Personal Loan Collection Rates Return to Pre-Covid Levels, NIRA Data Reveals
Bengaluru-based fintech start-up NIRA, a leading lender to blue and gray-collar workers, has revealed that it has seen a steady improvement in the collection performance of their personal loans. While COVID is still a feature of life in India, NIRA’s personal loan collection performance has returned to pre-COVID levels.
Early-stage collections (up to 30 days past due) had returned to their historic standards by the end of 2020. However, July 2021 marked the first month since the COVID outbreak that NIRA has seen collections revert to “normal” levels in later stage delinquency compartments as well.
NIRA saw only a slight drop in early-stage collections from 97% to 94.5% during the second COVID wave, as lockdowns were less severe than last year, and borrowers had better visibility into when the restrictions would ease and they could return to work.
Later stage buckets have also seen improved collection rates over the past 4 months. There was a striking increase in collection efficiency between June and July, with collection rates in the overdue 60-90 day band nearly doubling month over month.
NIRA’s unconventional collector’s model
Rather than relying on external agencies, NIRA’s collections function is almost entirely managed in-house. In another deviation from the conventional model, NIRA achieved its results without the use of street-level collection frames. With borrowers spread across the country and loans averaging just Rs. 20,000, it was imperative to put in place a centralized collection process. They thus did not suffer from an inability to recover due to the inability of the agents to move during the confinements.
The return of consumer confidence
With COVID cases remaining moderate across much of the country, consumer confidence is gradually returning, as measured by the NIRA loan approval rate. During the stress of COVID, consumers were holding back discretionary purchases and choosing to deleverage where possible. NIRA’s approval rate halved from its pre-wave high level, as credit-hungry borrowers looking to refinance existing loans accounted for a larger share of applications. Approval rates have recouped half of those losses over the past 3 weeks.
Commenting on the improved collection rate, Rohit Sen, CEO and Co-Founder of NIRA, said: “We have always viewed collections as a core function and have devoted a lot of time and effort over the past year. to invest in the development of our capacities. It’s always rewarding to see your hard work pay off, but the work doesn’t stop there. We will continue to invest in our collection function so that we can maintain these excellent efficiencies as we grow. “