Bharatpe, a fintech company, has recently launched a new product called 12% Club Interest Account. The product offers a yield of 12% per annum, which is a significant increase from the traditional 3-4% offered by other products on the market. In this article, we will review the features of the 12% Club product, analyze Bharatpe’s business model, examine the risk and reward of the product, compare it with other interest products, and discuss the potential impact of Bharatpe’s entry into the P2P lending market.
12% Club Product Features
The 12% Club Interest Account offers a yield of 12% per annum, with daily interest credit. %. So far, no defaults have been seen on Bharatpe’s older merchant lending product. The borrowers of the 12% Club Interest Account are merchants who use Bharatpe’s platform. The maximum investment amount is INR 10 Lakh.
Does 12% club has Compound interest feature?
No, The interest is credited in the account daily basis, these are not reinvested automatically hence no question of compounding arises, although if you invest it manually then these interest will also earn interest and then only there will be a compounding effect.
>>Open account on 12% club and get 500 bonus on signup investment<<
BharatPe Business Analysis
Bharatpe’s business model is centered around onboarding merchants and providing them with credit at a low cost. The company recognized that retailers face a margin squeeze due to high digital channel fees and a lack of awareness of the UPI system. Bharatpe’s solution was to offer zero commission and educate merchants on the benefits of using the UPI system. By analyzing a merchant’s transaction history, cash flow, and credit score, Bharatpe is able to make loan offers to willing merchants. The loan is then processed by Bharatpe’s NBFC partner and credited to the merchant’s account in a few days. Bharatpe’s repayment rate is 96%, which is among the best in the market.
12 Club Risk and Reward
With the 12% Club Interest Account, Bharatpe is entering the P2P lending market and targeting consumer loans in addition to merchant loans. The company is partnering with Lendenclub to disburse loans as they do not have an NBFC license. In the past, the author of this article had a negative experience with Lendenclub, however, with Bharatpe’s vetting process, the risk of default is less than that of Lendenclub’s existing pool. The returns on the 12% Club Interest Account are high, but it is yet to be seen if Bharatpe will stick to its merchant borrowers or expand to a new pool of borrowers.
One of the concerns with P2P lending is that if a borrower defaults, the lender’s money is lost and there is no chance of recovery. The 12% Club Interest Account offered by BharatPe does not completely eliminate this risk, but it does mitigate it to a large extent. BharatPe has payment control for 10 million merchants, a large percentage of whom borrow through the company. By dividing the P2P money over a wider range of borrowers, and with better underwriting than most P2P lenders who are not in the cash flow of the borrower, the risks are reduced.
When it comes to the risks involved in investing in the 12% Club Interest Account, the main risk is if a large portion (30-35%) of borrowers default on their loans. However, BharatPe’s interest margins and diversification of its loan book helps to mitigate this risk. The company’s default rates are very low (less than 3%) as they have a payment flow with their merchants. Investors may be at risk if more than 30% of borrowers default in full, but this has never crossed 5% in BharatPe’s 3 years of history. To further minimize the risk, each person’s investment is divided into a minimum of 1000 smaller loans, so individual borrower default has no implications on investor returns.
The terms and conditions of the 12% Club Interest Account can be found on the app. It is a simple P2P lending offering, where the investment amount is divided into hundreds of micro loans, and returns come from there. Interest is credited daily into the investor’s account. In rare circumstances, where a large number of loans default, the expected return of 12% may not be achieved. However, this has not occurred in the company’s 3-year history. BharatPe already has 600,000 merchants earning 12% on their merchant app, and this product is the company’s consumer offering.
It is important to understand the measures that BharatPe is taking to ensure proper credit assessment and recoveries, to ensure that this initiative does not become a Ponzi scheme like some players in China. One way to understand this is by comparing returns with similar risk profile instruments. However, it is important to note that P2P investments should not be compared to sovereign or AAA yields, as they have different risk profiles
Comparison with Cred and other Interest Products
Cred, a competitor of Bharatpe, recently launched CRED Mint, which offers an interest rate of 9% per annum for investments between INR 1-10 lakh. When compared to Bharatpe, Cred’s product is inferior as Bharatpe has a long transaction history with its merchant borrowers and a better understanding of their creditworthiness. Cred, on the other hand, provides loans to anyone with a high CIBIL score, which is no guarantee of repayment. While Cred’s interest rate is lower than Bharatpe’s, the difference in yield (3%) is substantial.
The 12% Club Interest Account offered by BharatPe may not have the same high returns as some other platforms like Faircent which offer up to 14% returns. However, it also comes with minimal risk. The interest rate on the 12% Club Interest Account is unlikely to fluctuate or increase in the future. Unlike platforms like Faircent, where investors take on more risk and can make up to 18%, BharatPe manages risk by distributing loans and cross-subsidizing. Additionally, based on the number of people an investor refers to the platform, individual investors can potentially make even higher returns of 30-40% (by earning 10% of the interest earnings of all the people they refer) on top of the 12% on their capital.
Withdrawal Information
When it comes to withdrawing funds, there are a few things to keep in mind. If the withdrawal amount is less than INR 1 lakh, it will be paid out immediately. If the withdrawal amount is greater than INR 1 lakh, it will be paid out within 24 hours. Additionally, there is no TDS (Tax Deducted at Source) deducted on withdrawals and there are no charges for adding or withdrawing money however it doesn’t mean that it is tax free, this interest income will be treated as income from other sources and taxed accordingly, No deduction is allowable under section 80C and 80TTA yet.
How to open account with 12 club
It is simple process like any other P2P platfrom
- Go to there platform, if you use this referral link for signup we both will get 500 rupees once you add funds first time.
- Complete KYC and adhaar verification.
- Wait for their approval, generally approval investment comes within 24 our but for borrowing it takes time of 4 to 8 days or sometimes more.
In conclusion, Bharatpe’s 12% Club Interest Account offers a high yield with low default risk due to the company’s understanding of its merchant borrowers. While the company’s entry into the P2P lending market presents some risks, the returns on the 12 Club Interest Account make it a viable investment option. Compared to Cred and other interest products on the market, Bharatpe’s product is superior due to the company’s transaction history and understanding of its borrower’s creditworthiness.
