IDFC Bank, which was set up last year, has tied up with Capital Float to extend loans to the small and medium enterprise (SME) businessmen online. Given the inadequate data on the creditworthiness of small businessmen and their numerous defaults, few banks lend to the SME sector now.
With branches in just five cities, IDFC Bank will explore an alternative mechanism of lending by using the available data. The interest rates will be 18-20%, the average loans ₹15-20 lakh for a period ranging from 90 days to 1-2 years.
Starting from the second week of November, IDFC is offering term loans from ₹5 to ₹30 lakh for 18-24 months in the form of working capital loans. It will also offer short-term loans of ₹50,000 to ₹5 lakh for 30-60 days. It has made the fastest loan approval in 10 minutes, and slowest in two days.
IDFC wants to make 100 loans in a couple of months and add 3,000-4,000 customers by next year.
Capital Float is a 3-year old digital lending platform for SMEs. It is existent in 100 locations with a loan book of ₹800 crore, catering to over 5,000 customers. It underwrites collateral-free loans online for startups, business-to-business (B2B) firms, small manufacturers and e-commerce merchants. It offers risk-based interests based on end-to-end monitoring of the business, transaction history, supply chain and behavioural data.
A senior executive at IDFC Bank said, “As a new bank, we do not want to follow the traditional model of banking. It allows access to capital flows digitally that amplifies our reach without the required physical infrastructure. We did not lend to the unsecured market previously. It is a huge untapped market because the size is low on value, and high on volumes and costs. But this digital platform will help us reduce costs and get better yields.”
Sashank Rishyasringa, co-founder, Capital Float, said, “IDFC tie-up will help us build a scalable model and offer other banking services to our customers. We currently offer an interest rate of 15-19% to customers in the urban and semi-urban locations. Our stronghold is in North Delhi, NCR, Rajasthan, Tamil Nadu, Karnataka. We will expand in the west and see rising demand from tier- 2 and 3 cities as well.”