{"id":24378,"date":"2021-01-18T11:57:55","date_gmt":"2021-01-18T06:27:55","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=24378"},"modified":"2024-07-03T10:50:15","modified_gmt":"2024-07-03T05:20:15","slug":"trends-and-investments-in-nbfcs","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/trends-and-investments-in-nbfcs\/","title":{"rendered":"Factorizing the Current Scenario Underlining the Trends &#038; Investments in NBFCs"},"content":{"rendered":"\n<p class=\"has-drop-cap\">NBFC is a\ngrowth-oriented sector that contributes heavily to the country&#8217;s growth. But in\nthe past few years, this sector has encountered plenty of challenges owing to\ntight government compliance and evolving technology. In this blog, we will\nunfold some fact, given the current scenario regarding trends and investments\nin NBFCs.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/trends-and-investments-in-nbfcs\/#A_Generalized_Overview_on_NBFCs_Non-Banking_Financial_Companies\" >A Generalized Overview on NBFCs (Non-Banking Financial\nCompanies)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/trends-and-investments-in-nbfcs\/#Government_Support_to_Triggers_Credit_and_Investment_in_NBFCs\" >Government Support\nto Triggers Credit and Investment in NBFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/trends-and-investments-in-nbfcs\/#Reasons_why_NBFCs_Seeking_Investment_from_Banks_and_Other_Sources\" >Reasons why NBFCs Seeking\nInvestment from Banks and Other Sources<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/trends-and-investments-in-nbfcs\/#Key_Challenges_for_NBFCs_in_Upcoming_Times\" >Key Challenges for NBFCs in Upcoming Times<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/trends-and-investments-in-nbfcs\/#Conclusion\" >Conclusion&nbsp;&nbsp;<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_Generalized_Overview_on_NBFCs_Non-Banking_Financial_Companies\"><\/span>A Generalized Overview on NBFCs (Non-Banking Financial\nCompanies)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NBFCs plays a pivotal role in advocating equitable opportunities for growth in the nation by rendering a wide range of financial aid to the unprivileged as well as privileged section of society. Furthermore, <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NBFCs<\/strong><\/a> is a prominent provider of unique financial services to MSME fitting to their requirements and catering to Microfinance needs for the individuals.<\/p>\n\n\n\n<p>As\nmentioned above, they do consider as the relevant alternative to the banking\nsector in meeting the financial needs of the industrial sector. However, the\nscope of operation of the Non-Banking Financial Sector is limited by the rules\nand regulations lay by the government of India.<\/p>\n\n\n\n<p>Before we\nstart to unfold the multifarious roles of NBFCs in the current scenario, it is\nvery much needed to comprehend the key objective behind the functionalities of\nthese esteemed institutions. To be precise, NBFCs are not merely focusing on profitability as\ntheir main goal is to make financial services accessible to all verticals of\nsociety and the working sector.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Government_Support_to_Triggers_Credit_and_Investment_in_NBFCs\"><\/span>Government Support\nto Triggers Credit and Investment in NBFCs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Following are the growth-oriented reforms and schemes announced by the Finance Ministry for the betterment of the NBFC sector.&nbsp;<\/strong><\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" width=\"985\" height=\"679\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Following-are-the-growth-oriented-reforms-and-schemes-announced-by-the-Finance-Ministry-for-the-betterment-of-the-NBFC-sector.png\" alt=\"Credit and Investment in NBFCs\" class=\"wp-image-24391\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Following-are-the-growth-oriented-reforms-and-schemes-announced-by-the-Finance-Ministry-for-the-betterment-of-the-NBFC-sector.png 985w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Following-are-the-growth-oriented-reforms-and-schemes-announced-by-the-Finance-Ministry-for-the-betterment-of-the-NBFC-sector-300x207.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/01\/Following-are-the-growth-oriented-reforms-and-schemes-announced-by-the-Finance-Ministry-for-the-betterment-of-the-NBFC-sector-768x529.png 768w\" sizes=\"(max-width: 985px) 100vw, 985px\" \/><\/figure><\/div>\n\n\n<h3 class=\"wp-block-heading\">Special Liquidity\nScheme<\/h3>\n\n\n\n<p>In\nmid-2020, the finance ministry came up with a scheme viz <strong><em>Special Liquidity Scheme<\/em><\/strong>\nto render fiscal credit to distressed NBFCs through special purpose vehicle\n(SPV) established by SBICAP. The scheme was announced in the view of the COVID\n19 pandemic as a relief package for the struggling NBFCs and Microfinance\nminister.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Reduction of Limit under\nSARFAESI Act<\/strong><\/h3>\n\n\n\n<p>The budget facilitated reducing the asset size if NBFCs from Rs 500cr to Rs 100cr to make them eligible for the debt recovery under the said Act. This will enable them to keep track of the rise of the NPA ratio of NBFCs.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Credit Guarantee for the NBFC<\/h3>\n\n\n\n<p>The budget announced by the <strong>finance ministry<\/strong> in 2019 primarily focused on a partial credit guarantee scheme to overcome liquidity crisis while for 2020-21 budget further underpin guaranteeing securities on affected assets of NBFCs. <\/p>\n\n\n\n<p>By backing\nup stressed assets through bonds, the government aims to improve the financial\nstanding of the NBFCs by making them eligible for credit. The much-needed\ncredit can save hundreds of NBFCs from being bankrupt and even increase the\nchances of investments in NBFCs.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Amendment in Ongoing Schemes<\/strong><\/h3>\n\n\n\n<p>&nbsp;To advance Agri-finance, the focus was on broadening the scope of the NABAED refinance scheme to encompass NBFCs &amp; other cooperatives that are actively operating in the agriculture sector. Accordingly, the agriculture credit worth Rs 15 lakh crore has been led out by the government for the financial year 2021.