Factors influencing the expansion of NBFCs in India
Updated: Oct 29
The expansion of NBFCs in India has advanced significantly, and a significant portion of their activities have been diversified. The NBFCs have now paved the road for inclusive growth by opening a channel connecting the less banked customers to financial services. Financial institutions that offer specific banking and financial services without a banking license make up the NBFC industry. The public's demand for deposits cannot be accepted by these institutions.
India's Non-Banking Financial Companies (NBFC) industry has seen a considerable shift and has become increasingly important to the development of the country's financial system.
From 13% in FY16 to 16% in FY17 to 20% in FY18, the total credit market of NBFCs is increasing. Every fiscal year, NBFCs will increase by an average of 4–6%.
The NBFC sector has experienced substantial expansion, but what is driving this growth?
The expansion of NBFCs in India is influenced by several reasons. The following factors include:
Offerings of customized products:
Although there are requirements for NBFCs as well, they are not as strict as those for traditional banking institutions. The banks must offer a specified rate of interest and charges on their products under the RBI's rules and regulations. As a result, the NBFCs can offer products that are tailored to the needs of the customer. To service the desired consumer niche, many NBFCs concentrate on a small range of products, or frequently only one product line. To satisfy the distinct qualities of the consumer category and concentrate on addressing their demands, it has tailored its product offerings. According to the client profile and lending risk inherent in each product line, many NBFCs are using non-standard pricing strategies. Many customers prefer or pick NBFCs over conventional lending institutions due to the availability of customized financial products.
Comprehensive and improved risk management:
The NBFCs are required by certain requirements to maintain the greatest level of risk management for all of their financial products. To guarantee the greatest security standards and discretion, NBFCs appoint financial specialists at all levels of management. It maintains a flexible, reliable, and superior risk management approach.
Utilizing technology and using it properly:
Making the most use of business processes and customizing credit assessment models are two ways that technology is assisting NBFCs in reducing time to market and enhancing client satisfaction. The NBFCs have taken the initiative to integrate technology into every aspect of their operations. The majority of them offer online platforms that facilitate the quick processing of loans, insurance, and other application materials online. To more effectively engage with its target clients, it is making significant investments in artificial intelligence and data analytics.
Depth understanding of the customer's segment:
NBFCs have placed a heavy emphasis on underserved and unorganized economic sectors, which has allowed the enterprises to carve out a niche for themselves through regular engagement with customer segments and an in-depth understanding of demands. They are making sure that customers receive improved last-mile delivery and service.
Arrangements for Co-lending:
To expand their target customer base, NBFCs are taking steps to partner with numerous alternative lenders, commercial banks, and digital platforms.
Broader and more efficient reach:
The NBFCs have received praise and recognition for expanding their financing options for small businesses while upholding their excellent reputation, skills, and quality thanks to their distinctive teams and credit delivery methods. The lending options offered by NBFCs help small business owners with demands including equipment purchases, working capital requirements, technological upgrades, and business expansion. Additionally, the NBFCs are concentrating on expanding their networks in particular regions. It has created creative concepts to become dynamic in its growth and connect with the public.
The expansion and development of the Indian economy are greatly aided by NBFCs. It has gained popularity across a variety of industries, including finance, investments, equipment lease financing, etc. It can use resources more creatively and with a broader reach. It strongly emphasizes developing a relationship with clients and is aware of their demands. The emergence of Indian NBFCs was influenced by a variety of variables. In today's competitive environment, NBFC has effectively grown to be a strong financial institution.
It is challenging to meet customer demand in this cutthroat industry. Therefore, NBFCs need technology that can simplify their lending process to remove this type of barrier.
SynoFin excels in working with NBFCs of all sizes. The wide range of products in its stable ensures that NBFCs can depend on the services given by SynoFin for their digital consulting needs in every stage of their growth. SynoFin is enlarging its horizon or outlook to provide IT solutions to NBFCs.
The product suite includes:
Syno LMS: The most configurable Loan Management System for FinTechs
SynoLOS: Comprehensive loan origination system for NBFCs
SynoCRM: NBFC-focused CRM solution with rich workflows
SynoFin Collections: End-to-end collections management system
Visit SynoFin to know more about us!