for significant period.

Loan restructuring

“The study was conducted to understand the impact of Covid-19 second wave on digital lending business and fintech industry. The report highlights that how the Covid-19 outbreak and moratorium announcement by RBI has led to uncertainties in the lending business; however, the impact of pandemic on the digital lending business was less severe than compared to the last wave,” said a statement on Friday.

The survey also revealed that about 56 per cent of the members expect to provide loan restructuring to 10 per cent or less of the customers.

In terms of collections, about 69 per cent of the respondents said they see 10 per cent to 20 per cent less collections in the 31-60 day overdue bucket and 61-90 day overdue bucket.

The respondents had retrained their underwriting models after the initial wave of Covid-19 since these models continued to perform well during the second wave. The survey claims that 57.1 per cent of the respondents prefer using the underwriting model that was used during the first wave.

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Bank, NBFC loan collections drop up to 10% as Covid intensifies, BFSI News, ET BFSI

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April took a sudden turn for banks moving towards normalcy.

Bank, NBFC loan collections drop up to 10% as Covid intensifies

Bank and non-banking finance companies saw a drop in loan collections from the first fortnight of this month.

Collections dropped 5 per cent to 10 per cent as lockdowns hit businesses.

Banks are now going slow on disbursals too sensing troubled times ahead.

The worst affected have been the micro and small enterprises, micro-finance and the commercial vehicles (CV) segments where collection efficiencies dropped rapidly.

Weak business activity

As per a report by Emkay Global, the first fortnight of April 2021 has been weak in terms of business activity which is down by 20% across various segments due to lower working days and onset of an aggressive second wave of Covid-19 infections. This is expected to fall further with far stricter enforcement of localised lockdowns.

The collection efficiencies were improving from August-September onwards on a month-on-month basis across asset classes. However, a year back, the restrictions announced so far are lower in trajectory or intensity. So while there will be an impact on collections and delinquencies, the impact should be lower than what we saw in Q1 of last year.

Bank, NBFC loan collections drop up to 10% as Covid intensifies
Bank, NBFC loan collections drop up to 10% as Covid intensifies

But if there was a rise in the intensity of cases accompanied by containment measures and restrictions, it could further impact collections.

In the case of NBFCs, gold loan and home loan NBFCs will be least impacted whereas unsecured loans, MSME loans and wholesale loans will be more impacted given the vulnerability of the underlying borrower class.

The spread intensity and duration of the pandemic, how long the lockdown and curbs last and vaccine trajectory will decide the severity of hit to banks.

The customer cash flows

The salaried class includes a large segment of IT professionals whose salary levels and jobs have not been impacted, though their discretionary expenditure has come down.

However, a bulk of the salaried class is facing pay cuts and job losses while among the self-employed, those in the essential segment like agrochemicals, pharmaceuticals, have not seen much impact but others have faced a drop in cash flows.

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