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Episode 64 · Fintech · 45 min

Credit's last bastion is mid-market India

Banks and bond markets spent fifteen years backing away from India's smaller businesses (demonetisation, GST, RERA, IL&FS, COVID) until the segment became, in Vineet Sukumar's phrase, the last bastion with literally no focused players in it. His counter-evidence is unglamorous: credit losses of 2–3% before COVID, priced into rates of 16–27% in towns where the private moneylender asks 4% a month. Vivriti's three companies exist to make that arithmetic bankable at scale.

Credit & lending Regulation & policy Payments & fintech

Vineet Sukumar

Founder & CEO, Vivriti Capital · with Vishal Krishna

45:28

Said in this episode

▶ 11:57

$400M+

Raised across the group, equity and credit

Roughly $195 million into the parent entity and $220 million into the debt marketplace. Sukumar corrects the host's out-of-date $165 million figure on air.

▶ 12:42

$2M

Founder equity behind the first 18 months

The co-founders' own money paid for six-city distribution, a large technology team and a 22% employee option pool before any outside capital arrived.

▶ 33:07

2–3%

Pre-COVID credit losses in the nano segment

Manageable for a lender because rates are high enough to price defaults into the cost of debt; COVID pushed blended default rates into high single digits.

▶ 21:56

16–27%

End-borrower rate on a nano business loan

Customised by tenor, collateral, geography and business cycle, set against private borrowing the host puts nearer 4% a month in the same towns.

▶ 19:21

130+

NBFC partners Vivriti lends through

Working capital, term finance, asset-backed, revenue-based, vehicle and machinery, and warehouse-receipt lenders, each either refinanced or co-originated with.

▶ 28:58

20x

More borrower information than a decade ago

His estimate of what Aadhaar, Jan Dhan accounts, GST and competitive credit bureaus together put at a lender's fingertips versus 2010.

The brief

The argument in sixty seconds

Sukumar's claim is that India's smaller businesses are starved of debt because nobody built the market, not because they fail to repay. Small and mid-market enterprises remain a negligible share of loan, bond and securitisation markets, and every few years risk appetite is knocked back again (demonetisation, GST, RERA, the fall of IL&FS in 2018, COVID) leaving what he calls the last bastion, with literally no focused players in it. The counter-evidence is unglamorous: pre-COVID credit losses of 2–3% in the nano segment, comfortably priced into end-borrower rates of 16–27% against a private moneylender's 4% a month. The build follows the diagnosis. One company lends off its own balance sheet to earn the credit understanding; the marketplace matches thousands of enterprises with institutional and HNI money; the asset-management arm exists to pull international capital into Indian performing credit. Through 130-plus NBFC partners Vivriti either refinances or co-originates: on a ₹5 lakh loan the NBFC funds ₹1 lakh, Vivriti funds ₹4 lakh, and Vivriti's cheaper cost of debt drags the blended rate down so the NBFC earns more while the borrower pays less. What made all this possible is data: with the credit-bureau monopoly broken, Aadhaar to locate a borrower, Jan Dhan and GST to assess one and bureaus to check the history, he reckons lenders have twenty times the information they had in 2010. What is still missing is policy: refinance for nano lenders on the model the National Housing Bank built for affordable housing, blended structures with the state in the subordinated tranche, priority-sector treatment that stops flipping on and off, and regulation by product rather than by licence.

Worth your time if you are

NBFC founders hunting cheaper liabilities

Credit teams underwriting sole proprietors

Impact investors weighing blended-finance structures

Policy watchers on priority-sector and licensing

Corporate operators plotting a jump into fintech

Episode map

Where the conversation travels

Every block is a chapter, coloured by what it's about. Click any of it to jump straight to that minute on YouTube.

