{"id":3106,"date":"2021-03-08T08:31:09","date_gmt":"2021-03-08T08:31:09","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=3106"},"modified":"2021-03-08T08:31:12","modified_gmt":"2021-03-08T08:31:12","slug":"challenges-and-opportunities-for-the-future-of-nbfc-in-india","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/challenges-and-opportunities-for-the-future-of-nbfc-in-india\/","title":{"rendered":"Challenges &#038; Opportunities for the Future of NBFC in India"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Non- Banking Financial Companies (NBFC)\nperforms the function of delivering credit to the local borrowers, unorganized\nsectors and corporate sector, performing like a banking sector but is different\nfrom banks. The purpose of <a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\"><strong>NBFCs<\/strong><\/a> is to provide loans and advances and\nfinancial services to the public, becoming an integral part of the economy.\nNBFC enjoys the flexibilities in the privileges and rules that are provided by\nthe government to grant loans and financial services to the people that have\nbeen an important aspect for the growth of the economy, yet there are many\nchallenges faced by them. Therefore, this article will discuss about the\nchallenges &amp; opportunities for the future of NBFC 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-6a3aa3f52f032\" 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-6a3aa3f52f032\"  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\/challenges-and-opportunities-for-the-future-of-nbfc-in-india\/#Understanding_Non-_Banking_Financial_Companies_NBFC\" title=\"Understanding\nNon- Banking Financial Companies (NBFC) \">Understanding\nNon- Banking Financial Companies (NBFC) <\/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\/challenges-and-opportunities-for-the-future-of-nbfc-in-india\/#What_are_the_opportunities_for_the_future_of_NBFC_in_India\" title=\"What are the opportunities\nfor the future of NBFC in India?\">What are the opportunities\nfor the future of NBFC 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\/challenges-and-opportunities-for-the-future-of-nbfc-in-india\/#What_are_the_challenges_for_the_future_of_NBFC_in_India\" title=\"What are the challenges for the future of NBFC in India? \">What are the challenges for the future of NBFC 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\/challenges-and-opportunities-for-the-future-of-nbfc-in-india\/#Conclusion\" title=\"Conclusion \">Conclusion <\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Understanding_Non-_Banking_Financial_Companies_NBFC\"><\/span>Understanding\nNon- Banking Financial Companies (NBFC) <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Non- banking Financial Companies are the companies registered under the <a href=\"https:\/\/en.wikipedia.org\/wiki\/Companies_Act_2013\">Companies Act, 2013<\/a> \/ 1956 and are the financial institutions that offers various banking services and acts as a bank but are not banks itself. NBFCs are not allowed to take traditional demand deposits such as those in saving accounts from the public. Such limitations keeps the NBFCs outside the scope of ordinary oversight form the federal and state financial regulators. NBFCs include mortgage lenders, investment banks, insurance companies, private equity funds, hedge funds and <strong><a href=\"https:\/\/swaritadvisors.com\/peer-to-peer-lending-license\" class=\"text-primary\">Peer to Peer<\/a><\/strong> lenders. The NBFCs do not include businesses whose principal business is either of the followings:<\/p>\n\n\n\n<ul><li>Industrial\nActivity.<\/li><li>Agricultural\nActivity.<\/li><li>Purchase\nor sale or construction of any immovable property.<\/li><li>Sale or\npurchase of any goods excluding securities.<\/li><li>Providing\nany services. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_opportunities_for_the_future_of_NBFC_in_India\"><\/span>What are the opportunities\nfor the future of NBFC in India?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are some of the opportunities for the future of NBFC in India which would help them to growth and emerge and contribute in the economy. One of the biggest opportunities for NBFC is its new to credit investment customers. Such customers are those people who belong from the rural area and have never borrowed credits or loans from any financial institution in the past. People from rural areas have limited access to banks and other credit financial institutions and services and they have to rely upon the NBFCs for availing credits. Therefore, NBFCs are a boon for the rural sector. NBFCs have become a profitable segment for such purposes.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/different-types-of-nbfcs\/\">What are the Different Types of NBFCs?<\/a><\/mark><\/p>\n\n\n\n<p>Further, NBFCs involves less paper work. The NBFCs are performing in a unique way, by which it can access creditworthiness of the people and provide them loans with less paperwork. For example, the NBFC provides loans to <strong><a href=\"https:\/\/swaritadvisors.com\/msme-registration\" class=\"text-primary\">MSME<\/a><\/strong>\u2019s making base of their invoices due for the payment. Such credit people are the greatest opportunity for NBFC as there are no competitions due to probable risk and the new to credit segment provides a huge opportunity for NBFCs to expand their market base in villages and tier 2 &amp; 3 towns across the country. Majority of population in India lives in areas where banks would not provide loans and financial services because of the absence of requisite paperwork. And such people look for financial help and are