Rahul Singhal, Subject Matter Expert, S.N. Dhawan & CO LLP, expressed, “In 2023, the RBI’s strategic regulatory actions prompted pivotal shifts in the NBFC landscape, compelling a recalibration for heightened supervision and adjusted risk weights. As we approach 1 April 2024, the impending IT governance directives introduce a crucial cybersecurity imperative, essential for ensuring operational resilience in an increasingly digital financial ecosystem. Casting an eye to 2024, the NBFC sector is thrust into a dynamic landscape, steering through challenges and seizing growth opportunities presented by digital transformation and innovative funding mechanisms. Our NBFC tracker report illuminates the indispensable role of robust risk and governance frameworks, alongside adaptability to regulatory changes, in sculpting a resilient and vibrant future for the sector”.

Sectoral deployment of credit by NBFCs

The NBFC sector saw a significant 20.8% increase in credit growth between September 2022 and 2023, driven mainly by a surge in personal loans (32.5% growth) and agricultural lending (43.7% growth). Over the past four years, personal loans grew at an impressive CAGR of 33%, outpacing the overall credit growth. Recent risk weight adjustments for retail loans may affect future credit growth. In terms of market share, personal loans increased by 2.3%, and agricultural loans rose to 1.9% in September 2023, up from 1.7% the previous year.

GNPA – Gross Non-Performing Assets

In the first half of FY24, NBFCs saw a drop in their GNPA ratio across all sectors. Overall, the GNPA ratio decreased to 4.6% in September 2023 from 5.9% in September 2022. Personal loans had the lowest GNPA ratio at 3.6% by September 2023. Private NBFCs still face a high GNPA ratio of 12.5% in industrial advances, representing 21.6% of the total NBFC sector GNPA. All sectors showed improvement in their GNPA ratios by September 2023, with the services sector witnessing the most significant drop to 8.1%.

NBFCs’ sources of funds

As of September 2023, borrowings remained the primary funding source for NBFCs. Compared to September 2022, NBFCs’ reliance on borrowing increased by 1.1% to reach 62.1% in September 2023, while the share of share capital and reserve and surplus slightly declined to 27.9% from 28.5% in September 2022. Within borrowings, banks and debentures were the major sources of funds, with NBFCs raising 25.0% through bank borrowing and 19.6% through other debentures by September 2023.

Credit risk in NBFCs

The RBI conducted stress tests on 146 large NBFCs to assess credit risk resilience across three scenarios: baseline, medium, and high risk. As of September 2023, these NBFCs maintained a 24.4% capital adequacy ratio and a 3.1% GNPA ratio. In the baseline scenario, GNPA was 3.8%, while in medium and high-risk scenarios, it rose to 5% and 6.3% respectively. The number of NBFCs failing to meet the 15% regulatory standard increased to 9 for baseline, 15 for medium risk, and 21 for high-risk categories.

Top NBFCs and a track of their performance

In Q2 FY24, top NBFCs managed IN₹7,65,753 crores in assets, up 18.2% from IN₹6,47,855 crores in Q2 FY23. Capri Loans led with a 59.1% AUM growth to IN₹12,358.5 crores, followed by Satin Creditcare and Bajaj Finance with 38.6% and 32.9% growth respectively. Top NBFCs saw a notable increase in average return on assets (ROA) from Q2 FY23 to Q2 FY24, rising by approximately 0.5% to reach around 3.5% in Q2 FY24.

In Q2 FY24, the average capital adequacy ratio for top NBFCs improved by 1.7%, reaching 29.7% from 28.0% in Q2 FY23. PNB Housing Finance saw the most significant increase, rising by 6.3% to 30.4%, followed by Capri Loans with a 6.2% improvement.

Additionally, the majority of the NBFCs saw an improvement in their GNPA ratio during Q2 FY24. PNB Housing Finance led with a 4.3% improvement compared to Q2 FY23, followed by REPCO with a 1.6% improvement.

The post India’s Personal Loans Soar; Boasting A Remarkable 33% CAGR Over Four Years: Mazars In India NBFC Report appeared first on NRI News.

PUNE: Lentra, the leading digital lending platform, introduced its Intelligent Lending Cloud Platform during its annual flagship event, the Lentra Digital Lending Summit.

Representing a significant leap in integrating AI within the digital lending platform, Lentra introduces three cutting-edge AI-driven products. Additionally, it incorporates 40 new functionalities into its existing products, all meticulously crafted to leverage the potential of AI and deliver practical utility for Banks and NBFCs.

“The evolution of trends in India’s credit consumption narrative demands thorough understanding and analysis. At Lentra, we strive to meet the increasing demand for personalization and localization by harnessing the power of AI, ensuring accessibility for our clients.” – Ankur Handa, Chief Product Officer at Lentra.

Lentra’s Intelligent Lending Cloud solution is designed to address the evolving need for Vernacular Languages to expand reach, accelerate processing speeds, and reduce the cost of operation.

“AI has recently garnered widespread attention for various reasons, with its capacity for human-like interactions standing out. Aligning with our mission to transform lending by empowering lenders to democratize credit and foster financial inclusion through intelligent decisions, we are thrilled to introduce a wave of AI products and AI-infused features. With this extended portfolio, we are confident that our clients will experience significant enhancements in their business, equipped with actionable intelligence.” – Rangarajan Vasudevan, Chief Data Officer at Lentra.

Lentra is actively advancing the application of AI in intelligently automating solutions for Banks and NBFCs in India. The initiatives include leveraging Machine Learning Models to identify potential borrower segments within the existing customer base, employing AI for intelligent customer engagement and lead nurturing. It utilizes behavioral intelligence to enhance upsell and cross-sell opportunities by implementing hyper-personalized product recommendations for the bank.