Credit & lendingRegulation & policyPayments & fintechFounder journeyData & digitisationFundraising

01Cold open: a hurry, then six Tata companies 0:00 Vishal picks up the nano-entrepreneur thread from the Dell Foundation and Arthan episode before Sukumar admits his one regret (no gap between IIT Kharagpur and IIM Bangalore) then traces three dizzying years across six Tata companies and five years of corporate and investment banking at Standard Chartered. 02Employee number ten, at an 80% pay cut 5:08 The riskier move was not 2017 but 2010, when he joined Nachiket Mor's IFMR Capital as roughly employee number ten at an 80% pay cut, just as the world was crawling out of the subprime crisis, and spent seven or eight years building capital-market risk appetite for lower-rated NBFCs. 03The market nobody wanted to price 7:22 Small and medium businesses are a negligible share of loan, bond and securitisation markets, and bank and capital-market risk appetite kept getting knocked back by demonetisation, GST, RERA, the fall of IL&FS in 2018 and COVID, leaving what he calls the last bastion, with no focused players in it. 04Three companies, one problem statement 9:42 The lending arm buys its own understanding of credit by lending; the marketplace matches thousands of enterprises with institutional and HNI investors and handles price discovery, execution and monitoring; the asset manager uses that credit history and technology to bring international capital into Indian performing credit. 05$400 million, after 18 bootstrapped months 11:27 Sukumar corrects the host's figure to over $400 million now, roughly $195 million into the parent and $220 million into the marketplace, equity and credit combined, but the first 18 months ran on $2 million of founder equity while the company built six-city distribution, a technology team and a 22% option pool, and stayed profitable every year since inception. 06Micro, nano and the cheque-size test 14:45 Rather than argue definitions, Vivriti sorts the market by ticket size: under ₹3 lakh micro, ₹3–10 lakh nano, above that small and then medium, covering kirana stores, tailoring shops, food stalls and tier-5 ancillaries, of which 99.9% are sole proprietorships whose household and business share one balance sheet. 07Beyond the term loan 16:28 In 2010 the only product for a nano borrower was a term loan, and the constraint was technology rather than intent; today the menu runs to revenue-based finance against POS receipts, off-balance-sheet leasing of machinery, growth-linked term finance, lending against property and short-term working capital against gold or investments. 08Co-origination: one lakh theirs, four ours 19:06 Vivriti works through more than 130 NBFCs in two ways: refinancing their book so they can build distribution, or co-originating, where on a ₹5 lakh loan the NBFC funds ₹1 lakh and Vivriti the rest, so its cheaper cost of debt lifts the NBFC's spread while cutting the borrower's rate to somewhere between 16% and 27%. 09Virtual accounts, escrow, real time 22:25 A digital heat map of each borrower assembled from public and private data, bureau scores wired into the originator's credit model, KYC integrated with Vivriti's systems, money moving to the borrower's own bank account through virtual accounts and collections returning via escrow. The partnership runs literally in real time. 10Why the moneylender still wins 24:42 Discovery has improved steadily for a decade and a half, moving from urban to semi-urban to rural, but every macro or man-made crisis takes it two steps back, and states differ sharply in land records, asset records and the legal security a lender can rely on, which inhibits lending in whole regions. 11Twenty times more information 26:46 The unglamorous unlock was the regulator ending the credit bureau's monopoly around 2010 and mandating reporting, giving a lender in one part of the country the ability to lend across it. With Aadhaar, Jan Dhan bank statements, GST data and fintechs that digitise it, plus payment firms like Pine Labs selling POS data, lenders have roughly 20 times the information they had a decade ago. 12COVID, and households before businesses 30:04 Lockdowns made COVID a period of reflection for every lender in the segment, and while borrowers do graduate (bigger outlets, larger manufacturing units, direct access to the primary market) the vast majority borrow to help the household survive and thrive rather than to grow the business. 13Two to three percent, then the moratorium 31:53 Against bankers who insist the segment can only work as priority-sector obligation, Sukumar puts pre-COVID credit losses at 2–3%, manageable because the rate already prices defaults in, before COVID pushed blended default rates into high single digits and the RBI's six-month moratorium and government-guaranteed liquidity through SIDBI and state banks held the line. 14Six asks for the regulator 34:28 His list: get lenders the right cost of liabilities, encourage new NBFCs in micro and nano where formation has slowed even as consumer lending shot up, provide early-stage refinance the way the National Housing Bank did for affordable home finance, use blended structures with the state subordinated, stop flipping priority-sector status on and off, push open networks like OCEN, and merge the parallel credit-history systems. 15Licences versus products 38:34 Non-bank prepaid credit cards have just been opened up, but the flaw is structural: a lender wanting to lend, issue prepaid cards and factor receivables needs three licences for one underlying risk, and interventions arrive uncoordinated from RBI, SEBI, the finance ministry and NITI Aayog while small NBFCs have no voice at the table. 16Blended finance, securitisation, sunken cities 41:24 The Michael & Susan Dell Foundation sits subordinated in a six-year bond fund that finances small NBFCs lending to nano entrepreneurs, with insurers, bank treasuries and HNIs on top; next comes what he calls India's first retail asset securitisation fund for international investors, then a detour into submerged pre-Indus cities before the goodbyes.

