July 2021 marked the first month since the outbreak of COVID that NIRA saw collections return to ‘normal’ levels across later stage delinquency buckets as well.
Bengaluru-based fintech start-up NIRA, a leading lender to blue and grey collared workers, revealed that it had seen a steady improvement in collections performance on their personal loans. While COVID is still a feature of life in India, collections performance on NIRA’s personal loans have returned to pre-COVID levels.
Early-stage collections (up to 30 days delinquent) had returned to their historic norms in late 2020. However, July 2021 marked the first month since the outbreak of COVID that NIRA saw collections return to ‘normal’ levels across later stage delinquency buckets as well.
NIRA saw only a slight dip in early-stage collections from 97% to 94.5% during the second COVID wave, since lockdowns were less severe than last year, and borrowers had better visibility on when restrictions would ease and they could get back to work.
Later-stage buckets have also witnessed improving collection rates over the last 4 months. There was a striking increase in collection efficiency between June and July, with collection rates in the 60-90 days past due bucket almost doubling month on month.
NIRA’s Unconventional Collection Model
Rather than rely on external agencies, NIRA’s collection function is almost entirely maintained in-house. In a further departure from the conventional model, NIRA achieved their results without the use of feet-on-street collections executives. With borrowers spread across the country, and loan sizes averaging just Rs. 20,000 there was an imperative to build a centralised collection process. They thus didn’t suffer from an inability to collect due to agents not being able to travel during the lockdowns.
Consumer Confidence Returning
With COVID cases remaining subdued across most of the country, consumer confidence is gradually returning as measured by NIRA’s loan approval rate. During the stress of COVID, consumers were holding back on discretionary purchases and choosing to de-lever themselves to the extent possible. NIRA’s approval rate halved from the high pre-second wave as credit-hungry borrowers looking to refinance existing loans accounted for a greater share of applications. Approval rates have recovered half these losses in the last 3 weeks.
Commenting on the improved collection rate, Rohit Sen, CEO and co-founder of NIRA said “We’ve always seen collections as a core function and have spent a lot of time and effort over the last year investing in developing our capabilities. It’s always gratifying to see your labour bear fruit, but the work doesn’t stop here. We’ll continue to invest in our collections function so that we can maintain these excellent efficiencies as we scale up.”