Cashkumar: The story of how algorithms and a robust credit analysis framework has redefined business for India's 6th approved P2P lender

Last Updated: Tue, Sep 18, 2018 14:50 hrs
Rupee (Image Courtesy: PTI)

Cashkumar, the Bengaluru based financial entity was in news recently for getting the Reserve Bank's approval to conduct a P2P lending platform.

In a fast moving, no-frills attached world, players such as CashKumar have been steadily clearing the decks for what looks like a disruption in the financial market.

Dhiren Makhija, Co-Founder of CashKumar, says they have been active in lending space since 2016, but also admits that experience in a Forex driven reverse-bidding platform was paramount to CashKumar's success.

"Times are exciting, and we are looking at doubling business in the next 4-6 months as also raising another round," says Makhija when asked about the last two years.

The learning and technology built during the last few years has led the company to pivot into the lending space and set up a lead aggregation platform catering to banks and NBFCs.

In a quick conversation with, Makhija details on the customer ease, the RBI approval, and the credit analysis framework behind Cashkumar.

Edited Excerpts:

What makes people flock to P2P lending portals like yours when most banks have been advertising of the ease in getting personal loans themselves?

It may have become relatively easier and banks are automating a lot of processes, but many people still cannot access loan products of banks.

Banks have a strict credit assessment policy, while alternative lending platforms including P2P companies accommodate credit novice and credit stressed individuals also. Such participation is based on innovative credit assessment methods we follow while not letting go of tried and tested logic used by banks.

In many instances, our processes allow for faster closure cycles as compared to banks which make people with urgent needs opt for us over these institutions. Some appreciate the complete automation with a high focus on customer support making them choose our platform. In a nutshell, we include a larger percentage of the population in the ambit of loans while also providing some product/process enhancements over banks.

At Cashkumar, the product is a small quantum, short-term loan which many banks do not offer. We help people with urgent small needs access credit which they can clear in quick time. It is a great niche for loans while not in direct competition for a need profile the banks currently cater to. This gravitates a lot of people towards our P2P offering.

Where do you see yourself against the likes of i2i, Lendenclub, Faircent, Lendbox, Rupaiyaexchange etc?

Cashkumar is right up there in the clutch of companies which are driving the P2P lending category in India.

The entities mentioned are all doing well, and it sounds good to be a part of this group driving the P2P agenda.

We have not been as visible as the others named in your list, but we are the 6th company in India to obtain a P2P license from the RBI.

It is early days, I think co-operation will be the mantra for P2P players right now.

A vital task before us is to push the P2P agenda and make it a popular to lend and borrow. There is a lot of market for most companies to grow rapidly and become large players. In a nascent sector like P2P there is a lot of give and take as there is no precedent to follow. We keep following other players and see how they are doing- not for numbers but to study their innovations and growth in the sector

Was it challenging getting the RBI approval?

RBI released guidelines on P2P lending in October 2017. We were quick to study the guidelines and implement the recommendations of the RBI. These guidelines and regulations are comprehensive, and it was a challenge implementing them, but it is a step in the right direction for the industry.

We were only too happy to dive right in and set to work taking the team along and getting good advice from valued consultants.

In this direction we introduced more security and confidentiality features on our platform and physical infrastructure. Once we were done with implementing necessary changes to comply with guidelines, we submitted our application to the RBI.

It was then a matter of answering the questions posed by the honourable regulator on our operations, company status, investments etc which we responded with complete transparency.

After all the due diligence process by RBI, we were awarded license for P2P operations.

How does the loan system work? Importantly how do you scrutinize applicants? Do you check credit agencies or is this an in-house social algorithm?

Filling the loan application and submitting it, is pretty much easier on Cashkumar and the entire process is handled online. We have a dedicated support team who call applicants and mail them the loan offers. They also answer queries and guide them through the approval process. We certainly ping credit bureaus for a customer's report and history, but this is just a part of the process. The entire evaluation algorithm has been built in-house using a variety of different parameters. It defines the approval or rejection of a loan as also the amount that can be approved for a request.

Do shed some light on your credit analysis framework?

Our algorithm is built on demographic, situational, lifestyle and other parameters which include a host of factors. These are combined to calculate an app score which lead to approval or rejection. In doubtful cases, the credit team decides after considering other factors relating to a borrower's profile. While we are still not using social media indicators, work is on to integrate these in the algorithm. The next stage of evolution will involve looking at behavioural pointers as part of the credit assessment process.

Founders Dhiren Makkhija (seated), Kannan Kandappan (right) and Yogesh Joshi in a file-photo.

Could you talk about delinquencies and how these are handled at Cashkumar?

Delinquencies is a part of any lending business especially when one is catering to a wider audience. The way to mitigate them is to have an evolving credit assessment mechanism and a structured repayment process.

Coming to just repayments, we undertake auto-debits on a borrower's account to recover the EMI. A dedicated team calls up borrowers with EMI bounces and requests payment. We try to understand the situation of a borrower and try to accommodate delayed payments.

Personal visits are undertaken, and collection agencies are employed operating under the aegis of RBI recommendations. Legal action is initiated against chronic defaulters, if their security cheque bounces and a case is filed under the Negotiable Instruments Act, 1881.

Delays and defaults are also reported to credit bureaus which downgrade the rating of the borrower accordingly diminishing their ability to avail loans.

The lending business in China started on a pomp, but in recent times there have been concerns, especially with the case of Jiedaibao. When you look at regulations between Chinas and India, do you think there is a probability that India could go the Chinese way?

I think there is a lesser probability of such a situation repeating in India. If you look at the Chinese example, the industry exploded there without much regulation leading to such a situation.

The Reserve Bank, we are sure, is aware of this situation and has framed guidelines accordingly. There are strict rules to operate and a license will be required to run a P2P operation. RBI will monitor the situation closely and audit licensed companies periodically. We are sure such measures would eliminate occurrences of such shady practices.

A practice among the sector is to seek PDCs in order to maintain delinquencies. Although this minimizes risk, it certainly has a put-off on the customer. What is your take?

As mentioned earlier, we insist on PDCs from borrowers before disbursing a loan. It is a fact that some borrowers find it irksome, but these are essential under current laws. The one way to legally recover an obligation is by depositing a cheque and filing a case, if it bounces. Most borrowers appreciate the reason why cheques are required, and we try to be accommodating if it takes time to procure them.

Though it may be a put-off for a potential borrower, we cannot forego this procedure until laws are changed with regards to enforcement of a loan obligation. Remember, we are a P2P company with common people lending money on the platform. It is not just a responsibility but our solemn duty to take all measures we can to protect their hard-earned money.