Small NBFCS start moving off unsecured loan portfolio

Non-bank lenders such as Kinara Capital, Lendingkart, Aye Finance and Ashv Finance are taking a step back from unsecured loans, after regulatory heat tightened funding to the sector.

- Mansi Verma & Priyamvada C

These lenders who serve small businesses have sold unsecured loans, explored such sales, or are securitizing them, the people cited above said on the condition of anonymity. Potential buyers include banks and larger non-bank lenders. The development, which came after a central bank crackdown on the runaway growth in personal, credit card and small business loans, marks a pivot for these lenders and their backers, who had bet on such loans without collateral for growth.

Kinara Capital has started the sale process for its 2,200crore unsecured loan book, three people aware of the matter said.

"We remain open to different liquidity options that could further our commitment to meet our obligations towards our customers, lenders and partners," a company spokesperson said.

Kinara, backed by British International Investment and Nuveen, faces a liquidity crunch, after some lenders appropriated fixed deposits and recalled loans, Icra said in August. Kinara in August said it had paused repayments until October as part of a resolution plan agreed with its lenders.

Portfolio sale discussions are at a preliminary stage, one of the people cited above said.