Aug 22, 2018

New vistas in credit growth - Conference report by Banking Frontiers

New vistas in credit growth - Conference report by Banking Frontiers

Published in Banking Frontier 

Banking Frontiers organized an unconference to brainstorm and explore growth vistas among NBFCs and HFCs. Encore Theme was the knowledge partner for this program. Excerpts from the presentations:

V. Sreeram, Executive Director at Centrum HFC: 

There are more than 1000 NBFCs in India and it is a very crowded market. NBFCs need to target their segment deeply. They need to adopt technology. They need to first define the problem and later create solutions to work for them. NBFCs need to do things differently and in a right way.


Hari Padmanabhan, Executive Chairman at Encore Theme: 

The customer experience plays a vital role and there is a need to create magic for the customer by making the things simpler, and it mainly depends upon the approach adopted for the customer. Businesses look at the technology to solve problems, and there is a business created in technology and it creates the future.

Bhavesh Prajapati, Head - Credit at Aadhar Housing Finance: 

Collection of information is a major challenge for most of the affordable housing finance companies in India. Quality, qualitative information and bureau score are the 3 sources of collecting the information. Quantitative information comes from the application form, in which information like customer age and demography is available. Through qualitative sources, NBFCs can collect the information about the customer age, lifestyle, saving habit, customer banking behavior, etc. 60% of our customers are first-time loan borrowers. We have adopted a different approach for formal and informal customers. For formal customers, weight is given on qualitative collection methods and for an informal set of customers, we give more importance to qualitative parameters. Housing finance companies mainly follow a flexible approach because they don’t have a centralized policy. The NBFCs have a flexible approach for location, geographic, customer profile product. The flexible approach in risk management is the USP for NBFCs. How to verify customer subjectivity is the major issue and scorecard is mainly used to convert subjective approaches into objective approaches. The skill set is the biggest challenge in this industry.


Avinash Khanna, Head - Sales & Distribution (Education Loans) at Incred: 

Banks are doing great work; they are operating in huge structures; they have large balance sheets and a huge number of deposit account holders. Hence banks must follow regulatory norms, they must follow strict practices in the lending process.

NBFCs must find out the right segment and market, they need to design their management and practices correctly. Bajaj Finance has created a benchmark in customer durable industry. Educational loan platform is largely ignored by the PSU banks as they follow conventional practices in that segment. Our company uses alternative data in a strong way like accessing the academic profile of the students and employment opportunities before giving an educational loan to the students.


Sandeep Wirkhare, MD & CEO at Aryarth HFC:

 Today, technology is available in every aspect of customer acquisition and technology solutions are available for every business solution which includes acquisition, execution, and delivery of products and services. The cost of technology is also one of the important factors for the start-up companies. The need of the affordable housing finance companies is to get the technology provider to deliver technology which provides technology tools for chatbot, social media and customer acquisition.


Sabyasachi Rath, MD at Essel Finance: 

GST is a game changer for the NBFCs in India. Aadhar and GST will decide the customer credibility. The delivery mechanism of NBFC is stronger compared to the banks. NBFCs deeply analyze customer segment, past income, liquid income, etc, and these differentiate NBFCs from the banks. NBFCs are getting into the short term receivable financing, which is a low-risk business. There is a blurred line between service and product, the product can be served, and service can be a product. Blockchain technology will help in maintaining the privacy of the customer data. There is no lifespan of technology - it needs to be dynamic to provide instant solutions.