Clothing and jewelry stores have highest bad debts, Paytm dominates in Paan stores: report

NEW DELHI: Micro businesses have the highest bad debts or non-performing assets at 8.2% in the informal BNPL (Buy Now, Pay Later) program, up from 6.6% in 2020, followed by small businesses at 5% and averages at 4%, according to an analysis by digital small business lending app OkCredit. The higher NPAs are due to the small size of credit transactions.
“Store owners often have a casual attitude towards collecting small credits, which later leads to NPAs,” said the report, which analyzed data from one billion transactions on its platform in 2021.
Micro enterprises in Bihar, Rajasthan and Madhya Pradesh have the highest NPAs. Geographically, Jammu and Kashmir has been the best performer in credit collection for small businesses. It saw NPAs fall from 7.8% to 3.4%.
India has about 6.3 crore MSMEs and micro enterprises dominate this space
While micro-enterprises contribute the most to the volume of transactions, in terms of the amount of loans recorded, medium-sized enterprises come out on top, even if they are less numerous. Indeed, the size of authorized credit and the average size of tickets in medium-sized enterprises are significantly higher than those of micro and small enterprises.

Lifestyle categories such as clothing and jewelry posted the highest bad debts, due to their stagnant demand during Covid and higher ticket sizes. Medical stores, electronics, mobile devices and small electronics are the categories with the lowest NPAs.
The report also dwells intensely on the maximum credit size – the maximum amount of credit a store owner holds for an account. It is a barometer of the credit capacity of small, medium and micro-traders.
The maximum size of credit for small and medium enterprises has increased, indicating a growth in their activity. Since micro-enterprises have been hit the hardest by the pandemic, many of them have reduced their sales on credit and are opting for positive cash flow.
And, while cash is still the primary method of payment, digital payments are on the rise and growing steadily. Nearly 90% of online payment users on the platform use UPI.
In this context, 60% of payments for purchases below Rs 200 are made via UPI. GPay leads in UPI payments, followed by PhonePe, Paytm and Bhim. Paytm is the leader in small ticket transactions – under payments of Rs 200 and dominates in paan stores. Additionally, small items such as cookies, crisps, cigarettes, confectionery, milk, etc. are most likely paid through UPI.
In 2020, Gpay was the undisputed market preference for UPI payments with a 40% share. The contest for second place had been between Phonepe and Paytm. However, in 2021 Phonepe took over Paytm and now claims to be the market leader in the segment along with Gpay.

Repayment duration, also known as credit cycle, decreased for all categories, indicating faster repayments in the informal BNPL. Clothing and medical goods stores, which saw their credit cycles jump to more than 60 and 40 days respectively during the peak of the pandemic in 2020, saw sharp declines.
City dwellers are better loan repayers than in Tier 2 and Tier 3 cities, as evidenced by the shorter credit cycles in cities.

Southern states have a higher concentration of small and medium-sized businesses than other parts of the country.
Maharashtra has seen a huge drop in repayment tenure. People repay in 7 days compared to 28 days in 2020.