The coronavirus lockdown has been extended for the third time in the country. While over a month long lockdown already rendered many jobless and caused pay cuts or leave without pay, another phase of lockdown may add to their cash crunch worries. Although banks are operational for a few hours on working days and have ample liquidity to provide loans, most customers are unwilling to visit bank branches due to the fear of coronavirus infection. On one hand, potential borrowers can't step out of the home, on the other, lending operations are not fully digitised for most banks.
The crisis served as a wake-up call for banks whose digital operations were growing at a snail's pace. They have started embracing the change. They are digitising their processes to boost contactless financing, working closely with fintech players such as IndiaLends, BankBazaar and MyLoanCare. Some banks have opened COVID-specific credit lines for faster disbursement of loans.
"For our existing asset customers, we have launched a COVID Personal Loan Scheme and our branches are contacting these customers for availing the said facility which can be done with minimum engagement and in a matter of few minutes," Virendra Kumar Sethi, Head - Mortgages & other Retail Assets, Bank of Baroda says.
The bank is working on building a seamless digital experience for on-boarding customers. "Customers can visit the website for detailed information on each of the loan categories which they intend to apply."
The sudden halt to economy with bank employees and customers cooped up indoors, banks have no option but to make a faster shift to digital operations. "Earlier, our partners would take two-three quarters to operationalise digital projects. Now, it's taking us two weeks," points out Adhil Shetty, CEO, BankBazaar.com.
Online loan provider IndiaLends has been reaching out to banks for the last two-three weeks to link APIs so that customer on-boarding process could be made simpler. "We have received active response from banks, which are willing to lend but are unable to do it due to lack of digitisation," says IndiaLends CEO and Founder Gaurav Chopra.
On IndiaLends platform, you can avail an instant touchless loan and a line of credit anywhere from Rs 10,000 to Rs 10 lakh. The interest rate will depend on your credit score. "The entire process is touchless and contactless with no phone calls or physical contact either for the loan or the KYC verification."
Banks are also sanctioning home loans online on the basis of documents uploaded.
"Banks have moved to a digital process for providing loans based on soft copies of income and property documents uploaded by the borrowers. This has come as a boon to home loan borrowers who can get their loan sanctioned online and sign the agreement to get the loan disbursed immediately as the lockdown lifts," explains Shalini Gupta, Chief Strategy Officer, MyLoancare.
Additionally, banks are going ahead with online sanctions in a limited manner with disbursals subject to meeting the physical verification norms which will be conducted once the lockdown opens, she adds.
Contactless financing is the future. Banks had realised it in the pre-COVID era, but it's now that it has become a key focus area. Now if you have to open an account or avail any banking service with banks, some of them will facilitate it with video KYC and Aadhaar-based OTP. On the credit assessment part, beyond your credit score, your online shopping behavior, phone bill and even social media activity could be considered to run a credit check. Banks are increasingly partnering with fintech lenders whose unique selling point is alternative sources of credit scoring.
"There is a real belief that by December 2020, 80 per cent of all credit activity would have moved digital. Customers are going to be averse to personal interactions, and therefore banks have to put in that additional effort to digitise in order to reach out to them," says Shetty.
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