NBFCs must innovate to avoid customer inertia: Ashwini Kumar of MoHUA

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Optimal allocation of available capital in the credit market has an important role to play in the Banking, Financial Services and Insurance (BFSI) sector. It is well known that the credit market has the problem of asymmetric information and that is where the Non-Banking Financial Companies (NBFCs) have an edge, according to Ashwini Kumar, Additional Economic Advisor, Ministry of Housing and Urban Affairs, Government of India.

NBFCs are known to have a better knowledge of the ground level insights of their customers and it actually enables them to address the problem of asymmetric markets in a better way than the banks, explained Kumar while addressing a session at the recently concluded NBFC100 Tech Summit 2017, commenced in Mumbai.

“The current banking system is under tremendous stress as it has Non-Performing Assets (NPAs) worth Rs 30 lakh crore. It is a huge amount and NBFCs can be proved helpful in this regard.Going forward, NBFCs should build on what they have achieved as they hold a key to making the credit market robust,” said Kumar.

NBFCs are emerging as one of the most preferred options among the financial institutions due to their flexible credit offerings. While the bad loans are bothering the banks NBFCs are doing well in terms of customer satisfaction and revenue generation. But the segment still has a long way to go as far as digitisation is concerned,

“Largely if we look at the present scenario technology interventions are huge. NBFCs have a played a significant role in MSME sector but going forward I think if they can leverage big data and enter into the customer finance segment as India has crores of smartphone users. That will be a big boost to the NBFC sector,” he added.

If they have to enter the finance segment they will have to innovate. Because the consumer finance segment will also depend on the kind of products that they are going to offer to the consumers.

They will have to offer better and competitive cost. There is this inertia of consumers to move towards NBFC sector. In the initial phase, NBFCs will have to give competitive offers to enter into consumers’ list of preference,” suggested Kumar.

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