Blog Details

Author - Associate Shereen Abdin

In recent years, the rise of the scope of NBFCs in India has become predominant and contributed considerably to the financial progress of the country by being the largest receiver of funds. Many small ventures have emerged with the view of encouraging different types of investments. The major reason for the sudden upcoming scope of NBFC is attributed to the inflow of money from many sources.

NBC formally referred to as Non-Banking Financial Company, is a company registered under the Companies Act of India, 1956. NBFC plays a major role in the business of loans and advances, acquisition of shares, stock, insurance-oriented business issues by the government or any other local securities.

NBFC's operate under the supervision of the Reserve Bank of India but are not a part of the formal payment system. They mobilize resources and provide small loans at payable costs. This way they have supported the small enterprises.

India's NBFC sector is leading now with great support for driving in new credit disbursals for the economy's retail sector and MSME market. Though the scope of NBFC sector has seen drastic growth, large-scale investors have intimidated the market share, which makes the small enterprise owners suffer to scale up the business profitably.

The scope of NBFC sector is facing enormous pressure because of the external and internal factors such as:

• Tough competition from incumbents and entry of Fintech players
• High expectations from the customer end, the demand for 24 into seven support
• Technology advancements leading to customisation and social mobility

Strict regulations are slowly coming into action on the need for cost compliance, reducing the freedom to freely decide to price.

Due to the above pressure, it is very much critical for the newbie NBFC has to define, and adopt a standard strategy that meets these challenges, and survive in this competitive market space. NBFC's will definitely to overcome these obstacles and continue to survive in the Indian economy with passion and zeal.

Scope of NBFCs

The future scope of NBFCs is likely to advance if they concentrate on the following aspects like

• Offer uninterrupted 24 into 7 customer support with informative engagement programs to attract and maintain customers
• Partnership with Fintech markets will help scope of NBFCs to gain more recognition and compete stronger in a congested market
• Adopt efficient risk detection, management, and mitigation policies to help NBFCs survive market losses, and analyse whether lenders are financially good to collaborate
• Increased opportunities to embark their presence in unbanked rural areas
• The expansion of NBFCs into different markets like infrastructure, capital markets, debt funds, asset acquisition, and personal finance increases their scope and future
• Outline a segmentation strategy to focus on customer segments, distribution channels, and establish geographical locations for operations
• Over dues must be collected via a data-driven approach to expand recovery and avoid write-off.
• Make their presence in rural areas, where traditional banks do not lend money. This can benefit poor people greatly.
• Use the Online space as a constructive medium for connecting with borrowers who are let down by the banks. This will serve as a great platform for identifying borrowers and providing them with cheap investment options.

The NBFC sector is progressing in the right direction, and that is the reason it has gained so much importance from the government and other regulators. NBFCs primary role lies in bridging the gap in SME. In this regard, NBFCs have to update their business model or strategy, mandatorily. 

Conclusion

NBFCs with such challenging prospects have contributed considerably to the economy with great scope shortly. They outsmart the banks and have a great potential to reach the borrowers, and this is sure to change the banking value chain.

With the emergence of small finance banks, many of them would encourage NBFCs, and this will pave ways to create an extensive financial base for its customers. The government is also continuing to extend its support to NBFCs in creating a substantial base for lending activities.

To conclude, the scope of NBFC is likely to achieve tremendous growth by 2020. So let us look forward to continuous changes in the NBFC sector with innovative investment at winning rates.