Banking Frontiers – July 2019

22 Banking Frontiers July 2019

Banking Frontiers recently organized an NBFC conference in Chennai to

discuss issues that pertain to NBFCs. There were 3 different sessions. Here

are the highlights of the deliberations in these sessions:

Mahesh Thakkar

D.P. Yadav

T

he NBFC sector in India has achieved

a 20-30% toy growth over the years

and NBFCs have capitalized on

opportunities created by Indian banks

• especially public sector banks – which
  normally do not lend in all geographies,
  said Mahesh Thakkar, CEO, Financial
  Industry Development Council (FIDC), a
  self-regulatory organization for the NBFCs
  in the country. Delivering a keynote address
  at a conference of NBFCs on the theme ‘
  NBFCs: Leapfrogging to Prosperity’, he said
  NBFCs are No 1 in the auto loans business.
  “Nowadays they are also growing in the
  MSME and infrastructure sector. Liability,
  affordability, accessibility and flexibility are

the 4 principles that govern NBFCs in India.

They have good reach compared to banks,

and some of the NBFCs have more than

2000 branches. South India-based NBFCs

are popular for their gold and vehicle loan

products. NBFCs have less NPAs compared

to the banks - the average NPA is between

3-5%,” he added.

Thakkar said NBFCs not only provide

loans, they also give financial advice to their

customers. For the last 5 years, NBFCs have

received good business from the SMEs,

traders and entrepreneurs and in the last

5 years gross domestic capital formation of

the country has reached from 5% to 15%.

However, asset funding by NBFCs is low in

India, he pointed out.

He said RBI needs to create different

categories of NBFC companies for asset

finance, capital market finance and

infrastructure finance.

Addressing the participants of the

conference, D.P. Yadav, secretary to

the government of India in the SME

department, said there is a need for a

cosmopolitan environment for funding.

He cited the instance of Tamil Nadu

government and government of India

coming out with different schemes for

promoting MSMEs, but these schemes have

unfortunately failed to reach the people.

Yadav said the cost of doing business

must be reduced and large organizations

have various instruments to raise funds.

He was of the opinion that the economy for

the MSMEs will improve and innovations

will help in local manufacturing in the

coming years.

Said Yadav: “The service sector

contribution will grow from 60% to 80% in

the country’s GDP. Tamil Nadu government

has recently unveiled its policy for the

startups and innovation. Initially we need

to form venture capital fund. It will be more

open-ended fund, or fund-of-funds, with a

corpus of `1.5 billion. The government will

invest half and the rest will be collected

from other partners. We are promoting

first-generation entrepreneurs in

our schemes.”

NBFCs:

Leapfrogging to Prosperity

Conference Highlights

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