Months after the devastating second wave of Covid-19, the digital lending sector is beginning to contend with its adverse effects. The September quarter numbers reported by multiple players reveal a bad debt pile-up and an impact on their earnings profile.

Large tech-enabled lenders such as Aye Finance and Lendingkart have seen stress on their books lately, and the non-performing assets (NPAs) of Sachin Bansal’s new-age lender, Navi, have also ballooned over the past few months.

Navi, which is awaiting a banking licence, wrote off a chunk of bad loans in the September quarter, according to a credit note published by India Ratings and Research on October 29. Its gross NPA numbers had shot up to 7% in the June quarter, but came down to a more manageable 4% in September after the write-offs.

Navi’s business expenses, however, soared, causing the Bengaluru-based startup to report a loss of Rs 15.8 crore ($2 million) in the September quarter, regulatory filings show.

Some prominent players have also suffered losses. Ahmedabad-based Lendingkart, which offers loans to small and medium enterprises, posted a net loss of Rs 132 crore ($17.3 million) in the September quarter, up 200% from Rs 44 crore ($5.7 million) in the June quarter, according to regulatory filings. Aye Finance’s net loss was Rs 9.7 crore ($1.2 million). In the June quarter, this figure stood at Rs 38 crore ($5 million).