Skip to main content

Abhay Bhutada Underscores NBFCs' Significance in Overcoming Lending Challenges

For years, the commercial banking sector has been the dominant force in lending, including catering to the Micro, Medium, and Small Enterprises (MSMEs) sector. However, the evolving needs and demands of modern-day MSMEs have outpaced the traditional lending models. Abhay Bhutada, Poonawalla Fincorp’s MD, sheds light on the challenges faced by MSMEs and how Non-Banking Financial Companies (NBFCs) are emerging as crucial players in bridging the lending gap.

The Lending Landscape Dilemma

In a dynamic economic scenario, the lending space struggles to keep pace with the evolving needs of MSMEs. The Indian lending industry faces challenges such as limited access to finance, stringent scrutiny by traditional lenders, and the need for collateral. Shockingly, a report reveals that only 14 percent of the over 64 million MSMEs in India have access to credit, resulting in a staggering credit gap of $530 billion in the sector. This is particularly concerning given the substantial contribution of MSMEs to India's GDP and economic growth.

NBFCs' Strengths Unleashed

In response to the lending gap, NBFCs have emerged as key players with unique offerings and technology-based products. Abhay Bhutada underscores the strengths of NBFCs over traditional lending institutions. While commercial banks follow traditional lending practices that demand collateral and a proven credit history, NBFCs specialize in serving the last-mile population. Their wider regulatory framework allows for a broader range of activities and innovations, giving them a risk-taking ability that reaches consumer categories often underserved by banks.

Bridging the Gap with Specialized Services

The distinctive strength of NBFCs lies in their ability to cater to the specific needs of their segmented customer base. Specialized NBFCs strategically design tailor-made products, efficient distribution channels, and robust risk evaluation procedures. These companies offer product packages that include non-financial services, promoting customer loyalty, expanding their portfolio, and increasing asset size. Leveraging machine learning and data analytics, NBFCs personalize their product offerings, including business loans, quick loans, and supply chain financing.

Also Read: NBFCs and Digital Transformation: Shaping the Future of Finance

Co-Lending Models: A Collaborative Solution

The evolution of co-lending models involving traditional banks and NBFCs has further propelled credit flow to priority sectors at competitive rates. This collaborative approach benefits from the versatility of NBFCs' business models and lower cost of funding from banks. The infusion of digital technologies like e-signature and eKYC/Aadhaar-based verification has empowered NBFCs to cater to the large digital footprint of the Indian population, making their services more accessible and efficient.

Digital NBFCs Revolutionizing SME Lending

Digital NBFCs are at the forefront of leveraging technology to make credit more accessible to underserved customers in India. By employing alternate data sets and innovative credit underwriting approaches, they offer customized products with faster turnaround times. Ecosystem-based lending, facilitated by partnerships with digital platforms like Amazon and Google Pay, allows digital lenders to tap into available information about MSMEs, offering custom-tailored lending solutions.

The Way Forward: A Multi-Channel Approach

To bridge the credit gap in the MSME sector, a dynamic multi-channel approach with digital backing and vernacular access is imperative. While NBFCs have made significant strides in making last-mile borrowing more accessible, further expansion of their footprint is crucial. Identifying more gaps in lending, curating better products, and continuous refinement of technology are key aspects that NBFCs need to focus on to ensure the best lending experience for the MSME sector.

Also Read: Abhay Bhutada's Strategies for Enhancing Loan Prospects in MSME Sector

Summing Up

Abhay Bhutada's insights underscore the pivotal role played by NBFCs in revolutionizing the MSME financing landscape. As traditional lending institutions face limitations, NBFCs are adapting, innovating, and filling the credit gap, ultimately contributing to the growth and sustainability of the MSME sector in India.

Labels:

Comments

Post a Comment

Popular posts from this blog

Green Finance And Sustainable Development: Merchant Banking Initiatives In India

  As the world strives towards sustainable development, the financial sector is assuming a pivotal role in fostering green initiatives. In India, merchant banking institutions have emerged as key players in promoting green finance and sustainable development. Let's delve deeper into how prominent entities like IDBI Capital, ICICI Securities, SBICAPS, Axis Bank, and HDFC Bank are contributing to this cause: 1. IDBI Capital Positioning itself as a frontrunner in promoting green finance, IDBI Capital offers bespoke advisory services specifically tailored to sustainable projects. Leveraging its profound expertise in corporate advisory within India, IDBI Capital plays a pivotal role in facilitating funding for a wide array of initiatives ranging from renewable energy to clean technology and infrastructure projects. Through its extensive network and keen financial acumen, IDBI Capital endeavors to expedite the transition towards a greener economy, thereby catalyzing sustainable developm...
Post a Comment
Read more

Methods For Businesses To Steer Clear Of NPA

  In the realm of business, Non-Performing Assets (NPAs) stand as formidable obstacles. For Indian enterprises, steering clear of NPAs demands a strategic approach. These challenges, prevalent in the financial sector, require proactive measures and astute management practices to avoid their detrimental impact. Understanding Non-Performing Assets (NPAs) NPAs encompass loans or advances that have ceased to generate income for the lender. In simpler terms, when a borrower fails to meet interest or principal repayments for a specified period, typically 90 days in India, the asset is classified as an NPA. For businesses, this could stem from a variety of reasons, including economic downturns, market fluctuations, or internal operational issues. Robust Credit Assessment and Risk Mitigation One of the fundamental pillars of NPA prevention is a meticulous credit assessment process. Businesses must thoroughly evaluate the creditworthiness of potential borrowers before extending loans. This ...
Post a Comment
Read more

Interactive Music Discovery Hubs: Where Community Meets Melody

In the symphony of streaming services, music lovers often seek harmony through platforms like Spotify. But what happens when the rhythm falters, and the 'shuffle' feels out of sync? The vexing issue of Spotify shuffle not working prompts exploration beyond the familiar beats. Let's venture into a melodic world of alternative music platforms, where community engagement and diverse genres harmonize to create a vibrant musical tapestry. Amazon Music: A Melodic Oasis Amazon Music stands tall among the diverse music apps available in India. Offering an extensive library of tracks, it also provides personalized recommendations based on listening habits. This platform boasts various genres, ensuring there's something for everyone. Moreover, its seamless integration with Alexa and the ability to download music for offline listening makes it a user-friendly choice. Apple Music: A Harmonious Haven Another significant player in the music streaming realm is Apple Music. With its e...
Post a Comment
Read more