Synopsis
Digital lenders are becoming cautious about loans to small businesses like restaurants and petrol pumps. This move follows disruptions in West Asia that have increased costs for several sectors. Lenders are taking pre-emptive steps, especially for unsecured loans. Early signs of stress are visible, and while repayments have held up, future stress is a concern.Listen to this article in summarized format
The move comes amid the crisis in West Asia, which has disrupted gas supplies to India and raised input costs for several sectors. Beyond banks and non-banking financial companies, new-age lenders are taking pre-emptive steps, given their relatively higher exposure to unsecured loans in these segments, according to the executives.
“It is in the nature of digital lenders to underwrite relatively riskier businesses compared to banks, so there is a higher degree of caution in sectors where early signs of stress are visible,” said Alok Mittal, cofounder of Indifi Technologies, a small business lending startup.
While repayments in March and April remained stable, lenders, who offer working capital and short-tenure loans based on order books or payment flows, are wary of stress emerging in the coming months.
“Restaurants and dry cleaners are already seeing first-order effects. These segments account for 6–7% of our portfolio. While repayments have held up so far, that does not rule out stress in the near term,” said Sanjay Sharma, managing director at Aye Finance, a Gurgaon-based listed fintech lender.
Aye Finance, which got listed in February this year, reported operating revenue of Rs 1,814 crore and net profit of Rs 193.6 crore for 2025-26.
Sharma said the company has drawn up a sectoral risk blueprint to calibrate its exposure. “If electricity costs rise further, multiple industries will face pressure and small businesses will be the most vulnerable,” he added.
Digital lenders have significant exposure to segments such as consumer goods distribution networks, retail stores, restaurants and small manufacturers. While only a portion of these sectors has been directly impacted so far, industry insiders warn that prolonged disruption could trigger second-order or indirect effects across the ecosystem.
Pune-based supply chain financing startup Vayana conducted a stress test across 13 countries with strong trade ties to India, assessing the impact of declining trade flows on domestic businesses.
Chief executive Ram Iyer said the analysis indicated high vulnerability in sectors such as chemicals, rice exports, automobiles, gems and jewellery, and pharmaceuticals.
“Many businesses are absorbing higher costs for now, assuming the disruption is temporary. However, some small manufacturers have already cut shifts and scaled down production,” he said.
The full impact is likely to become visible from May onwards, as inventory cycles get disrupted, Iyer said, adding, “Once production slows and inventories tighten, payment delays will follow, and that is when lenders will begin to feel the strain.”
Drawing lessons from the Covid-19 pandemic, digital lenders are also strengthening their collections infrastructure to manage potential repayment stress.
Indifi’s Mittal said the firm is leveraging data from the account aggregator ecosystem and other sources to detect early signs of borrower stress and design customised repayment solutions to prevent delinquencies.
Sharma of Aye Finance said lenders will rely heavily on their collections networks to contain non-performing assets, adding that lessons from the over-lending cycle of 2021–23 should help the industry avoid a sharp deterioration this time.
