Non-Banking Financial Companies (NBFCs) in India are already in troubled waters. Sanjay Sharma, MD and Founder of Aye Finance, explained that NBFCs, which have invested in the delinquency management process and automation and also have a clear process for managing delinquencies, will be less impacted with Aparajita Gupta.

1. In these trying times, how do you see NBFCs performing in the next six months in India?

The next two quarters will be a test of resilience for large as well as small businesses across India. For NBFCs that are already stressed, this scenario will be an existential challenge. However, NBFCs that are well managed and have diversified portfolios will possibly find an opportunity to march on and improve their market share. NBFCs that have invested in the delinquency management process and automation and who have a clear process for managing delinquencies will be less impacted. New fintechs who have not paid enough attention to delinquency collections arrangements may be getting worried now.

At Aye, we have deployed data science and machine learning models that help us in our cluster-based underwriting of micro-enterprises. However, it is not lost to us that branch presence and the ability to collect repayments on the field are crucial to be a successful lender. We have branches in 173 locations across 18 states and have deployed best in class automation and data models along with a well-staffed and effective collection team that has worked well for us. Our NPAs are hence among the lowest in the industry.

2. Since the Indian economy has not been in the pink of its health for the last few quarters, how has been the credit uptake from the SME sector?

Despite the potential and the significance of the MSME sector, which contributes over 37 per cent to the country’s GDP, the 60 million MSMEs continue to battle with myriad issues, timely and affordable finance remains at the top of the list. Banks have followed a safe path of lending and have lent only to segments that have well-maintained books of accounts and a documented credit history. And the micro and small enterprises have neither. This has resulted in the sector facing a credit deficit of over Rs 69.3 trillion (IFC and Intellecap Report of 2016).

Aye with its proprietary Cluster Based Credit Assessment methodology along with a variety of analytics-based scorecards and machine learning algorithms has been solved for this. From disbursing 4,000 loans in FY16 to 13,000 in FY17 to 38,000 in FY18, over 70,000 in FY 19 and now 113,000 in 2019-20, we have seen the demand for our customised loan offerings increase exponentially.

3. How do you plan to facilitate SME companies now when the economy is in a real bad shape with the coronavirus outbreak?

India is currently under a lockdown that has disrupted routine commerce and financial activities across all types of businesses in India including MSMEs and micro-enterprises. Aye has offered a moratorium to its customers, which are the bottom of the pyramid businesses, as per the RBI notification dated March 21, 2020, to support them during this difficult period. We are also designing a few innovative loan offerings, which will help our customers manage their cash flows when they resume operations.

4. What is your total loan book size? Out of your total loan book, what is your exposure to the SME sector?

Our loan book stands at Rs 1,700 crore and consists entirely of loans extended to micro-enterprises.