With the recent rounds of funding from Global investors, India is seeing a lot more money with their startups than they did in the past. India’s digital lending startups are witnessing an increase in debt funding activity. Due to the efficiency of credit models, proven track records, and consumer accessibility, banks and other financial companies are ready to begin lending.
Initially, banks provided 16% interest for clients interested in debt funding. Currently, these rates have gone down to 12% which is quite a big deal. Lending Kart is an RBI registered non-banking finance company that raised almost 500 crores in an equity round. Harshvardhan Lunia, the founder of LendingKart, said that he expects the cost of lending to go down even further, to 11% after this.
Debt funding is a system where platforms take money from banks or non-banking finance companies, in an effort to lend this money to their customers. Lending at a higher cost means the rate at which the company lends to their customers would be higher and vice versa.
For bankers, although their money is now increasing, the biggest hassle that they go through is keeping the interest rate low. Furthermore, since most platforms are using equity investments to lend, it is quite difficult for banks to keep looking for people interested in borrowing.