Hello Ravish,
Thanks for identifying this company.
Charging a flat 6% fee for the disbursed amount, deducting it from the loan amount itself and keeping the loan amounts small so that these 6% fees don’t pinch the students is a neat business plan. Plus, it helps the students to start having a credit score. So, parents may also be incentivized to allow the students to use this mechanism once in a while to create their credit profile.
However, there are 2 concerns for me
- A few students taking a drastic life-taking step because of the loan recovery mechanism or any other factor may cause RBI to put an end to these type of practices. Such things have happened in the past.
- I went through the company’s Annual Report and nowhere did I find any mention of the delinquency rate or GNPA/NNPA. If we go by the BWR credit rating report, the company has a GNPA of 4.36% and NNPA of 3.97%. This also means that the company has made provisions of just 10% of the Gross NPA which is a very small percentage.
What are your thoughts?
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