KreditBee CEO talks about building resilience amid regulatory quagmire, other challenges

Lending companies need to build a lot of resilience in the good times to survive the bad times, remarked online credit platform KreditBee's Co-founder and CEO Madhusudan Ekambaram.

He shared that when the economic cycles are on the upswing, everyone makes money. “When the economy is great, the job losses are low, people are happy, and lending also works better," he said in a fireside chat with YourStory Founder and CEO Shradha Sharma at TechSparks Mumbai 2024.

However, downswings are a great test for real businesses, and can often wipe out half of the digital lenders. He shared that prior to the COVID-19 pandemic, there were about 1,600 digital lenders. After the lockdown, only around 80 survived, and one-tenth of those are profitable.

"The companies which survive these cycles are the ones that will go on for longer,“ he noted.

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The KreditBee chief also underscored the importance of establishing a robust and sustainable loan portfolio during economic upswings to withstand downward cycles triggered by external factors regulatory interventions such as the digital lending guidelines introduced by the Reserve Bank of India in September 2022

Ekambaram further noted that lending is a proven business model in India, attributing the industry's strength to the growing number of successful banks and the inherent profitability. While digital lenders operate on a similar model, they have disrupted the lending industry.

“Digital lenders have found a way of distribution or acquiring customers through the digital/online way," he explained while talking about the two models of lending.

"If a company is disbursing loans of Rs 100-200 crore, at a certain point in time, this business is bound to make money. If it is not (making money) then they have to go back to the drawing board again and look at what is fundamentally wrong,” Ekambaram added. 

He further elaborated on the increasing concerns surrounding the exponential growth of unsecured lending in India, emphasising that the central bank is working to stabilise the growth in this sector and address any systemic risks arising from the sudden surge in digital lending in the country.