Indian Economy

India grew at 6.6 % for the FY18 lower than 7.1% for FY17, the year in which it surpassed China (at
6.8%) to become the fastest growing developing country (CSO). As per CSO’s second estimate of
national growth. RBI estimates GDP growth rate at 7.4% for FY19.

GDP(%)
9
8
7
6
5
4 GDP(%)
3
2
1
0
2014 2015 2016 2017 2018

Implementation of Goods and services tax(GST) was a major dampener even though transient in
nature. Lack of urban consumption and loss of employment and output in the informal economy had
a negative initial impact, even though the government expects an increase in number of taxpayers
under the GST network. As per the latest numbers, During the year 2017-18, total revenue
collections under GST in the period between August 2017 and March 2018 have been Rs 7.19-lakh
crore, Including the collection of July, 2017, the total GST collections during the 2017-18 stands
provisionally at Rs. 7.41 lakh crore. (Finance Ministry)

Another major growth inhibitor was the piling up of bad debts in the commercial banks. Commercial
banks accumulated Non performing loans worth close to INR 8 lakh crores, with nearly 7 lakh crores
in the books of public sector banks. The government put in place the Insolvency Bankruptcy code to
recover loans from 24 major companies that accounted for nearly 2 lakh crores(or 25%) of the total
stressed assets.

CPI inflation excluding food and fuel remained unchanged at 5.2 per cent for the third consecutive
month in February, after rising from its trough in June 2017. Among its constituents, housing group
inflation rose significantly, reflecting the HRA increase for central government employees. Excluding
the HRA impact, inflation in this group was estimated markedly lower at 4.4 per cent. Inflation in the
transport and communication group increased in February on account of the rise in petroleum
product prices and transportation fares. Inflation either eased or remained at a low level in February
in other major sub-groups such as household goods and services, recreation and amusement,
education, and personal care and effects.

Headline inflation stood at 5% till December 17’ and core inflation at 4.2% on the back of rise in
prices of oil, fruits and vegetables, government expenditure due to 7th Pay commission and passing
on of GST related expenses to the final consumer. Industrial output has been growing at more than
7% per month till February 18’ while manufacturing has been growing at 8% in the same time (CSO).

At 35,319 and 10,717(as on April 9th), benchmark indices Sensex and Nifty50 grew 16% and 13%
respectively. In the 2018 Budget, a Long Term Capital Gains tax was introduced on securities traded
in these stock markets. Effects of this tax will be seen in the coming year. Foreign institutional
investors, in FY18 made INR 13 lakh crores gross purchases and INR 14 lakh crores gross sales making
them net sellers in the Indian stock markets.
 Indian Lending Sector
According to an RBI report titled “Flow of financial resources to the commercial sector”,
loans up to US$ 225 billion of credit was absorbed by Indian companies in four years ended
FY17’. Till FY16’, 50% of these loans were given by banks. In 2017, 35% of all commercial
requirements were met by banks while the rest was met by non-banking sources. Among
non-banking sources, NBFC’s and housing finance companies extended nearly US$ 39 billion
to commercial enterprises. Capital adequacy and falling interest rates have been favourable
factors for the rise of NBFC’s.

According to the Economic Survey 2017-18, of the US$ 39.42 billion disbursed in FY17’, large
businesses absorbed 82% of these loans while SME’s received 18%.

A major problem of Non-performing assets has plagued the banking industry. For second
quarter of FY18’, Gross Non-Performing assets of public sector banks stood at US$ 110.5
billion while that for private sector banks stood at US$ 15.5 billion.
 Lending to MSME Sector
Currently, the MSME lending market size is estimated at about US$ 210 billion, according to
a CRISIL study. Both GST and demonetisation have adversely affected the SME sector, most
of which remains unorganised and outside the tax net. Nearly US$ 7 billion of loans were
disbursed in FY17’ (Economic Survey 2017-18).

