Pramod Bhasin, former Genpact chief executive officer (CEO) and chairman of online lending platform Clix Capital, said the COVID-19 pandemic is going to impact the online lending space in a big way.
According to him, demand reduction is likely to be over 50 per cent in many cases. He also warned of a surge in bad loans and delayed payments as result of significant cash flow shortages. “Impact of the virus and the lockdowns are bound to have a very significant impact on the overall economy as well as the lending environment across India. Given that businesses cannot operate normally, people can’t travel to work or for business, and shops are shut. So, demand is bound to fall dramatically. This won’t be a 10 per cent reduction in demand but upwards of 50 per cent in many cases and we also can’t predict how long these conditions will persist,” Bhasin said.
A report by Omidyar Network and Boston Consulting Group (BCG) had said that the digital lending to micro, small and medium enterprises (MSMEs) in India could grow to Rs 7 trillion by 2023.
COVID-19 is the disease caused by the novel coronavirus, which originated in China late last year and has now spread to the rest of the world. The unpredictable nature of the contagious disease has led to nearly 350,000 people being infected and over 15,000 deaths. This has led to an unprecedented lockdown in several countries and now Indian cities as well.
Bhasin said that non-banking financial companies (NBFCs) will also face an impact, with liquidity getting impacted across the board for individuals and businesses. “The demand scenario for loans for many smaller businesses will be high as they struggle to meet ends. They need more working capital to continue to operate, and as their supply chains get stretched. Some private and public banks continue to have strong liquidity and this should help everyone. But there is no doubt that many businesses will face very significant stress and we hope they can really rely on the industry and the government to help them,” he added.
Suggesting steps the government can take, Bhasin said the measures must protect and enhance liquidity for small borrowers and individuals. According to him, it should help the informal and unorganised economies that will be hit the hardest, and save cash flows and unnecessary rapid escalations of non-performing assets.
“We must address the issues of tax payments, due before March 31, and postpone these by three-six months. The Reserve Bank of India (RBI) will have to look at relaxing some of the norms for restructuring as well as NPAs to give borrowers more time to repay and adapt to this situation.
The refinancing windows will need to be opened and direct immediate relief is required for stressed individuals and small businesses. Additional liquidity will be required by everyone during these very difficult times,” he said.