Little could the Reserve Bank of India (RBI)—India’s banking regulator—have known that two of its circulars issued in May 2020 and September 2022 would have such a profound impact.
The first aimed at easing borrowers’ loan burden and the second at reducing collection harassment, and both ended up spurring the growth of an emerging pool of SaaS SaaS Software as a service (SaaS) Software as a service (SaaS) is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. -based fintechs.
These startups are attempting to rationalise a murky world of debt collections, the vertical in which banks spend more than $7 billion a year, equivalent to Bermuda’s entire economy.
On 22 May 2020, the 59th day of the Covid-19 lockdown, the RBI extended the moratorium on equated monthly installments (EMIs) on term loans by three months, in an effort to provide relief against the covid-induced financial crisis.
“Sharp surge in enquiries from lenders followed,” said Sumeet Srivastava, chief executive and founder of Spocto, a full-stack debt-collection platform set up in 2016. It was acquired by online debt marketplace Yubi, formerly CredAvenue, last February.
During the first phase of the moratorium in March 2020, creditors continued to keep monthly tabs on delinquent borrowers using excel sheets. But with the extension, the number of customers needing different kinds of repayment nudges was only set to increase. Lenders now required a tool to manage this, and collect tech came to their rescue.
Spocto, the segment’s oldest and most prominent player, has over 30 clients—including giants, such as HDFC Bank, ICICI Bank, and Axis Bank and credit card company SBI Cards & Payment Services. For the year ended 31 March 2022, it saw about Rs 57 crore (~ US$7 million) in revenue, a 4X rise compared to the previous year. During the same period, it saw a 6.5X increase in profits to Rs 9.5 crore (~ US$1.2 million), a rare achievement for a fintech.
By the end of 31 March 2023, Srivastava is confident of clocking a revenue of Rs 250 crore (~ US$30 million). “We’ve seen 4-6X growth every single year,” he told The Ken.
The prolonging of the moratorium had another unintended consequence. Lenders were looking for an army of third-party collection agents to ramp up recovery that had taken a hit. And that ended Ranjit Kumar’s arduous job search in October 2020.
The 27-year-old was hired as a debt-collection agent by a human resource firm in Katihar, a small town in India’s eastern state of Bihar. As is standard practice, his monthly earnings would be based on collection targets achieved. A major chunk of this came from the area’s most eminent lender, Mahindra Finance, also the largest rural non-banking finance company (NBFC).