Bank reluctance to serve this informal sector due to lack of proper documentation required
to carry out due diligence, cost of processing and recovery of loans exceeding loan amount
in some cases gave rise to NBFC’s as a major lender to SME’s in small ticket and collateral
free loans. From FY16 to FY17, NBFC’s lending to SME’s grew by 11% to US$ 10 billion.
(CRISIL)

Government initiatives like MUDRA scheme where collateral free loans up to US$ 1500 can
be availed from Micro Financing Institutions, NBFC’s and commercial banks who have opted
under MUDRA loans.
 Loan Frame
Loan frame is a market aggregator that brings together banks, NBFCs and other lenders on
one platform to provide quicker and easier loans using a fully transparent process. The start-
up uses proprietary technology tools and models to help lenders in borrower evaluation;
however, the final credit decision always rests with the lenders.

Borrowers can apply for a loan by logging on to the company’s website or by downloading
its app. After an eligibility check, borrowers can apply for the loan using minimal paperwork,
upload the documents and then choose the loan.

SMEs usually do not have sufficient collateral to secure the bank loans. Collaterals are
considered by banks to be one of the traditional ways to mitigate the credit default risk.
Loan Frame helps SMEs choose the best lender and the best product. More tangibly, we also
help borrowers negotiate the best possible rates for their business loans. It has 25 banks
and NBFCs on the platform with 50+ SME loan products. It has provided loans to more than
12000 SMEs in one year of operations.

They cater to a wide variety of sectors like retail, manufacturing, self-employed,

pharmaceuticals, IT, services and specialize in some core sectors like health and FMCG.

Loan Frame Back End

Loan Frame provides a website portal as well as mobile phone application to all the
members involved to have access to live information and details of the transaction; namely

 Lenders App/Portal
 Borrowers App/Portal
 Dealers App/Portal
 Sales App/Portal

Its in-house underwriting system ensures proper scrutiny of the borrower by way of CIBIL
assessment, documenting and analysing company’s financial history of both the Corporate
Partner and its Channel member (borrower). Loan Frame has technology available with it to
find out about fake and fraudulent information if at all furnished in the documents
submitted by the borrower.
This technology enables Loan Frame to acquire partner with new lenders by way of
minimising risky leads and expand lending coverage to credit strong borrowers.

Loan Frame Partners

Loan Frame has a network of partners who partake in the lending process in different ways.
These include:

 CA’s, DSA’s and Business Associates: These members who have direct access to SMEs
help them get access to credit by way of introducing them to Loan Frame’s products.
 Large Corporate(Anchors); are partners with an established supply chain whose
members would have requirements relating to working capital, fixed asset financing
etc. Hence, these entities can help their channel members to gain access to credit.
 Other Marketplace Aggregators; that require financing for their merchants and
clients.

Loan Frame working capital products

Working capital loans are sanctioned in the form of limits. These can be fund and non-fund
based limits to meet day to day requirements of business. The primary collateral that
secured these loans is the inventory and book debt/receivables. But it is also not uncommon
for these loans to be backed by secondary collateral, usually a property. CC limit allows you
to deposit or withdraw funds as per your convenience. You draw based on the value of your
stock and receivables adjusted for the margin as stipulated by the lender. Then you don’t
have to worry about repaying the principal. There are no fixed EMI’s and you need to pay
only interest on the drawn amount. If you offer property as secondary collateral, the
sanction limit can be as much as 200% of the market value of the property. Similarly, other
working capital facilities like Over Draft (OD), Packing Credit Limit (PCL), Letter of Credits
(LC) and Bank Guarantees (BG) can be obtained depending on the business requirement.

Feature/Criteria:

 Drawing power is based on your stock and book debt

 Periodic submission of stock and book debt/receivable statements
Although right now only three products are offered and the main source for client is through
direct selling agent’s (DSA).

 Smart OD – It is a product which is based on annual banking of the client and the
limit is set up-to twenty percent of the banking and for manufacturer up-to a extent
of twenty five percent and the maximum amount which can be credited through this
product is one crore.
 Scorecard – this product is based on the financial of the client and the limit is set up-
to twenty percent of the financial and for manufacturer up-to a extent of twenty five
percent and the maximum amount which can be credited through this product is
two crore.
 GST based – It’s in infant stage right now, in this we take the six month turnover on
which GST return has been filed and double the amount to make it annual and then
limit is set up-to twenty percent of that amount and for manufacturer up-to a extent
of twenty five percent and the maximum amount which can be credited through this
product is one crore.