Timeline

The arc, briefly

Two decades of one credit career, lined up with the shocks that kept lenders away from mid-market India.

2001-03IIT Kharagpur, then IIM Bangalore, back to back. Sukumar was in a hurry and jumped straight from one to the other. Six packed years of learning, and his one regret is that he left no gap between them.

2003-10Six Tata companies, then Standard Chartered. Three dizzying years inside the Tata group, then five years in corporate and investment banking in Bombay cutting his teeth on credit, distribution, product and operations.

2006-11The big banks burn their fingers. They tried to carry smaller businesses inside the retail portfolio and took enough delinquency to back away from the segment.

2010Employee number ten, at an 80% pay cut. He joined Nachiket Mor's IFMR Capital as the world was crawling out of the subprime crisis, and over the next seven or eight years it built capital-market risk appetite for lower-rated NBFCs. The same year, the only product a nano borrower could get was a term loan, and the constraint was technology rather than intent.

2010+The credit bureau monopoly ends. Before 2010 CIBIL stood alone; the regulator let competitors in and made reporting mandatory. Add Aadhaar to locate a borrower and Jan Dhan and GST to assess one, and Sukumar reckons a lender has twenty times the information it had then.

2017Vivriti starts, bootstrapped. Two million dollars of his and his co-founder's own equity carried the first 18 months, paying for six-city distribution, a large technology team and a 22% employee option pool. He calls it the toughest phase of twenty years of work.

2018IL&FS falls. Appetite had already been knocked back by demonetisation, GST and RERA, and nobody stayed long enough to learn the segment. That is what he means by the last bastion, with literally no focused players in it.

2020CredAvenue, and a six-month moratorium. The debt marketplace is founded the year COVID pushes blended default rates from 2 to 3% into high single digits, held together by the RBI moratorium and government-guaranteed liquidity through SIDBI and the state banks.

Today$400 million in, and a list for the regulator. Roughly $195 million into the parent and $220 million into the marketplace, lending through more than 130 NBFCs, profitable every year since inception. What he still wants: early-stage refinance on the National Housing Bank model, blended structures with the state sitting subordinated, priority-sector status that stops switching on and off, and regulation by product rather than by licence.

Takeaways

Ideas to carry out of this hour

The segment is a market failure, not a credit risk

Small and mid-market businesses in India remain a negligible share of loan, bond and securitisation markets, and Sukumar's diagnosis is that the cause is institutional rather than behavioural. Bank and capital-market risk appetite has been knocked back roughly every eighteen months for a decade and a half (demonetisation, GST, RERA, the fall of IL&FS in 2018, COVID) so nobody stayed long enough to learn the segment, which is exactly why he called it the last bastion with literally no focused players. The numbers he offers against the fear are dull: credit losses of 2–3% in the nano segment before COVID, low enough that a lender charging 16% and up prices defaults into the rate and still earns.

▶ 8:24 ▶ 9:13 ▶ 33:07

Three companies because one balance sheet can't do it

The same problem statement, that mid-market India needs debt, is attacked three ways. The lending company buys genuine credit understanding by putting its own money at risk; the marketplace connects thousands of enterprises with institutional and HNI investors and solves price discovery, execution and monitoring; the asset-management arm converts that accumulated credit history and technology into a pitch for much larger international pools of capital. Each is a distinct value proposition, and only together do they move enough capital to matter.

▶ 9:58 ▶ 10:14 ▶ 10:43

Bootstrap the balance sheet, then take the deluge

The group has now raised more than $400 million (about $195 million into the parent entity and $220 million into the marketplace, equity and credit combined) but that arrived very recently. The first 18 months ran on $2 million of equity from Sukumar and his co-founder, and he calls it the toughest stretch of his working life, because the early call was to build infrastructure for scale anyway: offices, six-city distribution, a large technology team and roughly 22% of the company set aside for employee options. The discipline that made it survivable is unusual for a lender this young: profitable every year since inception, or as he puts it, real commerce rather than the promise of future value.

