Exposure to NBFCs The threemost dominant sectors in the Indian financial systemare Schedule Commercial Banks (SCBs) followed by Insurance companies and Asset Management Companies (AMCs – Mutual Funds). These three sectors constitute to more than 80% of the financial system. While SCBs were the largest gross receivers of the funds, NBFCs were the largest net receivers of the funds from rest of the financial system as of March 31, 2016.
Exposure of SCBs, AMC-MFs and insurance companies to NBFCs. Particulars Mar 31, 2012 Mar 31, 2013
Mar 31, 2014
Mar 31, 2015
Mar 31, 2016
1,595 1008 1080
2,029 1,489 1,038
AMC – MFs
NBFC – Account Aggregator As all the financial assets of the individuals like bank deposits, mutual funds, fixed deposits and insurance policies etc., are held under purview of different financial regulators, entities get a distributed view of their financial assets. For this purpose, NBFC – Account Aggregator will provide consolidated information of all the accounts held by the customer in organised manner. The draft was issued by RBI in March 2016. Following are the guidelines for the business of the account aggregator – • It will not support any transactions in financial assets by the customer. • It will not undertake any business other than that of account aggregation. • Pricing of the services will be as per board approved policy. • Proper documentation of agreements/ authorisation will be ensured between the aggregator, customer and financial service provider. • The information will only be shared with the customer or any other person authorised by the customer. • Terms and conditions of the license will be applicable for customer protection, grievance, redressal, data security, audit control, corporate governance and risk management. Regulatory requirements for the NBFC sector The NBFC sector plays a significant role in our financial system as it mirrors few of the banking operations which are critical in bearing the financial stability of the country. According to the Department of Non-Banking Regulation (DNBR) 2015-16, the aim of the DNBR was harmonisation of the regulation across NBFCs and banks in order to stream line the processes. During the year, few of the steps undertaken include early recognition of financial stress; speedy moves for resolution and recovery for lenders; guidelines in formulation of Joint Lenders’ Forum (JLF) and corrective action plan (CAP); assessing risk weights assigned to exposures to central/ state government/s and claims guaranteed by state government; refinancing of project loans; strategic debt restructuring; risk weights to investments in the corporate bonds. The process for issuing CoR was also simplified and rationalised; documents to be submitted were reduced from 45 to eight. Further, NBFCs were divided into two groups Type I & II, the type I NBFC does not accept public funds and do not have customer interface. Conclusion New age digital customers and rapid technological innovations have changed the face of businesses are conducted today. To have competitive advantage NBFCs need to leverage on the new avenues of customer interaction. In order to deliver differentiated customer experience, NBFCs can leverage on partnerships with other companies. Use of technologies like big data analytics, can help create synergies between the product – customer requirement, analyse customer portfolio etc. Social media engagement, this helps to attract larger customer base, proactive end to end visibility to customer, faster leads generation etc. Going forward, with the government’s initiatives like ‘Make in India’, ‘Start up India’, ‘Digital India’ amongst others is expected to boost development in India. NBFCs are likely to benefit from underlying trends and developments in the Indian market. As the traditional banks already under stress; NBFCs would be of vital importance and can fill the necessary credit demand gap. The NBFCs therefore need to be well integrated in the financial system to match the growing needs of the economy. Furthermore, the Indian consumer is increasingly adapting to the digital technology in day to day life. Thus, NBFCs need to rethink on their strategies to enhance their product portfolio, process and customer experience. Additionally, they need to leverage on digital data for better credit decisions and social media to serve customers better etc. We hope that the forthcoming changes will further strengthen the robustness of the NBFC sector.
Made with FlippingBook Learn more on our blog