By Rajiv Sabharwal
With the onset of new fiscal, it is crucial to highlight the evolution of India’s Non-Banking Financial Companies (NBFCs), driven by changing consumer preferences and increasing regional dynamics. The sector has witnessed rapid growth owing to the growing needs of consumers, who are opting for digital banking and personalised financial products. With this, NBFCs must adapt and innovate to thrive in a connected world.
FY25 Focus
Outlook for the NBFC sector appears optimistic. The recent Moody’s report projects India’s GDP growth to 6.8%, which is the fastest-growing economy among the G-20 economies. Consumer optimism, double-digit credit growth and technology will form the baseline in building innovation and adaptability for the finance sector. With the anticipated decline in interest rates in the latter half of the year, demand in credit will also help NBFCs grow in tandem.
There will be an increasing demand for financial products in rural markets fuelled by the penetration of the internet and an entrepreneurial mindset. Government schemes like Pradhan Mantri Jan Dhan Yojana (PMJDY), Mudra Yojana and Stand-Up India have created a backbone for NBFCs in this market. Using technology and existing initiatives, NBFCs can educate and collaborate to reach the grassroots level. There is immense potential here as microfinance loans can boost local businesses, agri loans can spur farm productivity, thus putting NBFCs in a position where they are playing a key role in hyperlocal economic development.
Paytm Payments Bank’s board is independent, says Vijay Shekhar Sharma
Target over 30% deposit growth in FY25: IDFC First Bank’s CEO
Draft guidelines issued for loan web aggregators
SBI Cards logs profit of Rs 662 crore in Q4
All this can be done in alignment with the government’s regulations and compliance for sustainable growth. NBFCs need to stay abreast with the evolving RBI regulations and adapt swiftly to the changing ecosystem. With compliance-driven frameworks in place, NBFCs can mitigate risks and build credibility and trust among the stakeholders and customers.
In this digital-first world, technology has played a key role in driving the growth of NBFCs. A few financial services companies have already implemented advanced technology to stay ahead of the curve. Like the FMCG model, NBFCs have also shifted towards a customer-centric approach by investing in social listening tools, market research and technology to enhance customer experience and build trust. From customer support, AI bots, content creation tools and productivity measurement has been the backbone for NBFCs in offering tailor-made solutions to meet their growing customer needs.
The implementation of Generative AI will bring a paradigm shift for businesses. It can be used in strategy where main problems can be addressed with defined goals and policies. By adapting to technological advancements and consumer trends, NBFCs can play a pivotal role in shaping the future of the finance sector. With that being said, first investing in market research, consumer insights, social listening, etc. is key to building customer-first products.
In conclusion, India’s NBFC sector stands at the crossroads for growth and transformation with the right strategies and innovations. Embracing technology and building financial inclusion while staying in compliance with RBI regulations can be the enabler of growth and opportunity for the sector.
(Rajiv Sabharwal is the MD and CEO of Tata Capital. Views expressed are the author’s own. Please consult your financial advisor before investing.)
