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Indian NBFCs must adopt new tech-based biz models to attract PE funding: Study


Agencies, New Delhi With banks tightening their purse strings owing to increasing bad loans, Indian non-banking financial companies (NBFCs) are growing their market share, however a recent ASSOCHAM-PwC joint study has stated that NBFCs will have to keep pace with new technologies and changing customer aspirations to attract timely PE (private equity) investments. “NBFCs must challenge the status quo in their business and find funds to invest into operating models with the potential to disrupt the industry,” said the study titled, ‘Fuelling NBFCs through private capital,’ jointly conducted by ASSOCHAM and professional services firm PwC. It added that in wake of digital advance of policy initiatives such as India Stack, Aadhaar Pay and Direct Benefit Transfer (DBT) and exponential increase in smartphone/internet access, NBFCs need to think hard about tweaking their current business models to grow in a hybrid world (digital + physical). The ASSOCHAM-PwC joint report also said that in order to ride the wave of increasing formal credit penetration in a growing economy, NBFCs will need to invest in new technologies to lower the cost of acquiring new segments (including thin files), servicing existing customers and de-risking the portfolio. Besides, in order to fulfil demands of the new-age customer in terms of credit facilities, NBFCs will have to invest in analytics and AI (artificial intelligence) capabilities to be able to connect to the customer in a hyper-personalised manner. “New tech-based business models have the potential to crunch the learning period substantially and re-balance the strategic advantage of information access by inserting themselves into the value chain with technology,” further said the study. Highlighting as to what makes NBFCs attractive for investors, the paper noted that state-run and some private sector banks have been grappling with bad loans for the past three years, which in turn has given a tremendous opportunity for NBFCs to ramp up their scale.

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