capable of returning the loan but face the problem due to paperwork and are denied loans. There NBFCs, becomes a source of help to provide financial aid as it involves less paper work. <\/p>\n\n\n\n<p>Taking into consideration the rise in non-\nperforming assets (NPA), banks are being cautious in relation to credit\nworthiness of the customers and deny loans for the same. Due to this, credit\ngap is made. However, in the case of NBFCs, they charge high rate of interest,\nwithin the guidelines of the government. The customers accept to pay additional\ninterest rate for loan to the NBFCs in order to skip any complications of\ncomplying with the requisites of the banks that are put on them. <\/p>\n\n\n\n<p>Also, keeping in regard the financial needs\nof the people and the structure of the banks, for the interest of the people\nthe government has exempted NBFC from harsh rules and regulations that are\nimposed on the other financial institutions, such as in the case of banks. The\nNBFCs enjoy the flexibility in rules relating to restrictions, paper work,\nthereby making it suitable for the entrepreneurs to show their interest in\nNBFC. One such example where the government has provided the opportunities to\nthe NBFC to establish their place in the market is the foreign investment that\nis permitted to NBFCs up to 100%. There are continuing advantages for the\nNBFCs, are government takes initiative to implement rules to help in the growth\nof NBFC. <\/p>\n\n\n\n<p>Further, NBFC has played an important role\nin contributing towards India\u2019s GDP to the extent that the government is also\ncoming forward now and will do so in future to protect the interests and help\nthe NBFCs to grow and emerge as they have been providing financial help and\nservices with easy procedure to the people of the country. The business of NBFC\nis of profit and their contribution in the growth of the India\u2019s GDP shows that\nNBFCs are working for a better in these past years. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_challenges_for_the_future_of_NBFC_in_India\"><\/span>What are the challenges for the future of NBFC in India? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Even though there are many opportunities\nprovided to NBFCs for its growth and improvement, yet there are some challenges\nthat are faced by NBFCs in India. <\/p>\n\n\n\n<p>The <strong><a href=\"https:\/\/swaritadvisors.com\/due-diligence\" class=\"text-primary\">due diligence<\/a><\/strong> is important to optimize the default risk. Since the customers who avail borrowings from NBFCs do not have any credit history, it becomes quite difficult to verify their financial credentials. There NBFCs have to take up additional resources for on- ground visits, reference checks, and etc. all of this adds to the operational cost and becomes difficult to service this segment. <\/p>\n\n\n\n<p>Further, since, new to credit customers do\nnot have any experience on getting financial services, they may not naturally\nengage with the NBFC to take loans for their business of personal requirements.\nTherefore, to attract the customers, the NBFCs have to spend additional\nresources in educating and financial literacy and awareness. Oh the other hand,\nonce these customers are made aware of the benefits of obtaining a loan from an\nNBFC, there is an extreme likelihood to convert the lead into real business. <\/p>\n\n\n\n<p>Non- performing assets have been a challenge\nnot only the banks but as well as for the NBFCs. With the new credit customers,\nthe risk remains higher as compared to those customers who have a credit\nhistory. Therefore, NBFCs continuously works on checking and balancing so as to\nmake sure that the EMIs are on time and records of the customers remains up to\ndate and any issues are notified immediately. <\/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 plays a very important role in providing financial assistance to those in need and it supplements the role of traditional banks by meeting the financial requirements of the unorganized and organized sectors. There are many challenges &amp; opportunities for the future of NBFC in India and therefore, it is necessary for them to work properly so as to create financial stability and protect the interest of the borrowers and depositors.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/documents-required-for-nbfc-registration\/\">What are the Vital Documents Required for NBFC Registration?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Non- Banking Financial Companies (NBFC) performs the function of delivering credit to the local borrowers, unorganized sectors and corporate sector, performing like a banking sector but is different from banks. The purpose of NBFCs is to provide loans and advances and financial services to the public, becoming an integral part of the economy. NBFC [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":3108,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[58,56],"tags":[471],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/3106"}],"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\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=3106"}],"version-history":[{"count":6,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/3106\/revisions"}],"predecessor-version":[{"id":3114,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/3106\/revisions\/3114"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/3108"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=3106"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=3106"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=3106"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}