{"id":2159,"date":"2017-11-28T00:00:32","date_gmt":"2017-11-27T18:30:32","guid":{"rendered":"https:\/\/swaritadvisors.com\/?p=2159"},"modified":"2020-11-30T16:00:44","modified_gmt":"2020-11-30T10:30:44","slug":"retail-lending-best-business-model-nbfc","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/retail-lending-best-business-model-nbfc\/","title":{"rendered":"How Retail Lending Considered As the Best Business Model for NBFC?"},"content":{"rendered":"\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-6a55bb002fbb9\" 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-6a55bb002fbb9\"  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\/learning\/retail-lending-best-business-model-nbfc\/#What_is_retail_lending\" title=\"What is retail lending?\">What is retail lending?<\/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\/learning\/retail-lending-best-business-model-nbfc\/#DEFINITION_of_%E2%80%98Retail_Lender\" title=\"DEFINITION of &#8216;Retail Lender&#8217;\">DEFINITION of &#8216;Retail Lender&#8217;<\/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\/learning\/retail-lending-best-business-model-nbfc\/#BREAKING_DOWN_%E2%80%98Retail_Lender\" title=\"BREAKING DOWN &#8216;Retail Lender&#8217;\">BREAKING DOWN &#8216;Retail Lender&#8217;<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_retail_lending\"><\/span>What is retail lending?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-drop-cap\">Retail lending&nbsp;is the practice of lending money to individuals rather than organizations. Retail lending&nbsp;is done by banks, credit unions, and savings and&nbsp;loan&nbsp;associations. These institutions make&nbsp;loans&nbsp;for automobile purchases, home purchases, medical care, home repair, vacations, and other&nbsp;consumer&nbsp;uses.<\/p>\n\n\n\n<p>A lender is an individual, a community group, a private group or a financial institute that makes reserves existing to another with the expectation that the funds will be repaid, in addition to any interest and\/or fees, either in increments (as in a monthly&nbsp;mortgage&nbsp;payment) or as a lump sum.<\/p>\n\n\n\n<p>Lenders may provide funds for a variety of motives, such as a mortgage, vehicle&nbsp;loan&nbsp;or small business loan. The terms of the loan specify how the loan is to be satisfied, over what period and the consequences of&nbsp;default.<\/p>\n\n\n\n<p>Retail lending&nbsp;is the practice of lending money to persons rather than institutions Like <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\/\" class=\"text-primary\">NBFC registration in India<\/a><\/strong>. Retail lending is done by banks, credit unions, and savings and loan associations. These institutions make loans for automobile purchases, home purchases, medical care, home repair, vacations, and other customer uses. It has taken the important role in the lending activities of banks, as the accessibility of recognition and the number of products offered for retail lending have grown. The amounts advanced through retail advancing are usually smaller than those loaned to productions. Retail lending may take the form of installment loans, which must be paid off minute by little over the course of years, or non-installment loans, which are paid off in one lump sum.<\/p>\n\n\n\n<div class=\"read\"><p><b>Read, Also:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/why-nbfc-registration-is-required-in-india\/\">Why NBFC Registration is Required in India?s<\/a><\/mark>.<\/p><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"DEFINITION_of_%E2%80%98Retail_Lender\"><\/span><strong>DEFINITION of &#8216;Retail Lender&#8217;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A lender who lends money to individuals rather than institutions. Banks,&nbsp;credit unions, savings and loans institutions, and&nbsp;<strong>mortgage bankers<sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Mortgage_bank\" class=\"text-primary\"><strong><em>[1]<\/em><\/strong><\/a><\/sup><\/strong>&nbsp;are all examples of retail lenders.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"BREAKING_DOWN_%E2%80%98Retail_Lender\"><\/span><strong>BREAKING DOWN &#8216;Retail Lender&#8217;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Some think that retail investors should have a\u00a0fiduciary\u00a0responsibility to the individuals that they lend to. Others believe that borrowers should be financially cultivated sufficiently to make wise borrowing decisions.<\/p>\n\n\n\n<p>It is easy to understand why Fintechs are scoring over the banks. Without the burden of regulations, the limitations created by inflexible legacy IT systems or the huge costs of bank branches, many online lenders are able to operate business models that are much more efficient and cost-effective than the traditional bank model. For example, according to\u00a0this article from The Economist<u>,<\/u>\u00a0a typical online lenders\u2019 ongoing business expenses as a share of an outstanding loan balance is about 2%, compared to 5-7% for traditional lenders.<\/p>\n\n\n\n<p>With an increase in the bad loans burdening the books of the banking sector, commercial banks once again seem to be focusing on the retail lending business.<\/p>\n\n\n\n<p>The post-liberalization changes in banking practices included an increased emphasis on retail lending, which transited from being a risky and cumbersome business to one considered easy to implement, profitable and relatively safe. In some instances, such as housing, the income earned (rent received) or expenditure saved (stoppage of rent payment) from the investment is seen as providing a part of the wherewithal needed to service the loan.<\/p>\n\n\n\n<p>In other areas, confidence that future incomes to be earned by the borrower would be adequate to meet interest and amortization payments provides the basis for enhanced retail lending.<\/p>\n\n\n\n<p>In the process of financial intermediation, retail banks channel savings into loans to individuals and SMEs that finance investments in the real economy. By implication, the expected growth rate of gross domestic product (GDP) and similar measures of economic activity provide a macro constraint on the anticipated loan growth rate of the retail banking sector. At the level of a retail bank, profitable growth begins with growth in total revenue. In addition, as shown in the footnote below*, growth in interest-sensitive assets is a key determinant of a bank\u2019s profitability. In particular, it is shown that the growth rate of net interest margins is positive if the growth rate of interest-sensitive assets is higher than the growth rate of interest-bearing liabilities. But these growth rates must be aligned to meet external and internal constraints on asset growth. For example, the growth rate of loans (for example) is constrained not only by macroeconomic activity but also by the Basel III leverage ratio and the bank board\u2019s risk appetite statement. For example, the risk appetite statement may place limits on the loan to deposit ratio or loan concentration ratio. The latter may lead to a limit in the loan to deposit ratio or loan concentration ratio.<\/p>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/banks-vs-nbfcs\/\">Difference Between Banks v\/s NBFCs<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>What is retail lending? Retail lending&nbsp;is the practice of lending money to individuals rather than organizations. Retail lending&nbsp;is done by banks, credit unions, and savings and&nbsp;loan&nbsp;associations. These institutions make&nbsp;loans&nbsp;for automobile purchases, home purchases, medical care, home repair, vacations, and other&nbsp;consumer&nbsp;uses. A lender is an individual, a community group, a private group or a financial institute [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":2160,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[89],"tags":[124],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/2159"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=2159"}],"version-history":[{"count":6,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/2159\/revisions"}],"predecessor-version":[{"id":17049,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/2159\/revisions\/17049"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/2160"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=2159"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=2159"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=2159"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}