{"id":2917,"date":"2021-03-03T06:46:46","date_gmt":"2021-03-03T06:46:46","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=2917"},"modified":"2021-03-03T07:26:28","modified_gmt":"2021-03-03T07:26:28","slug":"nbfc-funding-in-india","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/nbfc-funding-in-india\/","title":{"rendered":"A Complete Guide on NBFC Funding In India"},"content":{"rendered":"\n<p class=\"has-drop-cap\">In India, every business depends on funds to operate its day to day activities. Inadequacy in finances can delay the progress and compels one to shut down the business. In the case of NBFCs or Non-Banking Financial Companies, the requirement of funds get double. After obtaining <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\">NBFC Registration<\/a><\/strong> but without any banking license, Non-Banking Financial Companies renders credit services. Non-Banking Financial Companies do not depend on the&nbsp;<strong>Current Account Saving Account (CASA)&nbsp;<\/strong>deposits for raising NBFC funds in India. CASA deposits are only crucial for banks where banks are provided with licenses issued by the Reserve Bank of India (RBI) to accept money from the public. Non-Banking Financial Companies in India don\u2019t have those fortunes, which means the Non-Banking Financial Companies need to choose another source of money supply that is higher than the deposits taken by banks where the rate of interest in between 4% to 6%. Scroll down to check more information regarding NBFC Funding in India.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a5ba237d7e\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a5ba237d7e\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-funding-in-india\/#Importance_of_NBFC_Funding_in_India\" title=\"Importance of NBFC Funding in India\">Importance of NBFC Funding in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-funding-in-india\/#Points_to_consider_for_raising_NBFC_Funding_in_India\" title=\"Points to consider for raising NBFC Funding in India\">Points to consider for raising NBFC Funding in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-funding-in-india\/#Sources_of_Business_Funding_for_NBFCs_in_India\" title=\"Sources of Business Funding for NBFCs in India\">Sources of Business Funding for NBFCs in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-funding-in-india\/#Different_Services_Provided_by_NBFCs\" title=\"Different Services Provided by NBFCs\">Different Services Provided by NBFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-funding-in-india\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Importance_of_NBFC_Funding_in_India\"><\/span>Importance of NBFC Funding in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In India, any registered NBFC requires fundraising to function\nits business objective. Regardless of having a strong and robust business plan,\nNon-Banking Financial Company can fail due to lack of capital. Non-Banking\nFinancial Company plays a leading role in the growth of the Indian economy as\nit catches the Fintech Companies attention. Hence, Fintech Companies\ncollaborate with Non-Banking Financial Company for innovating technology-driven\ntools.<\/p>\n\n\n\n<p>Non-Banking Financial Company must make sure the right\nallocation of funds in each of its sectors to achieve the financial stability\ngoal. The agenda of NBFC funding in India should be carried daily since it\u2019s a\nnever-ending process.<\/p>\n\n\n\n<p>NBFCs are incompetent to raise money at lower interest rates like banks from Reserve Bank of India. Thus, they finish up by raising funds at a higher interest rate, which further proportionally increases the hurdle rate to maintain&nbsp;<strong>NIM or Net Interest Margin<\/strong>&nbsp;between 1% to 3%. It makes Non-Banking Financial Company search for an alternative plan like External Commercial Borrowing, Public Bond Issuance, and so on.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/what-is-the-history-of-nbfcs\/\">What is the History of NBFCs?<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Points_to_consider_for_raising_NBFC_Funding_in_India\"><\/span>Points to consider for raising NBFC Funding in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are two different measures that one has to take in the process\nof raising NBFC funding in India, and you can check the same below:<\/p>\n\n\n\n<ul><li>Calculate the mismatch between liabilities and assets.<\/li><li>Reducing the mismatch in liabilities and assets.<\/li><\/ul>\n\n\n\n<p>In case of Non-Banking Financial Company, the assets refer to\nthe investments made by Non-Banking Financial Company for working as a\nfinancing institution such as equity, debt, and organized products whereas the\nliabilities defines the amounts owed by the parties that have supplied money to\nNon-Banking Financial Company to carry out financial activities.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sources_of_Business_Funding_for_NBFCs_in_India\"><\/span>Sources of Business Funding for NBFCs in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following are different sources of NBFC funding in India:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/03\/Infographic-for-Swarit-Blog-3-1.png\" alt=\"Sources of Business Funding for NBFCs in India\" class=\"wp-image-2921\" width=\"491\" height=\"362\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/03\/Infographic-for-Swarit-Blog-3-1.png 894w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/03\/Infographic-for-Swarit-Blog-3-1-300x221.