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78% Indian MSMEs shut down during Covid-19 pandemic: Spocto says

Sumeet Srivastava

The three-month-long lockdown in India, starting from March, triggered by the ongoing COVID19 pandemic has adversely impacted the small businesses in the country. About 78% of the Indian MSMEs shut shops due to the massive economic crisis created by the novel Coronavirus in the last few months coupled with the unavailability of working capital, according to Spocto, a leading big data analytics-based banking, and financial services company.  In a study titled, The Ground Truth – Voice of Indian borrowers”, Spocto gathered nsights from 1,800 account holders across cities pan India such as Mumbai, Pune, New Delhi, Bangalore, Kolkata, Ahmedabad, etc.

The pandemic left countless working professionals bereft of employment opportunities, and factors like layoffs, salary cuts, and reduced earnings have resulted in a mass exodus of both skilled and unskilled workers from the big cities to their hometowns. In this light, the data received from these retail loan account holders bring in insights pertinent to the ground reality, the support they need, their current awareness and understanding of moratorium, and its impact on their payment amount.

As per the study, 59% of consumers witnessed the complete loss of income due to COVID-19, while another 34% of employees from the present workforce pool have lost their jobs. A staggering 78 of the MSMEs shut down operations due to zero revenue generation following fiscal depravity.  about 76% of the overall account holders have taken small-ticket loans amounting to INR 50,000 in EMIs while it is mostly the unsecured loans that have contributed to the plunge in repayments than secured loans, the study added.

Sumeet Srivastava, Founder, and CEO of Spocto said, “The year 2020 has proven to be the proverbial Black swan event for all industries and their professionals. This period has also unfolded a few valuable takeaways, namely, that it is time the banking and lending ecosystem revamp their engagement policies and strategies, as their customers may not have the means to pay back their loans within the allotted time-frame.” However, this also on the other end implied that the MSMEs have the willingness, but not the ability to pay right now.

The banks must also keep in mind that these customers who are victims of the market inertia with all probability shall return to the financing space in the span of a year or two with at least 15-20 years of potential service, Srivastava said adding that hence banks should rather value the long term customer rather than smite down a short term defaulter.

He also said that the banks too should focus on the heightened optimization of digital and efficient pathways of the loan disbursement and recovery to generate greater consumer traction and engagement to not only help the ailing sector get back to its feet in due time but will also catalyze the re-building and recuperation of the considerable hammering that the sector experienced due to the catastrophic contagion.

As per the study,  over 78% of the consumers opted in for the initial Moratorium period (March to May), which implies that 22% either willingly chose to opt-out or did not opt-in from their bank’s Moratorium offer.75% of the borrowers highlighted the need for more clarity and education surrounding moratorium. In a similar vein, 64% of the borrowers affirmed that they are aware regarding the interest that is levied on availing the moratorium clause.

A few other findings are as follows:

  • 38% of consumers prefer to speak or interact with a human interface to get their queries resolved
  • Digital is the new de-facto medium for 62% of the loan borrowers reflecting on their need for real-time, bias-free, consistent & authentic resolutions
  • In another frame, about 28% of consumers were discontented with the level of conversation with their banks 46% only are satisfied with the banks’ efforts on explaining the terms of Moratorium to its customers
  • 37% consumers stated that they require support from the financial system in the form of essential loans for personal expenditure in the next 12 months
  • Lastly, more than 56% of customers are now yearning to opt-out of the Moratorium

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