NIRA, a Bengaluru-based fintech lender, released fresh data today which shows that despite the health crisis being far more acute during this second covid wave, borrowers have been much better able to meet their debt obligations than in the lockdown at the start of the pandemic in 2020.

In normal times NIRA usually sees 97% of monies due repaid within 30 days of the repayment date. Collection rates still reached 95% during this second wave, displaying a very strong degree of resilience considering the scale of the crisis and that the majority of states imposed restrictions on movement. This compares to a low point of 75% observed in the middle of the national lockdown last year.

Performance

There was more stress seen among borrowers in grey and blue-collared jobs than among white collared workers. Non Performing Assets (NPA) rates were 1.1times and 0.75 times of portfolio average  respectively. During lockdowns, office workers are much better able to work from home and thus less likely to suffer income shocks.

Contrary to conventional wisdom, borrowers in the lowest income bucket (Rs.11,000 to 15,000 per month) didn’t perform any worse than their higher earning counterparts. NIRA saw the worst performance among borrowers earning more than Rs. 50,000 per month, mostly likely due to adverse selection, while there was an eagerness to build a good credit record in low-income segments.

In recent weeks there have been some additional signs of stress as the lockdown takes its toll. NIRA has seen an increasing proportion of already over-leveraged borrowers applying for loans and getting rejected.  

NIRA also saw customers who had fallen behind on their payments in April due to increased medical costs (Covid or otherwise), catch up on their payments in the month of May. On an average one out of two such impacted customers caught up on their loan repayment.

Loan Demand

Unsurprisingly, there was a large increase in the proportion of demand for medical loans (53% increase) as middle-class Indians stretched to meet covid related expenses for their loved ones.

With people forced to spend more time at home, NIRA witnessed a 44% increase in the proportion of loans sought for home renovation.

Interestingly, the demand for wedding loans held somewhat constant, possibly because small scale weddings have been permitted even during the lockdown.

Commenting on the data, Rohit Sen, CEO and co-founder of NIRA said, “I’m encouraged by the strong performance of borrowers in India’s mass market, defying conventional wisdom both about their ability and willingness to meet their obligations, particularly in challenging conditions. I think the absence of a national lockdown was critical, and workers were much better able to have visibility of their future income streams this year than last. As states gradually open up and economic activity increases, credit performance will also normalise”.