Digital lending sector sees slowdown in growth, higher bad loans as regulator increases scrutiny
The Reserve Bank of India has given a clear indication that it does not want unsecured lenders to grow faster than 20%, according to three startup founders in the sector, who said a slowdown in new disbursals could result in an increase in bad loans.
“While officially the RBI has taken a cautious stance, through backchannel conversations the industry has been asked to stay within the 20% growth limit and also keep the total cost of borrowing for the customers at moderate levels,” the founder of a digital lending startup said on the condition of anonymity.
Even though there is no regulatory cap on credit rates offered by financial institutions, industry participants are trying to keep the total borrowing rate lower than 45%, which is typically the highest interest rate levied on overdue credit card payments.
According to another founder, the regulator has pointed out that fintechs should not try to cater to customers at the lower end of the income bracket where microfinance institutions specialise. The RBI defines the annual household income limit for microfinance loans at Rs 3 lakh.
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