Factors That Led to the Growth of NFBCS

Let’s accept the fact that NBFCs (Non-Banking Financial Companies) have been playing a pivotal role in channelizing limited financial resources in capital creation.

NBFCs have been playing the alternative role of the organized banking sector by minimizing the credit gaps, thereby in fulfilling the rising financial requirements of the corporate sector, providing a business loan to small local borrowers and the unorganized sector.

By 2023, the non-banking financial company (NBFC) sector had grown significantly, reaching a substantial size of USD 326 billion, highlighting its increasing impact within the financial sector.

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Moreover, NBFCs have enjoyed a more convenient structure than traditional lenders in the organized sector. The contribution of these NBFCs in the economic development and in fulfilling the credit requirements of the economy should be appreciated and there is also a requirement of keeping an eye on their activities as not every NBFC can provide profitable deals as Indifi does.

In the last few years, the transformation of NBFCs in India has played a vital role in the development of the Indian financial system. Check how NBFCs changing the business loan landscape in India

These non-banking financial organizations have become successful in comparison with traditional lenders like banks because their tailor-made solutions help people in meeting their financial requirements. Every year, NBFCs develop at an average rate of 4% to 6%. Let’s check out the prime factors which contributed to the development of Non-Banking Financial Companies in India.

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Factors Behind The Growth Of NBFCs In India

Knowing Your Clients Properly

• Concentrate on under-served and unorganized sectors of the Indian economy.
• Personalization of strict policies to fulfill client requirements.

Providing Tailor-Made Products

• Acceptance of non-standard pricing models for product ranges, the inherent risk of lending and in-line with the client profile.
• Focus on a restricted line for catering to the target client sector.

Ascending Technology

• Lessened time for marketing and improved client experience.
• Providing with tailor-made credit measurement models with optimized business procedures.

Dealing With Risks

• Enhanced governance with an active model of risk management.
• Non-Banking Financial Companies constantly develop with CRO (Chief Risk Officer) making sure the highest standard of risk handling.

Reaching Out To A Wide Range Of Audience

• Serving the requirements of Tier-2, Tier-3, and Tier-4 markets.
• Distribution of the business loan across numerous client touch-points with round-the-clock sales as well as service.

The Bottom Lines

So, these are 5 important factors which have been influencing the development of Non-Banking Financial Companies in India. Moving forward, the inherent credit demand of a growing India is offering NBFCs an opportunity for minimizing the gap, especially in the segments where traditional lenders like banks were not ready to serve.

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In accordance with the estimates, more than 50% of MSMEs(Micro, Small, and Medium Enterprises) are unable to access a formalized credit. In addition to this, enhancing the macroeconomic conditions, improved consumption, higher credit entrance, and innovative digital trends are going to offer massive scopes for NBFCs credit to increase at an exclusive rate of 7 to 10% in the upcoming years.

In case you also want to involve your business in this digital trend and maximize your business with increased working capital, this is high time to take out a business loan from a reputable alternative lender like Indifi.

FAQs

Why Choose NBFCs Over Banks For A Business Loan In India?

Opting for Non-Banking Financial Companies (NBFCs) over traditional banks for a business loan in India offers several advantages:

Faster Processing: NBFCs typically have streamlined processes, allowing for quicker loan approvals and disbursements compared to banks. This can be beneficial for businesses requiring immediate funds for various purposes.

Less Stringent Eligibility Criteria: NBFCs may have more flexible eligibility criteria compared to banks, making it easier for small and medium-sized enterprises (SMEs) or businesses with limited credit history to qualify for loans.

Customized Loan Products: NBFCs often offer specialized loan products tailored to specific industries or business needs. These customized solutions can provide better-suited financing options compared to generic offerings from banks.

Accessibility: NBFCs may have a wider reach in terms of geographical coverage, making their services more accessible to businesses in remote or underserved areas where traditional banking infrastructure may be limited.

Collateral Flexibility: While banks typically require tangible collateral for loans, NBFCs may accept alternative forms of collateral or offer unsecured loans, providing more flexibility for businesses with limited assets.

Less Bureaucracy: NBFCs are often perceived to have less bureaucratic processes compared to banks, resulting in a smoother and hassle-free loan application experience for businesses.

Credit for Non-Traditional Sectors: NBFCs may be more inclined to extend credit to sectors or businesses that banks consider high-risk or non-traditional, fostering financial inclusion and supporting the growth of emerging industries.

What is NBFC and different NBFCs in India?

• Nidhis: These are mutual benefit finance companies that allow the pooling of funds to achieve specific investment objectives.
• Loan Companies: LCs focus primarily on providing advances or loans.
• Asset Finance Companies: AFCs help businesses finance physical assets such as agriculture or industrial equipment.
• Investment Companies: ICs deliver services for the acquisition of securities.
• Infrastructure Finance Companies: IFCs position a minimum of 75 percent of their assets to provide infrastructure loans.
• Hire Purchase Companies: These institutions support hire purchase transactions.
• Housing Finance Companies: These NBFCs carry out the principal business of providing loans to construct houses.
• Chit Funds Companies: These non-banking financial companies operate chit schemes, i.e. they accept periodic deposits over a fixed period from a definite number of subscribers.