OptaCredit Fintech Pvt. Ltd, a digital lending start-up focusing on white-collar salaried workers, on Sunday said it has secured a credit line of $4 million from DMI Finance Pvt. Ltd, a non-banking financial services company (NBFC).
The credit facility may be topped up depending on the deployment of the funds. A credit line is an arrangement between a financial institution and the borrowing entity where the latter can access the stipulated credit amount, in parts or in full, over a specific period of time.
DMI Finance is the first external financier to OptaCredit. Set up in 2008 and backed by the promoters of Dabur India Ltd, DMI Finance focuses on corporate lending, housing finance, consumer finance and asset management.
OptaCredit will use the money to lend to its target group of customers and to strengthen its balance sheet in preparation to raise more capital from the market, its chief executive and founder Kumar Srivatsan said over the phone.
A part of the capital will be used to set up offices in Bengaluru and Hyderabad. OptaCredit is based in Chennai and has a 20-member strong team.
The start-up offers unsecured credit to employees, essentially white-collar workers in local establishments and mom and pop stores, who, despite a regular income, are unable to access credit from banks and financial institutions.
“People from uncategorized employers is our focus group. Uncategorized could mean an LLC or a local trading firm that does not have the brand recall but generates the same cash positive flow as a top-rated firm. New-to-credit plus uncategorized employer is a huge opportunity we are tapping into,” said Srivatsan.
Credit offered through OptaCredit is typically in Rs1-2 lakh range for an average tenure of two years. The platform may charge 8.8-15.8% interest per annum and takes 2.5% of the credit amount as processing fee. It underwrites loans using its proprietary credit analysis framework.
OptaCredit works on a hybrid model: the loans handed out rest on its own balance sheet as well as on that of its financing partner. For a Rs1 lakh loan for instance, OptaCredit will lend a certain percentage of the amount from its own capital pool while the rest will come from the financing partner, which is DMI Finance.
The company is in talks with other NBFCs to join as co-lenders, Srivatsan said.
OptaCredit was incorporated in 2016 and secured an NBFC licence from the Reserve Bank of India in November the same year. The platform went live in January 2017. Founder Srivatsan has earlier worked with the Royal Bank of Scotland and consultancy Ernst & Young, where he worked on banking and financial services sector projects.