▶ 11:57 ▶ 12:42 ▶ 13:42

Co-origination sells a cheaper balance sheet, not just capital

Vivriti works with more than 130 NBFCs, either refinancing their existing book so they can build branches and distribution, or co-originating loans alongside them. In a co-origination the NBFC that finds the borrower keeps a slice, funding ₹1 lakh of a ₹5 lakh loan against Vivriti's ₹4 lakh, and because Vivriti borrows more cheaply, the blended cost of the whole loan falls. The result is the rare structure where the originator earns more and the borrower pays less at the same time, landing end rates between roughly 16% and 27% depending on tenor, collateral, geography and business cycle.

▶ 19:21 ▶ 20:40 ▶ 21:56

Technology changed the product menu, not just the process

When lenders first went after nano borrowers around 2010 the only product on offer was a term loan (three to five years, EMIs, simple accounting) and Sukumar is clear the constraint was technology rather than the lender's intent or the borrower's need. Fifteen years on, the same borrower can be financed against the receipts in a POS machine as revenue-based finance, through off-balance-sheet leasing of machinery, against future growth, against the value of assets held rather than cash flow, or against gold and investments for very short-term working capital. Current business, future business, current cash flows, future cash flows, assets: each is now a separate product line.

▶ 17:16 ▶ 18:01 ▶ 18:34

The data dividend arrived before the capital did

The step change he credits most is the regulator ending the credit bureau monopoly around 2010 and forcing every bank, NBFC and small finance bank to report, which turned credit data into something a lender sitting in one part of the country could use to lend across it: current exposure, past defaults, extent of indebtedness, nature of lenders. Layer on Aadhaar to locate a borrower, Jan Dhan accounts and GST to assess one, and fintechs that digitise bank statements into analysis at the click of a button, and his estimate is that lenders have around twenty times the information they had a decade ago. That is also why payment firms like Pine Labs can now sell shop-level transaction data to lenders building a portfolio.

▶ 27:17 ▶ 27:59 ▶ 28:58

Regulate the product, not the licence

The regulator has just permitted non-bank prepaid credit cards, which Sukumar welcomes, but he thinks the architecture is wrong: lending needs a lending licence, prepaid cards a PPI licence, receivables a factoring licence, so a lender wanting to serve one customer three ways collects three licences for what is fundamentally the same underlying risk. Behind that sits a coordination problem: interventions arrive separately from the RBI, SEBI, the finance ministry and NITI Aayog, sandboxing is only just starting, and small NBFCs have no seat at the table while large institutions shape the rules. His fix is a designated cross-agency team and far more representation for last-mile lenders.

▶ 38:34 ▶ 39:03 ▶ 40:22

Blended finance is how commercial money learns a new segment

The Michael & Susan Dell Foundation's capital sits in the subordinated tranche of a six-year bond fund that lends to small and mid-sized NBFCs, which in turn finance nano entrepreneurs, and that first-loss position is what lets insurance companies, bank treasuries and HNIs come in above it. Sukumar wants the government or a government-run agency to take the same subordinated position at scale, letting commercial lenders take a little less risk while they learn the segment and eventually graduate to lending directly. The next structure in the same spirit is what he describes as India's first retail asset securitisation fund offered to international investors.

▶ 36:14 ▶ 41:59 ▶ 42:44

The numbers, drawn

What the episode measures

Every figure below was said on air, with timestamps included and caveats kept.