These initiatives, rooted in impactful applications, are a testament to Lentra’s commitment to innovation. Their intelligent cloud lending platform addresses current needs and anticipates market evolutions, positioning their partners ahead of the curve.

“With NIM itself becoming a non-differentiative commodity the focus amongst banks is becoming “experience”. How do we create a simple, easy, and yet WoW experience for our new customers? That is where the real differentiator lies! In the world of lending, there are quite a few one-trick ponies that address various components of lending. This is where someone like a Lentra is uniquely different. Their AI-powered solutions remove the friction from the entire lending and collection process, enabling decisions that are faster, fairer, and more accurate. We are impressed with how Lentra is continuously pushing the boundaries of their intelligence-embedded solutions and creating the WoW experience for end customers.”  – Cyrus Daruwala, Managing Director, Global Financial Services, IDC.

Lentra Convo:

To cater to lenders operating across varied geographic and cultural moorings, Lentra Convo brings the power of natural language conversations in multiple languages to simplify the loan origination journey. Powered by AI, this innovation enhances the lending process while providing end customers with a personalized and seamless experience that is convenient for them in the language of their choice.

Lentra Insights:

The second product, Insights, provides actionable intelligence to the lending institution, to better optimize credit policy and loan journey design. Coupled with AI-generated recommendations, lenders can now assess the impact of credit policy rules and change policy parameters to drive higher take-up rates. This one-of-a-kind tool will be of great value to lenders in boosting their asset businesses.

Lentra Wingman:

A game-changer for lending operations, Lentra Wingman is geared to help directly what is arguably the most critical stakeholder in the origination journey: the underwriter. It intelligently summarizes financial information from various sources in typical credit journeys like bank statements and related financial transaction records. It then automatically identifies financial behaviors that need further investigation by the underwriters. Such instances are then articulated as natural language questions that the customer-facing operations executive can air to the loan applicant to get needed clarifications. Thus, the Wingmanguides the underwriter to focus only on those loan applications requiring further scrutiny, along with the specifics of that application that merit attention, all in a form factor that makes it easy for more information to be collected seamlessly to speed up decision-making.

Aligned with the theme ‘Empowering Economic Growth for all, Bridging the Credit Gap,’ the Digital Lending Summit, provides a holistic perspective on the digital lending landscape in India. The summit serves as an interactive platform for CXOs, Credit Heads, Retail Heads, CEOs, and all other top-level executives in Banks & NBFCs, fostering discussions on market innovations, trends, enablers, and drivers.

The event features insightful panel discussions, special addresses, and breakout sessions and is a beacon for lending industry practitioners. Lentra’s flagship annual event consistently draws distinguished guests from the regulators, Prominent Banks, and NBFCs, underscoring its growing significance year after year.

The post Lentra Unveils New Innovation with its Intelligent Lending Cloud appeared first on NRI News.

This credit facility is available on the FundsIndia investor platform and will soon be released on their partner platform as well. FundsIndia partners will also be able to offer the product to their investors digitally via the FundsIndia partner platform.    

As part of the deal, investors can pledge their mutual fund units of different asset management companies (AMCs) with both CAMS and KFintech – the Registrar & Transfer Agents (RTA) to avail loans against mutual funds. Customers can also pledge shares from a large list of approved shares held in a Demat account with NSDL only. 

The investors will get the option of creating an overdraft facility against their mutual funds and shares on the FundsIndia portal at 9% p.a. and with a fixed processing fee of Rs 999 plus taxes that will help them manage their liquidity without redeeming their investments.

“We have so far onboarded 400 plus mutual fund distributors as our channel partners and the business from them has grown significantly in the last quarter. Now with FundsIndia making available our product on their website and mobile app, we will be able to reach out to a large number of investors that they cater to, and I am confident that a large number of investors will take advantage and avail of a loan against mutual funds/ shares to take care of their short term money requirement. Currently, 30% of our clients are sourced by channel partners. I expect this number to go up significantly with partners like Fundsindia coming on board.” said Krishna Kanhaiya, Chief Executive Officer, of Mirae Asset Financial Services.

Excited with the collaboration Mr. Girirajan Murugan, CEO, FundsIndia said, “We are delighted to announce that we at FundsIndia have partnered with Mirae Asset Financial Services to provide our investors with greater access to credit against their securities. This partnership marks a momentous milestone for both firms and is sure to benefit thousands of investors across India.

Our collaboration will ensure that our investors can access credit facilities in a reliable and convenient manner. We are committed to providing a seamless and hassle-free digital experience to our customers and look forward to working together to make this a reality.

We are confident that our partnership with Mirae Asset’s NBFC arm will be a great success and are excited to provide our investors with a broader range of credit options. We believe this will open up new opportunities for investors and help them achieve their financial goals.

We thank Mirae Asset Financial Services for their trust in us and we look forward to continuing our successful collaboration.”

FundsIndia and Mirae Asset Financial Services leverage digital technologies to provide financial products to their customers. FundsIndia is India’s friendliest online-only investment platform with 14+ years of excellence in enhancing the investment experience for users. Mirae Asset Financial Services launched on 1^st July 22 has onboarded over 400 mutual fund distributors across 50+ cities with the help of their digital partner module. Financial advisors have found loans against securities ideal where they can provide their investors with a solution to generate liquidity without having to redeem their investments. Both FundsIndia & Mirae Asset Financial Services teams are very optimistic that investors will find loans against securities very useful and expect the product to be accepted by a large number of investors.

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