Digital Disruption in India’s Lending Landscape

Krishna Kanhaiya

Traditional borrowing processes typically involve extensive paperwork and several days’ wait time to secure a loan against securities, shared Krishna Kanhaiya, Chief Executive Officer, Mirae Asset Financial Services, in an exclusive interview with Srajan Agarwal of Elets News Network (ENN).

How has the digital loan facility against mutual funds and shares impacted the financial inclusion goals of the Government of India, especially in terms of access to credit in remote and less economically developed regions?

Through our digital journey for LAS (Loan Against Securities), the product is now conveniently accessible to all, regardless of their location. We’ve observed clients from smaller cities also availing the product to safeguard their long-term investments. This demonstrates the inclusive nature of our services and the importance of providing accessibility to financial products for individuals across diverse geographical areas.

What are the major factors contributing to the success of digital loans against mutual funds and shares in attracting borrowers from beyond the top 30 cities in India, and how does this trend compare with traditional borrowing methods?

The major factors, I would say, are speed and convenience, but the most important is transparency. We provide loans against mutual funds in just 15 minutes; this includes completing your KYC, pledging your securities, verifying bank mandate & signing the loan agreement, end to end in 15 minutes. Not just onboarding, if you want to close your account or partially de-pledge your securities everything can be done in a few minutes online.

Being a digital service, our reach extends across India, eliminating the need for customers to visit physical branches or offices. Notably, we operate with a lean team and without any physical branches. The convenience of conducting all activities from the comfort of their homes holds significant sway for customers residing beyond the top 30 cities, given their limited options and the cumbersome nature of visiting traditional branches.

Traditional borrowing processes typically involve extensive paperwork and several days’ wait time to secure a loan against securities. Moreover, frequent branch visits are often necessary for onboarding as well as other account-related activities, further complicating the process for customers.

Furthermore, given that loans against mutual funds and shares are secured, they typically entail lower interest rates compared to unsecured loans. This combination of affordability, speed, and convenience has proven to be a pivotal factor.

Mirae Asset Financial Services has been at the forefront of digital lending with its mobile app enabling quick LAMF and LAS. Can you share insights into the technological innovations that have been key to achieving this? How has the collaboration with NSDL for LAS enhanced your service offering?

Mirae Asset Financial Services is one of the first to offer digital loans against securities. Our gratitude goes to CAMs, KFintech, and NSDL for their technological advancements that made the digital loan against securities journey possible. Thanks to these innovations, we can now enable our customers to digitally pledge and release their securities, enhancing convenience and accessibility for all involved.

These innovations have allowed us to onboard customers within minutes and expedite the release of underlying securities when loans are closed. Additionally, we can offer customers the option of partial security withdrawal. This feature has been beneficial for many customers who wish to sell specific investments while maintaining their loan accounts.

Also Read | i2i Funding emphasizes technology’s Transformative Power in Lending Landscape

Furthermore, in collaboration with our IT partners and other stakeholders, our internal teams have developed a robust system capable of managing a revolving credit loan type. This means that our system can handle situations where the value of the underlying securities changes daily.

The credit industry is continually evolving, presenting both challenges and opportunities. What are the biggest challenges facing the industry today, and how is your organisation positioned to tackle these? Conversely, what opportunities do you foresee shortly?

As a lender, we encounter various challenges in the dynamic credit industry, with balancing risk and opportunity, as well as preventing fraud, being among the most significant. Operating in a fully digital environment needs us to be more vigilant, especially concerning fraud prevention.

To address these challenges, our organisation adheres strictly to a clear underwriting process for loans against securities. We maintain consistency in our approach, leveraging technology to enhance fraud prevention measures. Critical information is sourced and validated from centralised data repositories such as UIDAI, RTAs, or Depositories.

Despite challenges, the credit industry presents abundant opportunities, with double digit growth across various product segments. Evolving consumption patterns, particularly driven by e-commerce, auto, consumer durables, and travel, underscore the potential for retail credit expansion.

However, there remains a notable gap in credit access for Indian households and MSMEs compared to global figures. Factors such as high-risk profiles, insufficient data, and limited collateral contribute to this gap. We anticipate witnessing product innovations tailored to rural, semi-urban, and low-income consumers in the unorganised sector, addressing specific consumer needs and further bridging this gap in credit access.

Looking ahead, what are the plans for Mirae Asset Financial Services? Are there any new products, services, or partnerships in the pipeline to further revolutionise lending against securities?

As Mirae Asset Financial Services, we aim to become one of the most trusted and transparent NBFC. Our vision extends beyond secured loans as we set our sights on offering unsecured retail loans in the near future.

Also Read | The Digital Lending Landscape: Unlocking Opportunities for MSMEs and Bridging the Financing Gap

Continuing our commitment to meeting consumer needs, we will consistently enhance our loan against securities offerings. In particular, we aspire to introduce loan against shares in collaboration with CDSL once they implement digital pledging and de-pledging capabilities. This endeavor aligns with our mission to innovate and revolutionise lending against securities, providing our customers with even more accessible and efficient financial solutions.

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