India’s digital loan market has gained new momentum since Facebook Inc. and Xiaomi Corp., indulged into play to attain a foothold in the $1 trillion industry of digital loan market. Facebook has chosen India as the first country to roll out its small business loan program. It will offer loans to small business individuals, who advertise on their platform via a partner. The loan will be granted on 17-20 percent interest rate, without paying collateral. The range of loans will begin from 500,000 rupees ($6,720) and extend to 5 million rupees.
The timings of both Facebook and Xiaomi (a Chinese electronics company) are in a clash, because Xiaomi is also planning to offer credit cards, loans, and insurance products. For this, they are planning to tie up with the nation’s biggest banks, reported local head, Manu Jain, PTI.
Proses NV is also acquiring Indian online payments service BillDesk, for $4.7 billion rupees, which is going to make it the largest global acquisition in the Indian payment space. PayU is the biggest online payment processor in India. With the acquisition of BillDesk, its total volume will reach to $147 billion. This investment will increase Prosus’s value to more than $10 billion in the country.
Google’s Alphabet Inc. is also escalating the game by tying up with small Indian lenders for opening time deposits for its customers after offering wealth management products such as digital gold, mutual funds on its popular google pay platform.
“Making money through payment business does not generate much wealth, but lending makes a lot of wealth,” said Saurabh Tripathi, managing director, and senior partner at BCG’s financial institution’s practice. “Consumers in India are eagerly waiting for advanced digital experiences, and a lot of players are jumping at this opportunity too.”
While there is huge potential in India’s digital loan market, risks are also attached to every investment. The bad-loan ratio of the country is also expected to rise to 11.3 percent by March 2022. It can make India the worst performer among major countries for a second consecutive year. Reserve Bank of India is geared up to regulate online lenders which will also include 300+ startups.