The technological landscape in the country is evolving and has started progressing to bring more new technology, which makes certain works efficient and effective. Banking and finance are other aspects that have leveraged technology to spread to the nooks and corners of the country.
Banks have used this technology to cater to their customers. Still, NBFCs have leveraged their technology to gain new customers who were experiencing the traditional banking facilities for the first time. For example, a farmer in a village used to take credit at a high-interest rate due to the lack of funds.
The NBFCs now play a huge role in providing loans to these farmers, and they create a cooperative where each can take a loan on behalf of the cooperative and easily pay it off in time. It is one such example of financial inclusion and how it can benefit a person who is living in the Tier-2 Tier-3 areas of the nation.
In this blog, we will look into the process of financial inclusion from the NBFCs and how they are incorporating several people into the traditional banking and financial system.
Understanding NBFCs
Non-Banking Financial Companies are the institutions that have the license to participate as banks but cannot access the deposit capital like the traditional banks. These entities are RBI-registered entities that engage in operations like asset management, lending, and serving other financial products. From there, they incur the capital to invest and grow their business.
NBFCs provide an alternative to traditional banks, provide credits to individuals and businesses, and have more flexibility in their loan offerings compared to banks.
The Role Played By NBFCs in the Financial Market
NBFCs play a crucial role as they work as a parallel way of offering financial products to the people. Traditional banks, due to many restrictions in their operations, cannot take risks as the depositor’s fund is involved with the bank.
However, the NBFCs are the ones who can become creative and bring more personalized products catered to the specific segment of the population and bring people under the financial landscape. They have championed peer-to-peer lending and provided customized MSME loans, which helped millions of small and medium-sized business owner sustain their business.
Use of Technology By NBFCs
In the era of technology, NBFCs are the ones who plan to bring innovative technology to the finance segment so that they can serve their existing and potential customers. Here, we have mentioned some of the strategies that these entities have applied to stay ahead in the industry. Â
1. Technology oriented mindset
NBFCs have started leveraging technology to streamline their services and develop better products for their customers. They have also worked on bringing mobile apps early so that they can ease the customer experience and make the process of availing financial services easy.
2. Partnership with the Fintech Startups
They have also partnered with the country’s fintech startups, giving them backend support through licensing and funds and leveraging their technology to get more customers and serve them under the traditional banking system.
3. Building Innovative Products
NBFCs have also started to master the process of product innovation, and they are working towards developing better and more efficient financial products that can be used to serve customers in an efficient and personalized way. One can do an NBFC DSA registration and earn a commission based on selling the products of that particular NBFC.
4. Changing the Credit Scoring Models
The credit scoring model penalizes those who are unwilling to default for some reason in some instances without checking whether or not the earlier record is good. For example, a person who missed a loan payment for a bad year in farming gets the chance to receive yet another loan with the new credit scoring model system developed by the NBFCs. If you’re looking to enhance your online presence in Rumford Maine SEO strategies tailored to local markets can significantly boost your visibility.
Impact of NBFCs on the Society and Financial Industry
Due to these changes in the industry, some positive impacts have helped people across the country in various spectrums. Here are some of the benefits we have witnessed due to the innovative approach taken by the NBFCs.
- Financial Inclusion in the country
- Innovation and spurring competition regarding who can serve better products to the customers.
- A better risk mitigation process has been introduced to finance a large portion of the country’s population.
These are some of the benefits that people are witnessing due to the financial inclusion done by the NBFCs.