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/03\/Infographic-for-Swarit-Blog-3-1-768x567.png 768w\" sizes=\"(max-width: 491px) 100vw, 491px\" \/><\/figure><\/div>\n\n\n\n<ul><li><strong><em>Long-Term:<\/em><\/strong>&nbsp;Bonds are utilized\nas a traditional route to reduce the interest rate on the roots of funds. The\nrate of the coupon on the bond is chosen to reflect the rating profile of the\nNBFC and a return better than the G-Secs. In a few cases, tax-free bonds are\nalso circulated for priority sectors like roads and infrastructure. The\nmaturity profile of these bonds accords with the interest\/repayment schedules\nof the investments made by the NBFCs (Also presented as assets on the balance\nsheet). Bonds can be allotted to retail investors, which is a chief advantage\nfor NBFCs at bond placement.<\/li><li><strong><em>Short-Term<\/em><\/strong><strong>:<\/strong>&nbsp;A Non-Banking Financial Company offers short-term loans\ncan be issued by raising funds through Commercial Papers. These appear\nshort-term unsecured notes which companies issue with three to twelve months of\ntenure. NBFCs with a net worth of Rs. 100 crores are eligible to list commercial\npaper as per RBI (Reserve Bank of India).<\/li><li><strong><em>Issue Bonds:<\/em><\/strong>&nbsp;Non-Banking\nFinancial Companies can avail the money at the lower costs by issuing bonds and\nits very common practice which helps to reduce the interest rate on the sources\nof funds. Bonds can be issued to the retail investors, which is a huge benefit\nfor Non-Banking Financial Companies during bond placement.<\/li><li><strong><em>Securitization of Loans:<\/em><\/strong>&nbsp;Non-Banking Financial Companies raised Rs. 2.36 lakh\ncrores between Oct 2018 and Sep 2019 by selling their loans in the market\nthrough securitization. Non-Banking Financial Companies depend on\nsecuritization as an effective tool to manage liquidity, raise funds, etc.<\/li><li><strong><em>FDI or Foreign Direct Investment:<\/em><\/strong> One of the best\noptions of NBFC funding in India is FDI (Foreign Direct Investment), the era of\npost-liberalization in the Indian economy. An incredible increase in foreign\ninvestors in the Non-Banking Financial Company was perceived. Recently, up to\n100%, foreign investment is permitted under the instinctive route in Foreign\nDirect Investment. Thus, foreign investors don&#8217;t need approval from RBI and\ninvest directly in Non-Banking Financial Company.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_Services_Provided_by_NBFCs\"><\/span>Different Services Provided by NBFCs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following are some services which are offered by\nthe NBFCs that have access to the automatic route in FDI: <\/p>\n\n\n\n<ul><li>Merchant Banking <\/li><li>Asset Management <\/li><li>Factoring <\/li><li>Underwriting <\/li><li>Portfolio Management Services <\/li><li>Stock Broking <\/li><li>Venture Capital <\/li><li>Custodian Services <\/li><li>Leasing &amp; Finance <\/li><li>Housing Finance <\/li><li>Credit Card Business <\/li><li>Financial Consultancy <\/li><li>Micro and Rural Credit <\/li><li>Non-fund based activities <\/li><li>Investment Advisory Services <\/li><li>Forex Broking <\/li><li>Credit Rating <\/li><li>Money Changing Activities<\/li><\/ul>\n\n\n\n<p>The Government of India has announced new FDI norms for Non-Banking Financial Companies to quicken the non-banking financial sector. It eliminates the minimum capitalization norms. The quick increase of <a href=\"https:\/\/en.wikipedia.org\/wiki\/Foreign_direct_investment\">FDI<\/a> (Foreign Direct Investment) will be beneficial for the Non-Banking Financial Company business model due to easier and faster sanctions of funds at some affordable rate of interest.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NBFC, unlike banks, lack the ability to raise funds, therefore raise funds at an excessive interest rate, thereby effecting the barrier rate on their funds to increase correlatively. This causes NBFC to look for substituted strategies for the distribution of funds to produce a higher return. In case if you need help on the NBFC funding in India, contact Swarit Advisors. Our experts will give you detailed information regarding <strong><a href=\"https:\/\/swaritadvisors.com\/learning\/what-are-the-latest-trends-in-nbfc-business-model\/\" class=\"text-primary\">NBFC Business Model<\/a><\/strong>.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/revised-regulatory-framework-proposed-by-rbi-for-nbfcs\/\">Revised Regulatory Framework Proposed by RBI for NBFCs<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In India, every business depends on funds to operate its day to day activities. Inadequacy in finances can delay the progress and compels one to shut down the business. In the case of NBFCs or Non-Banking Financial Companies, the requirement of funds get double. After obtaining NBFC Registration but without any banking license, Non-Banking Financial [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":2918,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[58,56],"tags":[452],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2917"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=2917"}],"version-history":[{"count":6,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2917\/revisions"}],"predecessor-version":[{"id":2930,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2917\/revisions\/2930"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/2918"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=2917"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=2917"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=2917"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}