NBFCs have navigated their challenges in the past by focusing on higher liquidity, provisioning buffers, and raising funds on time. Going forward, opportunities like co-lending, securitisation or partnership with banks will facilitate a funding-light business model for NBFCs, stated Jugal Mantri, Executive Director and Chief Executive Officer, Anand Rathi Global Finance, in an exclusive interaction with Rashi Aditi Ghosh of Elets News Network (ENN).
How do you see NBFC sector reshaping itself post the pandemic?
NBFCs have faced key challenges of funding, liquidity, asset quality and competition during the pandemic.
According to me, NBFCs have demonstrated admirable resilience by enhancing liquidity, provisioning cover, and capitalisation to strengthen their balance sheets India as an economy post-pandemic is on a remarkable growth trajectory which is evident from various financial indicators released by the government such as GST & direct tax collections, PMI, etc. The overall demand across all the sectors remained strong post- pandemic. The credit offtake of the financial institutions showed double-digit growth while showing significant improvement in asset quality. The monthly collection efficiency ratio of NBFCs has also seen an improvement. NBFCs have navigated their challenges in the past by focusing on higher liquidity, provisioning buffers, and raising funds on time. Going forward, opportunities like co-lending, securitisation or partnership with banks will facilitate a funding-light business model for NBFCs. As of now, Private Banks & PSU Banks have also refocused on the SME & retail segment and will pose tough competition to NBFC going forward.
How has been the year for Anand Rathi Global Finance? What are the growth plans with regard to lending and loans?
The year post-pandemic has been outstanding for our company as we grew our loan book by 58 per cent from 2020-21 to 2021-22. For 2022-23, the lending book is expected to grow by 40 per cent. Also, there was a significant improvement in the overall asset quality due to lower increamental NPAs and higher resolutions of old cases while the liquidity position remained strong.
With regards to our growth plans, we are targeting a CAGR of around 40 per cent over the next three years for our lending book comprising of SME loans, Construction finance, and loan against securities.
NBFCs have played an important role in meeting the financial inclusion vision of the country. What major changes in terms of leadership strategies have you witnessed in NBFC’s financial inclusion plan post covid?
NBFCs have been at the forefront of financial inclusion in India, lending to underserved and uncovered and deepening access to formal credit has helped in inclusive growth.
The role of NBFCs in financial inclusion has been increasing over the last many years due to rising demand for credit from several sections of the society and the government’s focus on financial inclusion.
NBFCs provide all kinds of credit including personal loans, consumer loans, mortgage loans, auto loans, gold loans, etc. So, one of the biggest opportunities for NBFCs is new to credit customers which means the people who have never borrowed in the past.
NBFCs have faced many challenges due to the outbreak of covid and intense competition. This has sharpened the focus on retail loans and faster turnarounds time, bank have become a necessity.
With digital solutions and nuanced underwriting models, NBFCs are now gaining market share.
How important is the contribution of the NBFC sector for achieving the USD 5 trillion milestone?
The role of the NBFC sector is extremely important for achieving the USD 5 trillion milestone as the sector complement banks in the credit intermediation process by offering diversified, tailor-made financial products through innovative delivery mechanisms and better service standards.
Furthermore, they facilitate financial inclusion by providing credit to unbanked sections of the society.
Over the years, NBFCs have assumed systemic importance due to their inter- linkages with the banking sector, capital market and other financial sector entities.
NBFCs contribute to nation building by efficient resource allocation, entrepreneurial boost, employment generation, specialised credit, increase market capitalisation and development of core sectors.
Thus, sustainability and high growth of NBFCs are imperative to achieve India’s target of USD 5 trillion.
What according to you are the key considerations for building a fit-for- growth NBFC sector?
NBFCs have undergone significant transformation over the past few years and played a significant role in the growth of the Indian financial system.
The key considerations for building a fit-for-growth NBFC sector according to me are:
- Adequate capital base and access to growth capital to meet the lending requirements.
- Timely availability of funds at optimal cost.
- Enhanced governance through a proactive, robust and agile risk management model.
- Leveraging technology for improved efficiency and enhanced experience.
- Deep understanding of customer segment and offering customised product based on their needs.