“The exposure of our investors to single borrowers is limited to 1%”
BharatPe, a leading financial technology company in India, launched peer-to-peer (P2P) loans for individuals in August, offering yields of up to 12%. The platform already had P2P loans for merchants, which gave it a head start in this area. BharatPe has partnered with existing licensed P2P players such as LenDenClub and LiquiLoans for this service, but has set some parameters to protect its own investors. Suhail Sameer, CEO of BharatPe, talks to mint on P2P activity. Edited excerpts:
Tell us about the BharatPe peer-to-peer offer (the 12% club)?
“12% Club” was launched in partnership with NBFC P2P (non-bank financial companies) registered with the RBI. The P2P offer will allow individual customers to invest and earn up to 12% interest via the 12% Club application. Additionally, consumers can avail loans at an interest rate of 12% if their credit score is high enough. 12% Club was launched about six weeks ago and we have seen a great response. We have 600,000 users on the merchant side. On the consumer side 12% The club has 73,000 members and is growing rapidly. The app has already facilitated P2P investments and loan disbursements of $ 12 million.
What is the gross rate (lender rate)?
This is a narrow range based on your CIBIL score or the amount of data BharatPe / P2P NBFC has on the loan seeker. Crude rates on average tend to be 24%, but they can range from 18-27%. This gives the NBFC partner enough cushion to cover any defaults, as investors earn up to 12% on their investment.
What is the content of these loans?
According to RBI rules, 36 months is the maximum length. All of the NBFC partners we work with typically donate no more than 15 months; for our traders, it’s three months, six months or 12 months. Basically most of them are working capital loans. For example, if you are a new merchant and take out your first loan, our partner NBFC will normally grant you a loan for a term of three to six months. But if you are a recurring borrower, NBFC partner can give you a 12 month loan because you have proven that you can pay back on time.
What about the default rate?
The average default rate depends on the segment you are playing in. The default rate on loans granted by BharatPe’s P2P partner NBFC is less than 3%, while the industry average tends to be 5-6%. We work with NBFC P2P partners such as LenDenClub and LiquiLoans. They decide which category of loans is allowed, what risk to take, and follow our advice, because ultimately, although the responsibility lies entirely with the NBFC P2P partners and not with us, the consumer or the merchant uses our platform, and I do not not want him to lose confidence in our brand.
Your clients don’t select individual borrowers, do they?
There are a bunch of borrowers and a bunch of lenders (investors). The NBFC P2P algorithm matches based on risk and then disburses. Thus, each investor effectively lends to at least 100 people and each borrower effectively borrows from at least 30 to 40 people, or even more, depending on the size of the loan. Therefore, whenever a borrower defaults, the impact on the portfolio, even in the event of total default, cannot exceed 1%. In accordance with the standards, the exposure to an individual borrower for a single investor can never exceed 5% of the amount of the investment. Our partner NBFC limits it to 1%.
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