NBFCs must challenge the status quo in their business and find funds to invest into operating models with the potential to disrupt the industry. Technologies like Artificial Intelligence (AI) and Analytics Can Solve the Problem of Bad Loans and enhance Credit Availability thirugh NBFCs.
Considering the increasing pressure on Indian banking system from bad loans, an ASSOCHAM–PwC study has noted that in order to meet credit demand, non-banking financial companies (NBFCs) in India could explore investments in newer technology, particularly in the area of analytics and artificial intelligence (AI). With banks implementing more stringent policies owing to increasing bad loans, Indian NBFCs are growing their market share.
However, the study stated that NBFCs will have to keep pace with new technologies and changing customer aspirations to attract timely private equity (PE) 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,” noted the study titled ‘Fuelling NBFCs through private capital.’ It added that in the wake of digital advance of policy initiatives such as India Stack, Aadhaar Pay, 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.
“NBFCs must challenge the status quo in their business and find funds to invest into operating models with the potential to disrupt the industry.”
The report also said 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.
“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,” the study noted. The paper noted that state-run and some private sector banks have been grappling with bad loans for around three years, which has, in turn, given a tremendous opportunity for the NBFCs to ramp up their scale.