How startups are tackling the demonetisation cash crunch with IOUs

Sindhu Kashyaap

Binjal Shah

How startups are tackling the demonetisation cash crunch with IOUs

Friday November 18, 2016,

7 min Read

When, on the fateful night of November 8, 2016, Prime Minister Narendra Modi announced that Rs 500 and Rs 1,000 notes would no longer be valid currency, India was taken aback and instantly divided, and the collateral damage has been there for all to see. In order to combat this cash crunch in an otherwise cash-driven economy, here are some of the credit and ‘IOU’ moves that startups are resorting to.

The demonetisation has proved to be a catastrophe for many, and like other disasters, this, too, has brought with it a death toll. The number, in this case, is as high as 33, as reports have surfaced that underprivileged people and senior citizens are being refused treatment as they struggle to pay at various private healthcare centres and hospitals.

IOU as a concept isn’t new in India. Kirana stores, or even the chai and pan wallas near your house, have accounts that you can keep. Now, even startups seem to be waking up to this possibility and bringing the concept to the online and healthcare systems.


Vatsalya Centre for Oral Health:

Even as the government astoundingly refrained from mandating that hospitals and clinics treat all cases in this chaos, Bengaluru-based chain of clinics, the Vatsalya Centre for Oral Health, has taken the initiative to offer indefinite credit to their patients, should they fail to produce new notes to make their payments. Dr Srivats Bharadwaj, Founder and CEO, says that their team conducted oral treatment and check-ups for over 40 patients on credit over the last week and will continue to do so until the dust settles.


An e-commerce platform that delivers fresh, chemical-free fish and meat to your doorstep, FreshToHome has announced an IOU scheme across 300 pin codes in the NCR region, Bengaluru, Mysore, Trivandrum, and Cochin.

The IOU scheme is as simple as it sounds — if a FreshToHome customer does not have access to cash, cheque or online payments, they can simply choose the IOU option while ordering and pay the company at a later date.

Shan Kadavil, CEO, FreshToHome, says

While the recent move on demonetisation of 500s and 1,000s is laudable, the common man has a burning short-term issue in buying food and we intend to do our part in solving the problem by offering hassle-free short-term credits or IOU payments to our customers without any paper work


 The disdain most Ola cab drivers have towards cashless transactions or transactions via Ola Money is no secret. However, the current cash crunch has left them with no choice but to accept cashless transactions. Despite the drivers’ attitude, however, the number of people who prefer cashless transactions is high.

Looking at this, Ola has launched ‘Ola Credit,’ a postpaid service that aims to provide people with hassle-free mobility. The facility provides customers with seven days of credit, which allows them to keep booking a cab without worrying about the cash crunch. The credit can be repaid via debit or credit cards, net banking, or Ola Money.


SupplyThis is a personalised purchasing service and online marketplace for the medical industry. Here, doctors get access to a large selection of products from sections like ‘surgicals’, ‘disposables’, ‘consumables’, and ‘pharmacy’.

More than 700 doctors within the city, who largely prefer to pay by cash, are already using

“We would have faced a temporary slump in our sales had we not provided some customer-friendly measures to encourage them to buy now and pay later,” says Founder Kartik Deshpande. Priority customers — those who order more than thrice a week — have been offered a credit window of one week. The payment will then be collected via cheque, card, or cash.


A New Delhi-based online seller for fresh fruits and vegetables, this startup is helping its 12,000-strong customer base to continue to get veggies at home on short-term credit, if short on new currency notes. Repeat customers, who have shopped with them more than 10 times, fit the bill.

Sanjay Goel, CEO, FreshFalSabzi, says,

It is time to pay back the trust customers have shown in us. Vegetables are essential for daily living and we feel responsible towards our customers.

The maximum credit one can avail is Rs 1,000, which they can pay out in December, when the new currency note supply strengthens, or simply pay online.


Keeping in mind the demonetisation process, fashion e-commerce platform StyleCracker and its annual exhibition StyleCracker Borough are also extending a two-week credit period to their customers. Most of the fashion brands exhibiting on their aggregator platform are allowing their customers to purchase products and pay for them, on an average, one or two weeks later. Brands like Ginil&Disha, Amoh by Jade, Pause, Spring Break, Rashmi Modi, Nestaah, Surbhi Shah-Jaipur, Oceedee, and many more have agreed to extend this credit service, upon recommendations made by the StyleCracker team.

EST Branding

A startup in the creative space of events and advertising also noticed a steep decline in the number of inquiries in the week following demonetisation. In order to help them get through this, they swiftly announced a credit period of three months for everything, right from event management projects, to creative campaigns, ads etc.” They just need to sign a paper describing the services and amount,” says Nitin Pathak, Founder and CEO of the Mumbai-based agency.


Mumbai-based delivery platform Scootsy too realised the importance of a credit facility. It has introduced a new ‘Pay Later’ feature on its app. The platform has added a line of credit to all its regular customers. So now you can just add your order on the cart and choose pay later as a payment option. After 15 days, a reminder about the payment is sent.

Rishi Khiani, MD of Scootsy, says,

We realised our customers were going to face a cash crunch due to the demonetisation and in order to ease their burden, we came up with the pay later solution. We took 24 hours from the time of Modi's announcement to roll out this option, which now enables our regulars to continue their daily purchases. Additionally, since we acted quickly, we haven’t seen any dip in orders.

Other startups that have smoothly and swiftly made modifications in their payments and deliveries in the face of these circumstances are companies like StayZilla, which allowed customers who had opted for the cash option to make their payments digitally instead.

Gemporia, an online jewellery store, immediately rolled out a feature wherein customers who have placed and will be placing their orders can decide a shipping date based on when they think they will have the means to pay.

Just Buy Live, an aggregator for manufacturers and retailers predominantly in the consumer goods space, has noticed a sharp spike, as high as 200 percent, in the adoption of their already existing ‘Udhaar’ feature that offers credit lines to their vendors, predominantly mom-and-pop retailers.

India is by and large a cash economy, and as a nation, we are used to the idea of carrying cash with us.

Arun Ramamurthy, Founder of Credit Sudhaar slips in a word of caution.

Effective management of finance is one of the key parameters that would contribute to any startup's success. In the face of demonetisation, while there could be stress on sales, it may not be prudent to extend credit unless credit assessment is possible. Moreover, there are various modes for cashless transactions that should be extended to consumers for ease of payments.