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Amendment in Factor\nRegulation Act<\/strong><\/h3>\n\n\n\n<p>Another move that is expected to motivate the <a href=\"https:\/\/corpbiz.io\/msme-registration\"><strong>MSME<\/strong><\/a> sector to make amendments in the existing Factor regulation Act 2011 would allow NBFCs to extend invoice financing to MSMEs via the TReDS portal.&nbsp;<\/p>\n\n\n\n<p>This\nmeasure will significantly minimize one of MSMEs&#8217; top loopholes- timely\naccesses to much-need credit &amp; working capital requirements meet.\nAdditionally, it would trigger the chances of investment in NBFCs.&nbsp;<\/p>\n\n\n\n<p>Government\nof India, in association with apex banks, allowing NBFCs to avail easy credit\nagainst the bonds. With such support, NBFCs can extinguish their existing\nliabilities and continue to conduct their operation for an extended period of\ntime. Such credit is available at easy repayment options and interest so that\ncash flow within the economy remains unaffected. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reasons_why_NBFCs_Seeking_Investment_from_Banks_and_Other_Sources\"><\/span>Reasons why NBFCs Seeking\nInvestment from Banks and Other Sources<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In the\nview current scenario, NBFCs across the nation are facing relentless pressure\nto survive in a competitive environment. They are in desperate need of funds\nowing to the following reasons:&nbsp;<\/p>\n\n\n\n<p>The COVID\n19 pandemic has dented the growth of many industries in the financial sector,\nand NBFCs are not an exception here. Lack of credit has eroded their ability to\nsustain longer in the market, and they are facing a severe liquidity crunch at\nthis point. This is one of the primary reasons why these firms seeking\ninvestment from viable sources.&nbsp;<\/p>\n\n\n\n<p>Stiffer\ncompetition is making life difficult for NBFCs operating across the country.\nAdoption of the latest technology by their counterpart is weakening their grip\non the existing market. To gain a competitive edge, these firms must leverage\nthe latest technology and reform their IT department. Apparently, such tasks\nrequire the procurement of heavy investment, which appears to be a daunting\ntask for NBFCs at this point.&nbsp;Government must frame out policies that can\nincrease the chances of investments in NBFCs. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_Challenges_for_NBFCs_in_Upcoming_Times\"><\/span>Key Challenges for NBFCs in Upcoming Times<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It won&#8217;t\nbe easy for NBFCs to stay competitive in the future without technological\nadvancement and required infrastructure amendments. To stay ahead of the curve,\nthese entities are required to shift their focus on the following measures:-<\/p>\n\n\n\n<ul>\n<li>Harnessing\nsynergies across the value chain of lead generation&nbsp;<\/li>\n\n\n\n<li>Ensuring\nwidespread reach to cater to all facets of society and industries seeking\nfiscal aid.<\/li>\n\n\n\n<li>Developing\ntactics to mitigates the financial gap created by the Covid \u2013 19.<\/li>\n\n\n\n<li>Amending\nrisk management assessment in accordance with the existing scenario to avail\naccurate results.&nbsp;<\/li>\n\n\n\n<li>Creating\nopportunities to adopt the latest technology and to implement seamlessly across\nall services.&nbsp;&nbsp;<\/li>\n\n\n\n<li>Finding\nviable investors, apart from banks and PE investors that are attracted towards\nthe investments in NBFCs. <\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Government to Impart Funding Sources for NBFCs<\/strong><\/h3>\n\n\n\n<p>While establishing\nnew sources for investment to support private lenders and considering the\nexpert views, the Indian government is finding it hard to strike a balance\nbetween overcoming fiscal deficit &amp; compromised economic growth in the long\nrun by aiming to counter the existing liquidity crunch for the NBFC sector. It allows\nto provide additional assistance to other ancillary sectors that can accelerate\ngrowth altogether.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion&nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Considering the existing trend &amp; future ahead, the NBFCs are all set to get much need resilience not only from the government&#8217;s viewpoint but also from the investors, i.e., private equity investors. These said investors might step up investments in NBFCs in spite of the credit crisis that is likely to continue for months from now.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/operational-manual-of-the-nbfcs\/\">A Complete Guide on Operational Manual of the NBFCs\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>NBFC is a growth-oriented sector that contributes heavily to the country&#8217;s growth. But in the past few years, this sector has encountered plenty of challenges owing to tight government compliance and evolving technology. In this blog, we will unfold some fact, given the current scenario regarding trends and investments in NBFCs. A Generalized Overview on [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":24385,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[91],"tags":[1439],"acf":{"service_id":"8"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":3846,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/24378"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=24378"}],"version-history":[{"count":13,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/24378\/revisions"}],"predecessor-version":[{"id":65160,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/24378\/revisions\/65160"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/24385"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=24378"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=24378"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=24378"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}