Lending to your customers, Byju's?
It isn't lending if your customer pays you every month for a service you offer. It's a subscription.
A specific note on the Byju's bits: if a bank or NBFC doesn't lend, and Byju's says that oh, it will lend instead, please note that it is entirely bullshit. It's just a subscription, where you rightfully recognise revenue only when customer pays.
Background: Byju's has courses. They cost lots of money. They do aggressive marketing to sell these courses. Many parents don't have the money. Byju's then tells them they can pay every month. But it's actually a loan from an NBFC, disguised as a monthly payment.
When people realized that this is (damn!) a loan, they were a little, uhm, peeved. If they don't like the course, they could stop, they thought, so they won't pay. The NBFC said it will hurt their CIBIL score - still, defaults were high. Who took the hit? Byjus.
In Byju's annual report, the auditors noted that although the NBFCs had paid Byjus upfront some money when the customer took a loan, there was a clause that required them to return it to the NBFC if the customer didn't pay the loan.
A "full loss default guarantee" of sorts.
RBI disallowed loss guarantees in NBFCs and now it's partially allowed 5%. But it seems the NBFCs are refusing to lend to customers of Byju's - because the new rules are like this: If a customer doesn't pay, even if there is a loss guarantee, that customer is an NPA.
NPAs are bad for NBFCs, who'll hit snags when they get rated.
Byju's: oh we'll lend instead. This is bunkum. If a customer pays me Rs. X/month, can I pretend that I lent him Rs. X*12 for 12 months which he's paying me back monthly? And recognize X*12 as revenue?
So: if your customer pays you X per month, that's your revenue. If he stops paying, no more revenue. If you can recover more because you have a "contract", then you recognise revenue when you recover it. "Lending to your customers" means a subscription, usually.
Not for Everyone. But maybe for you and your patrons?
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