It is apparent that, in the last few months, the Non-Banking Financial Companies have witnessed a keen liquidity calamity, and a bid to support the lending condition both center and the RBI have taken quite a few measures. While the big ticket NBFCs - AA category are in an improved position to deal with the present issues, the smaller ones have been largely affected. Examining this crisis and the hurdles, Rashi Aditi Ghosh of Elets News Network (ENN) determines what is in store for the non-banking financial companies for the year 2020. What is their strategy for existence?
Gururaj Rao, CIO, Mahindra Finance, says, “Our Vision 2020 is to focus on the launch of new business lines, multiple online platforms, improved customer relationships and higher analytics. The organization would have higher physical abilities through further advantage of the cloud, mobility, ESB and data lake platforms. There will be an prominence on information security due to escalating technology risks.”
Emerging new channels of development by exploring partnerships with aggregators, e-commerce companies, FinTechs and the MSME marketplace and mounting capabilities to build these partnerships can tender great benefits to the NBFC micro finance investment sector..
Ram Kewalramani, Co-Founder & Managing Director, CredAble says “The viewpoint for 2020 may be vigilantly bright, however, to guarantee reasonable footing on development, NBFCs necessitate to forge pioneering ways to elevate capital basically through co-lending partnerships, & innovative capital raising methods. The theme for 2020 would be largely “Strategic Partnership “based versus going the whole monopoly alone. No more lone wolves in NBFCs specially in 2020.”
“2020 could probably be a break point moment, with the Government taking a series of tough fiscal measures to create demand and ease the liquidity pressure, leading to green shoots arising sometime in Q3 probably. A barrel of measures have been in the right direction, namely public sector banks to lend further to the non-banking financial companies, introducing partly credit guarantee scheme, end-use of limitations on external commercial borrowings, loan co-origination with banks and financial institutions, introduction of liquidity coverage ratios among others,” he added.
“There are numerous technologies — RPA, Chatbots, 5G, Cloud, AI/ML, NLP are a few of them that are affecting the overall journey of the customer and operational processes. We can expect noteworthy improvements in the turnaround time for any customer interaction.
The Robotic Process Automation would get adopted broadly across KYC, disbursements, repayments, regulatory reporting etc. Chatbots would become conventional authorizing its customers to self-serve themselves, effortlessly enabling customers to administer their accounts 24×7,” added Chaudhary.
Amplifying the role of technology in terms of the non-banking financial companies a bit more, Joseph Jayakumar, Director, Amstar Technologies says “One of the most thrilling innovation trends in 2019 will be the continued movement to projecting financing. For the first time, the financing industry can fuse all internal and external data, building prognostic profiles of customers and members in real-time.
The consumer data that is loaded, available and financially feasible to set up, NBFC’S can not only be on familiar terms with their customers but also provide advice for the future prospects.” Besides the Artificial Intelligence, he referred to the Voice and Vernacular as – The next edge in the non banking financial companies Technological advancement , Video KYC – an immense enabler, Blockchain – The Gamechanger, Cloud Integration – bringing in relieve and competence, Automation which can help in actualizing quick outcomes, Chatbots & Robo-Advisors, Social Profiling Score, Biometrics – Fingerprint, Face and Iris Recognition as the technologies with brighter future in the NBFC micro finance company’s scope.
He also suggested a few practices such as Faceless or Paperless electronic KYC and quicker loan processing and disbursal, from the ‘Agility and Scalability’ outlook for the nourishment of NBFC players in the market for long run.
The lending around NBFC-MFI sector is facing several challenging situations in the country. The evasion and inconsistency created due to IL&FS and were later overblown because of DHFL has aggravated the situation.
The Economic Survey for 2018-19 pointed out the current NBFC crunches as a key challenge that could clog credit growth and hinder the achievement of this milestone.
ASSOCHAM and PWC co created a report titled- ‘Fit-for-future NBFCs: A key pillar of the USD 5 trillion economy’ that quotes, “With the conventional sources of capital, numerous Non-Banking Financial Companies are elevating capital through securitization of assets for short of other swift and feasible fund-raising options. The non-banking financial companies concentrating on infrastructure and real estate lending are facing pressure in their loan books as supported by the mounting level of non-performing assets. Moreover, NBFCs are facing rigid competition from FinTechs of the new age which has been capturing a greater market share with their technology-heavy low-cost operating models and by setting new gold standards for customer experience.”
Apart from technological upgradation, NBFCs require to level-up their hold on their core areas of function that includes catering to the banking requirements of the underbanked section through financial insertion.
Anand Aggarwal, Chief Information Officer, Capital Trust claims that, “Yet there is a large unbanked population in India who doesn’t have access to formal banking channels. MSME contribute considerably to India’s Gross Domestic Product and this is a sector where delinquencies are extremely low and huge potential for growth but restrictive access to funds from customary banks and Financial Institutions.” “NBFCs with extensive exposure and deep access to rural India can play a essential part in serving these areas by partnering with various players in BFSI and consumption space with innovative products like Micro ATM, Cash deposit or collection, selling home appliances, bundling insurance life and health,” adds Aggarwal.
While discussing about the outlook for 2020, technology, data-security and synergies without a doubt make it to the top preferred segments in the non banking financial companies. However, solidifying the core areas of operation is still the main apprehension list of the industry, as recommended by the experts.
Non-Banking Financial Company (NBFC) is that kind of financial institution which offers various financial and non-financial services to business enterprises, individuals, entrepreneurs, etc. NBFC License must be taken from RBI
Peer-to-peer lending platforms offers a simple key to borrow money for short-term necessities. This shall include buying consumer electronics, medical emergency, business loan, home renovation, repay credit card dues, travel loan, or any other such requirements.
The procedure for taking over an NBFC is being laid down by the RBI. Takeover of an NBFC refers to purchase of one NBFC by another company. Only registered NBFC under the Act shall undertake to acquire the control of another NBFC.
NBFCs do not have those prosperities, which means that the NBFCs need alternate sources of the money supply, which are higher than the deposits taken by banks, where the interest rate offered is between 4%-6%.
Collaboration means coming together for a shared goal. India has more than 9000 active NBFC but barely 954 the NBFCs have book size more than 40 crores. Rest 8460 NBFCs are only able to meet the regulatory cap of the loan book of INR twenty Million.
RBI and other related regulators set rules and regulations, which keep on altering because of changing needs and circumstances. It is important for the NBFC management to know about what to do and how to do it, and there is a strong need to keep abreast of the times.
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