No fuss employee credit: All you need to know about the new employee benefit

Offering loans of up to Rs. 1 lakh for up to 1 year, NIRA lets employees in need of finance apply for easy credit, relieving organisations from the not-so-comfortable business of lending

Today, as part of their engagement with their workforce, companies offer a range of benefits to their employees. The variety available is continually growing; it is now common place to see vouchers of various forms, health benefits, and sometimes pension provisions.
One unaddressed need however, is short-term finance.

For the most part, employees are generally able to manage their living expenses within their means. There are occasions, however, when unforeseen events can lead to a spike in expenses, leaving them short of funds. In such situations employees face a need for finance. Those at the lower end of the pay scale, who have the least ability to absorb such a shock, are particularly vulnerable. Young people, who often don’t have a credit history, lack access to credit from banks.

Unless you have a high CIBIL score, banks will not look at you. For them then, the next point of call is their employer. Often in times of need for a fund, an employee may approach their manager appealing for an advance or a loan. The manager in turn will discuss with HR, and a loan will be sanctioned if the employee is seen as valuable and the use-case is deemed as worthy.

This status quo is suboptimal from the employer’s perspective since the company then gets into the business of lending which makes things complicated for them as an employer. It’s also not ideal from an employee’s perspective since this ad hoc process is slow and discretionary. Most of all, it’s uncomfortable for the employee to have to reveal to their manager and employer any private problems they may be facing.

Click here to know more about how NIRA helps employers improve financial wellbeing of their employees at a no cost, no risk arrangement.

NIRA is a fintech company with a mission to enable financial access for Indians, who are precluded from bank finance. Offering loans of up to Rs. 1 lakh for up to 1 year, when working with employer partners, NIRA can replace this discretionary process with a systemised approach. Employees in need of finance can apply for easy credit. They can start the application within their HRMS system and find out if they qualify in three minutes. The process is fully digital and can be completed on their smartphones via NIRA’s mobile app.

Repayments are in the form of easy EMIs and can be deducted either from the employee’s bank account or from the payroll (giving lower rates for employees). Most importantly, there is no cost and no risk to the employer. No fee is charged and the employee’s default risk is borne entirely by NIRA.

For those who have a tie-up with a bank, the disadvantage is that banks are very rigid with their eligibility criteria. They require a high CIBIL score and usually the minimum loan size available is Rs. 1 lakh. This excludes younger and lower salaried employees, who often don’t have a CIBIL score and need smaller amounts. Rs. 1 lakh is a significant amount for someone earning Rs. 3 LPA. They are more likely to need Rs. 20,000.

Since NIRA focusses on small credit, it does not compete with or trying to replace any bank relationship that employees may have. Rather, NIRA’s service complements the existing arrangement and simply fills the gaps.

NIRA views financial wellness as a key part of any employer benefit programme. By partnering with NIRA, employees can enjoy improved interest rates as compared to the regular B2C customers. A 2015 survey by Willis Towers Watson found that 52 per cent of workers in India believe they are less productive due to financial stress. This proves how credit as a benefit can act as a key mechanism to alleviate employees’ financial anxiety, thus improving the company’s bottom line.

The author is CEO at NIRA.

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