Dawn of New Strategies
Banking Frontiers|September 2021
Multi-pronged asset strategy, diversified liability approach, and a fresh technology design and blueprint in place, NBFCs have redefined their strategy to take on the competitions concluded the panel discussion held as part of the NBFC’s TOMORROW series by Banking Frontiers.

Moderated by Manoj Agrawal, Group Editor, Banking Frontiers, eminent personalities like Shachindra Nath, Executive Chairman & MD of U GRO Capital, Sabyasachi Rath, CEO, Karvy Financial Services, Sanjay Sharma, MD & CEO, AYE Finance, Nehal Mehta, Head of Business Development, Financial Services Industry at Amazon Web Services and Arun Nayyar, CEO, NEO Growth Credit, deep-dived into the set theme of discussion ‘Re-thinking strategies for the new world.’

NBFCs, long considered a second cousin to banks, are slowly fighting their way up the recognition pyramid. They are putting themselves on the map, like in the case of UGRO Capital which recently tied up with Bank of Baroda. What has led to this turn around?

One of the ways that NBFCs have assuaged this is through a change in the leadership mindset. The Executive Chairman and & MD of UGRO Capital, Shachindra Nath believes: “What this segment needs are the innovators and problem-solvers because if you’re not solving a problem of a segment of the market, there is no value proposition available to you.”

The under penetration of India credit market is vast and the possibilities for newer financial institutions are endless. The concerns and roadblocks these institutions could face will also be challenging because of the very dynamic nature of technology. Shachindra Nath says: “Technology is not really the constraint, but our ability to keep enhancing it is one. And for the financial services industry, especially for lending, it is a constraint of mindset.”

According to him, the entire liability spectrum rating agency is over weighted towards the big names and high-rated companies. They are rated highly not due to a solid underlying business model, but due to their name-weightage in the industry. This tends to hamper the newer NBFCs’ ability to innovate, grow and serve the market. Despite excellent business models and innovation, they have to compete with a name, and that is a big constraint. But in the last 2 decades in India, multiple financial institutions have overcome this problem.

According to Sabyasachi Rath, NBFCs also face the constraint of funding as earlier sources like banks and mutual funds have changed their approach to funding NBFCs. COVID has been one more factor which has led to collection efficiencies dipping significantly, impacting the bottom-line of NBFCs.

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