What a nano borrower actually pays

% per year

As stated in conversation: end-borrower rates of 16% to 26–27% for a business loan, customised by tenor, collateral and geography. The informal bar is the host's characterisation, about 4% a month which he described as running towards 50% a year, not a Vivriti figure.▶ 21:56

Credit losses before and during COVID

% of the book

Pre-COVID credit losses of 2–3% in secured and unsecured lending to the nano segment, as stated; COVID-era defaults were described only as 'high single digits' on a blended basis, plotted here at the bottom of that range.▶ 33:07

One loan, funded twice over

a ₹5 lakh co-origination, and who gains from it

The structure Sukumar runs across 130-plus partner NBFCs, alongside plain refinancing. The end rate still moves with tenor, collateral, geography and the business cycle, and the whole comparison only works against a private moneylender the host puts nearer 4 per cent a month.▶ 20:40

What a lender can see now

the stack that did not exist in 2010

Sukumar credits the first layer most: the regulator ending the credit bureau's monopoly around 2010 and forcing every bank, NBFC and small finance bank to report, which let a lender in one part of the country write loans across it. The 20x is his own estimate.▶ 28:58

Worth keeping

Lines that stay

Sometimes the choice of career is not just about what you're good at, but about what you're not good at as well — you eliminate what you don't do well and narrow down to what you do.

▶ 3:53

We felt that should be our core focus — that this would be the last bastion, where there were literally no focused players at the time.

▶ 9:13

We are a company that has been profitable every year since inception — a discipline that ensures there is real commerce and value at the end of the rainbow, rather than just the promise of future value.

▶ 13:42

We see a very large part of the market focusing more on the household's prosperity than on the growth of the business itself.

▶ 31:37

If I want to be a comprehensive lender to this segment offering multiple products, I need three licences. It doesn't make sense — after all, these are products.

▶ 39:03

Clips that travel

Short on time? Start here

Corporate operators plotting a jump into fintech

The 80% pay cut nobody advised

Why 2010, when he was employee number ten at IFMR Capital straight out of the subprime wreckage, was the riskier move, and why 2017 then felt like a natural progression.

5:08 → 7:22 · 2 min ▶ Watch clip

Credit teams underwriting sole proprietors

Micro, nano, and what they actually borrow for

The cheque-size taxonomy, the 99.9% who are sole proprietors with one merged household-and-business balance sheet, and the product menu technology unlocked after the term loan.

14:45 → 19:06 · 4 min ▶ Watch clip

NBFC founders hunting cheaper liabilities

Co-origination and the cost of capital

The 20/80 split on a ₹5 lakh loan, why a cheaper balance sheet raises the originator's spread and cuts the borrower's rate, and where 16–27% sits against the moneylender.

19:06 → 22:25 · 3 min ▶ Watch clip

Fintech builders working on underwriting data

Twenty times more information

The broken bureau monopoly, the Aadhaar–Jan Dhan–GST–bureau stack, and payment firms selling shop-level data to lenders building a book.

26:46 → 30:04 · 3 min ▶ Watch clip

Policy watchers on priority-sector and licensing

Six asks, and the licence problem

NHB-style refinance, blended finance with the state subordinated, priority-sector whiplash and OCEN, then why three products should not need three licences.

34:28 → 39:18 · 5 min ▶ Watch clip

Glossary

The jargon, unpacked

NBFC

A non-banking financial company, licensed to lend but not to take deposits, and therefore dependent on wholesale funding; Vivriti works with more than 130 of them.

Nano entrepreneur

In Vivriti's cheque-size taxonomy, a business borrowing roughly ₹3–10 lakh (kirana stores, tailoring shops, food stalls, tier-5 ancillaries) almost always a sole proprietorship with no balance sheet separate from the household.

Co-origination

A loan funded jointly by the NBFC that finds the borrower and a larger lender behind it, so the cheaper partner's cost of debt blends down the rate the borrower finally pays.

Cost of liabilities

What a lender pays for its own borrowing, the number Sukumar says decides whether lending to this segment is viable at all.

Blended finance

A pooled structure in which philanthropic or government capital takes the subordinated, first-loss position so commercial investors (insurers, bank treasuries, HNIs) will fund a segment they do not yet understand.

Securitisation

Pooling loans into a tradable security that investors can buy; Vivriti's next product is described as India's first retail asset securitisation fund sold to international investors.

Priority sector lending

The RBI rule obliging banks to direct a share of credit to designated segments, a status Sukumar says has been switched on and off for this segment too often to plan around.

OCEN

The open credit enablement network: shared rails that let lenders, marketplaces and platforms plug into each other; Sukumar wants a much larger official stamp put on networks like it.

Connections

If this resonated, go here next

EP 68 · Fintech

Full transcript

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