ZestMoney saga highlights drying NBFC credit flow

economictimes.indiatimes.com:

ZestMoney's abrupt closure was primarily driven by its non-bank lending partners' decision to terminate credit lines to the fintech startup.

Two people in the know said partner lenders to ZestMoney like Aditya Birla Finance had conducted multiple diligence meetings over the last six months with the startup’s new leadership, before they decided to pull the plug last week.

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Though ZestMoney had raised a small equity round recently, it needed credit lines from partner NBFCs to continue operations.

“The senior leadership at Zest told the tech and product teams to start looking out and they are now trying to go for a firesale of the customer base and the platform,” said a senior fintech industry executive requesting anonymity.

Also read | ZestMoney to shut down by December-end, lay off 150 employees

Larger impact on the industry

Three founders of major consumer lending applications said overall, there is a slowdown in unsecured small-sized loans.

“The message from our lending partners is that they are going to be careful with loans extended in the sub Rs 50,000 category; overall, small ticket size personal loans are not something they are bullish about,” said one of the founders cited above.

Another founder pointed out that going forward, banks and large NBFCs will turn increasingly cautious to work with fintechs holding bad loans. They would instead prefer a fintech that is profitable, has a strong book and has strong underwriting capabilities, he added.

This would be over and