Bajaj Finance: Unsecured Lending Economics

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As an NBFC, it's not surprising that unsecured lending is significant, even though they also deal with secured lending. Could you shed some light on your role within the unsecured segment, including sourcing, underwriting, collecting, and the various growth avenues? PLCs seem to be one of the biggest, fastest-growing, and potentially higher-yielding products. I'll address that separately later. For now, could you focus on the larger unsecured segment or any specific vertical within it?

There had to be a differentiator to crack that market without sacrificing too much margin. Profitability was central to the business philosophy. Unsecured lending was already commoditized by then. The idea was to use consumer durable loans as a feeder market, acquire customers through that business, and then run analytics on them. This would make the credit part of unsecured loans straightforward, seamless, simple, and flexible. I'll give you an example.

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What would they be collecting apart from the credit score?

So, the score is just one element. You can actually create micro-segments from the score as well. For example, if the typical cutoff for a CIBIL score for a loan is 720, should you treat everyone with a score greater than 720 the same? Probably not. You can create bands like 720 to 750, 750 to 775, 775 to 800, and 800 plus.

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What would they be collecting apart from the credit score?

What does that mean? It means two things. One is from a pricing or commercials perspective. For the other, here's a simple example. Let's say I were to run a multiplier, offering a personal loan of 20X of the maximum EMI served in the last 24 months. For somebody who is an 800 plus score, I'll probably give a kicker of 2X or 1.5X.

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