Select Your Location
NBFCs are companies created in accordance with the Companies Act. With the Reserve Bank of India, these businesses receive NBFC licences (RBI). NBFCs are financial intermediaries that conduct financial transactions. NBFC provides credit, accepts deposits, and is crucial in directing limited financial resources towards the development of wealth. They provide credit to the unorganised sector and small local borrowers, assisting the organised banking sector in addressing the corporate sector’s rising financial requirements. However, they are not permitted to fund any agricultural, industrial, commercial, or residential real estate development or sales.The world is recovering from the effects of the difficulties presented in recent years. Despite its difficulties, India has emerged as a region of economic growth amid predictions of a worldwide decline. According to a recent World Bank research, when compared to other significant emerging economies and financial landscape, India is better equipped to handle global spill overs and navigate global headwinds.
Both business entities’ and individual customers’ financial needs are covered by NBFCs. The following are the several other purposes of non-banking financial institutions:
Provides Long-Term Credits: In order to meet the long-term financial demands of businesses engaged in commerce, trade, infrastructure development, and construction, NBFCs offer extended credit terms.
Expansion of National Income: Providing capital to various private businesses, they help industries grow faster and boost the nation’s Gross Domestic Product (GDP).
Provide Job Opportunities: NBFCs indirectly create job possibilities in the nation by promoting and assisting small and medium-sized businesses (SMEs).
Mobility of Funds: NBFCs are always beneficial for the economy since they mobilise capital by turning savings into investments and using that capital to lend to businesses.
Improved Living Standards: As industrialisation expands and NBFC loans are made available, people’s purchasing power rises, ultimately raising their standard of living.
Strengthening financial market: The NBFCs are the financial market’s heart and soul. Hence their strength is crucial. Most startups and SMEs rely primarily on NBFCs to obtain loans to meet their capital requirements.
In 2023, non-bank lenders will concentrate on restoring growth by improving asset quality supported by rising retail demand and liquidity, according to a recent analysis by ICRA. The MSME sector and other growing sectors will see more participation from NBFCs as part of the same. Also, more NBFCs will start investigating AI and machine learning for services or full-fledged applications with the introduction of 5G services nationwide.
Compared to 15 to 20 years ago, the gold loan sector has gained credibility, and the industry’s ongoing competitiveness shows that it is expanding. Even though banks will continue to compete in the market, NBFCs will remain an important player because of their wider reach, increased flexibility, individualised services, and cutting-edge digital solutions. Gold loans were a crucial source of financing for MSMEs, the agricultural sector, small companies, and the unorganised sector, as is clear from the consistent demand for gold loans.
It’s critical to overcome the significant difficulties the NBFC sector is currently experiencing if development is to continue in 2023. The recent change in the RBI’s securitisation regulations, which say that loans with residual maturities of fewer than 365 days cannot be securitised, is one of these difficulties. Due to the shorter period of gold loans and MFI loans, this may have an effect on the amount of securitisation.
NBFCs will need to concentrate even more on their pricing power to sustain profitability and also focus on higher-yield categories for expansion in a climate of rising interest rates and fierce competition from banks. NBFCs will continue to perform better and become stronger in financial landscape in the years to come if they have more robust business models, adequate capital, excellent underwriting capabilities, and a focus on digital strategy.
NBFC expansion typically goes hand in hand with a wider regional branch footprint. The reach is greater, and the asset under management is consequently greater the more branches there are (AUM). Regrettably, as businesses expand, federal, state, and local levels all have much more compliance requirements.
NBFCs may be able to offer themselves as a superior alternative to conventional banking practices and to their extensive reach and thorough grasp of the market. The addition of such specialised players and technologies will significantly alter the entire banking value chain. For NBFCs, this offers a strategic chance to secure long-term, sustainable growth.
Looking forward, From a macroeconomic standpoint and as a key accelerator in the Indian financial landscape, NBFCs have been quite significant. For addressing the financial landscape
and needs of numerous sectors, NBFCs are unquestionably becoming more advantageous alternatives to traditional banks. But, in order to thrive and continue to expand, NBFCs must concentrate on their core advantages while strengthening their disadvantages.
In order to remain in this very competitive financial industry, they will need to be highly dynamic and constantly try to find new goods and services. The regulatory framework has to be updated due to the NBFC sector’s innovative and dynamic nature.
The NBFC industry accelerates the country’s economic growth. The RBI is continually working to make the required modifications to the NBFC regulatory framework in order to proactively give regulatory assistance to the sector and maintain long-term financial stability. In 2023, NBFCs will make a more significant impact on the socioeconomic structure of the Indian economy. The potential for credit penetration in India is still relatively high. NBFCs may establish a new standard by working with fintech and creating new business models with specialised goods.
Also Read: How are NBFCs Changing the Business Loan Landscape in India?
I am a driven and meticulous professional who completed B.Com BL (Hons) from Tamil Nadu Dr. Ambedkar Law University and completed Master of Laws in specialization (Criminal Law with Cyber Crimes). I have extensive experience in Criminal Litigation and want to utilise my legal knowledge in writing also I have proficiency in writing legitimate content with comprehensive research. My core areas of interest are Business Law, Intellectual Property Rights, and Cyber crimes.
Tax planning is a continuing effort and a management strategy for ensuring the minimization of...
On 18th May 2023, the Securities Exchange Board of India (SEBI) released a Consultation Paper o...
Infrastructure and real estate have been regarded as India's "sunshine sector" since the turn o...
On 22nd May 2023, the Central Board of Direct Taxes (CBDT) issued a new circular under secti...
Anyone can have different sources of income. With globalization and the opening up of economies...
The Reserve Bank of India (RBI) is crucial in regulating NBFC, including branch openings and cl...
In India, Non-Banking Financial Companies are subject to certain restrictions from taking publi...
It's usually a good idea to diversify the assets in your financial portfolio, especially during...
A nation is being built by the non-banking finance company through the development of wealth, t...
A corporate entity known as a portfolio manager complies with a contract or agreement with the...
Are you human?: 8 + 2 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
NBFC in India and Nidhi companies are seen to be functioning at larger and smaller platforms respectively. However,...
11 Feb, 2019
The audit report of the company is a key deliverable which shows the end results of the entire audit process. The d...
16 Nov, 2019
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!