Two sources in the know told ET that a couple of months back, the Reserve Bank of India (RBI) had asked non-banking finance corporations (NBFC) about their exposure to the edtech sector. Given the warning signals from the banking regulator, many of the large NBFCs slowed down their exposure to this space. But by then a lot of money had already been disbursed.
“The regulator had cautioned about lending to this sector sometime back, and had asked lenders to submit details about their exposure to the edtech space,” said a founder of a fintech lending firm on condition of anonymity.
Byju’s depends on lending platforms for a large part of its sales. Its website says that it works with large lenders like CreditSaison, InCred, Aditya Birla Finance, IIFL and fintechs like Avanse. Recently, The Ken wrote that cumulatively around Rs 3,000 crore of loans to this sector would have been processed by NBFCs during the Covid years.
“Overall, the exposure to this segment is not so big that it cannot be managed, but there are concerns about stress building up’’, said a fintech executive who has worked with one of these lenders in the past.
Growth in the online education business stuttered after classes re-opened post-pandemic and students went back to school. A founder of a fintech with considerable exposure to the education segment told ET that as of now the offline business is holding fort.
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“As of now the offline piece is fine and we are processing applications for loans. If we see defaults picking up, we will dial down incremental exposure,” the founder added.For Byju’s the major offline business is Aakash Institute, which it acquired in 2021.
Exposure to edtech
When the online business started seeing traction, lenders stepped in to offer customised credit products. Their pitch was that students can take up courses now and pay later when they get a job.
Avanse specialises in education loans, with a chunk of its business coming from financing students who go abroad to study.
In a filing made to rating agency Care Ratings on May 17, Avanse said that as of March 31, 2023, the AUM (assets under management) of the company stood at Rs 8,646 crore. Around 9% of its exposure (Rs 778 crore) was towards the digital upskilling and test preparation segment, which had supported more than 1.5 lakh students. What part of this was towards Byju’s’ students could not be ascertained.
While Avanse is focussed on the education sector, InCred is a much larger NBFC which offers personal loans and MSME loans, along with education loans.
Currently, about 16% of its AUM is in student loans. As of September 30, 2022, InCred had a loan book of Rs 5,500 crore, which means its student loan component would be around Rs 880 crore.
Responding to ET’s queries, InCred said that they only offer loans to students going abroad to study.
Growing issues in the edtech space have made lenders wary about their exposure to this domain. Eventually, this might mean that students may no longer have easy access to credit