3Ts of NBFC’s journey towards digital automation (Technology – TransitionTransformation): Ajay Chadha, Executive Director, Nelito Systems

Ajay Chadha, Executive Director, Nelito Systems Pvt. Ltd

Solution design should have a customer first approach. There is no solution in a one size fits all model. NBFCs and MFI although have similar compliances and reporting, have diverse products, varied work flows and differed IT capabilities, shares Ajay Chadha, Executive Director, Nelito Systems Pvt. Ltd. in an exclusive interaction with Srajan Agarwal of Elets News Network (ENN).

In the near future, what would be the outlook for NBFCs in India?

NBFC loan growth is expected from segments of personal loans, consumer durable loans, loans to SMEs, property and gold loans. According to a recent CRISIL report, secured loans like Loan against property and gold loans are expected to touch 10-12 per cent growth supported by demand from small businesses and individuals. Intense competition from banks and the rising interest rate scenario will limit the competitiveness of NBFCs in certain segments, leading them to focus on higher-yield segments for growth.

According to you, how is the competition landscape positioned for new entrants with new banks and fintech players entering the segment?

There is a latent collaboration between the lending entities which is proved by the new evolving co-lending and business correspondents’ models. Although the lenders market is moving towards overcrowding, and thus, saturation will be restricted to particular segments like retail loans. A recent report by Times of India states that bank loans to NBFCs in the first 11 months of FY23 were 2x times the disbursement to industries. So, the bottom line is that interdependence between lending entities is eminent.

How can the new entrants build a stable scale of operations?

A good example is a domestic microfinance which initiated its journey just 4 years back with promoters investing around INR 5 crores net owned funds. Today, they have rapidly scaled to managing a massive AUM of INR 500+ crores and now they shall be classified as a systemically important NBFC. We have closely witnessed their transformations as their proud technology partners. The key to a sustained long-term growth is to keep cost of operations to an optimum and invest in the right talent and technology.

What are the potential challenges faced by NBFCs in technology adoption?

Constantly growing competition has put more stress on NBFCs to differentiate by extending quicker and personalised services to every customer. The NBFC sector is ever evolving to leverage technology in expanding their reach, improve customer experience, and optimize operations.

How has Nelito helped NBFCs achieve digital transformation?

This can be explained well with one of our casestudy. A South East Asia based microfinance institution was exploring solutions with an expectation to increase their client outreach, scalability and conforming compliances with International Financial Reporting Standards (IFRS), Generally Accepted Accounting Principle (GAAP), National Central Apex Bank and Credit Information Bureau (CRIB)

Nelito has successfully delivered its FinCraft Core Financial Services Solution (CFSS) in this institution with all their expectations covered. This was delivered in web and mobility module both. Additionally, this version is enabled with multi-lingual and multi-currency support, along with multi-channel integrations like payment gateway for repayment collections, credit bureaus, communication services etc.

Any new developments or additions which you would like to share?

We are integrating an AI-based E-KYC solution for the benefit of customer on-boarding aspects of NBFCs and MFIs. This is developed using OCR (optical character recognition) and Face ID authentication which shall also be available in mobility version. This will drastically reduce time for customer onboarding and improve the overall customer experience.

Also Read | FinTechs & NBFCs collaborate and synergise as they possess unique capabilities that compliment each other: Ramesh Iyer, VC & MD, Mahindra Finance

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