FidyPay, a popular FinTech service provider, has extended its services to NBFC in India and is helping them with payment collections, collaborations with financial institutes and other such FinTech services.
As the FinTech area is evolving at a rapid pace, it has been easier for the NBFCs to grow their business and service adoption.
The idea implemented by FidyPay is to provide these companies with FinTech solutions that can reduce their dependence on manual tasks.
As a result, this boosts their service turnaround time, provides efficient validation of customer presentations and much more. FidyPay is extending its service to promote real-time approvals for these companies to onboard their customers faster.
Know your NBFC before you grow your NBFC in India with FidyPay!
What is an NBFC?
The NBFC full form is the Non-Banking Financial Companies. The Reserve Bank of India defines NBFC as ‘a company registered under the Companies Act, 1956 engaged in the business of loans, advances, acquisitions of government securities, insurance etc’.
1. A Non-Banking Financial Company, or NBFC for short, is a type of financial company that operates in India and offers various financial services to people and businesses.
2. While NBFCs cannot accept public deposits like banks, they can provide investment goods, including loans and insurance.
3. NBFCs are crucial players in the ecosystem because they serve demographic groups that might not have access to banking services.
4. NBFCs are subject to Reserve Bank of India (RBI) regulations to protect the security and safety of their client’s assets. Several rules and regulations require them to abide.
If you are new to the NBFC sector and are willing to leverage the benefit of FidyPay, you must know about what we offer and how we help companies like yours to thrive in this competitive market.
Types of Non-Banking Financial Companies or NBFC in India
NBFC can bring some positive changes in your business if implemented properly. The following types of NBFCs in India (non-banking financial companies) are roughly categorized based on their commercial activities:
Asset Finance Company (AFC): AFCs mainly offer to finance the purchase of physical assets including machinery, automobiles, and construction machinery.
Investment Company (IC): ICs invest in government and corporate-issued securities and offer long-term financing to corporate houses.
Loan Company (LC): Individuals and small enterprises can get loans and advances from LCs.
Infrastructure Finance Company (IFC): IFCs long-term finance infrastructure projects in power, telecommunication, transportation, and urban infrastructure.
Systemically Important Core Investment Company (CIC-ND-SI): Investment Businesses with assets of $100 million or more invest most of their assets in shares and other securities, as well as loans and advances to group companies.
Microfinance Institution (MFI): MFIs offer small loans to low-income households and individuals who do not have access to traditional banking services.
NBFC-Factors: NBFC-Factors offer factoring services, which entail the discounted acquisition of accounts receivable from companies.
Non-Banking Financial Company – Mortgage Guarantee Company: NBFC-MGCs offer mortgage guarantee services, including protecting lenders from mortgage loan borrower failure.
NBFC – Non-Operative Financial Holding Company: Holding companies known as NBFC-NOFHCs own stock in other NBFCs or banks but participate in no financial activity themselves.
These are some of the different types of NBFCs present in India, and the Reserve Bank of India has enacted rules and regulations specific to each type. Thus, you can implement any of these types in your business to make it smoother.
Importance of NBFC in India for Businesses
NBFC in India (Non-Banking Financial Companies) has grown significantly for enterprises in recent years.
1. Businesses that might not be able to comply with the stringent criteria of traditional banks can benefit greatly from the customized finance solutions offered by NBFCs.
2. NBFCs have developed into a key source of finance for companies in various industries. They provide various financial services, such as loans, leases, and factoring.
3. Because of their accommodating lending standards, NBFCs can meet the unique requirements of businesses, even those with spotty credit histories or insufficient collateral.
4. NBFCs provide quicker turnaround times for loan applications and payments, making them a desirable alternative for companies needing immediate finance.
Factors to Consider While Choosing an NBFC in India
A crucial choice that could affect your company’s financial health long-term is selecting the best NBFCi for your enterprise. While selecting an NBFC, keep the following things in mind:
1. Interest Rates and Fees: Evaluate the interest rates and fees provided by several NBFCs and select the most affordable ones.
2. Credibility and Reputation: Look at the track record, financial stability, and market standing of the NBFC.
3. Client service: Consider responsiveness and accessibility while assessing the NBFC’s level of customer service.
4. Response time: Evaluate the NBFC’s loan approval and disbursement turnaround times.
5. Customized Solutions: Look for a top NBFC that offers financial solutions for the demands and goals of your business.
6. Regulatory Compliance: Confirm the NBFC is registered with the Reserve Bank of India and complies with all regulatory requirements.
How are FinTech Solutions Helping NBFCs?
The FinTech solutions are booming with the use of technologies such as AI, ML and advanced analytics.
Thus, it enables the NBFC lenders to take up a personalised approach for validating their customer applications specific guidelines, make quality credit decisions and empower the available data sources.
FidyPay has strongly worked out on its FinTech products and has been using astounding technologies to solve all forms of limitations that NBFCs are facing in fulfilling their service delivery goals.
With our support and service offerings, the NBFCs are now changing their mode of operations and are growing beyond their traditional legacy infrastructure.
Earlier, there was a very tight-knit process that needed approvals within the value chains to sanction a service request. But with our FinTech products, NBFCs have now stepped into the path of innovation.
The key players of the NBFC in India sector have now understood the changing expectations of customers and the pace of it.
How FidyPay Helps NBFCs in India Collaborate with FinTech Products
Therefore, they have made a decision to seek collaboration with the new-age FinTech products. And this is where FidyPay extends the collaboration assistance to them. Some of the benefits that the NBFCs can experience upon seeking it include:
- When NBFCs utilize the FinTech platforms or products by FidyPay, they have the liberty to offer an alternate mode of credit scoring and managing the investment or claims.
- We collaborate with the NBFCs to build a network to progressively develop or test the new-age tech solutions.
- Every NBFC in India gets assistance with referral arrangements, especially in the lending space. For instance, the NBFCs can refer a business to a lending FinTech firm, which falls outside the risk appetite of any usual bank.
- The NBFCs will acquire more customers without investing much of their time or resources.FidyPay’s use of leading technology solutions will make this possible.
Right at the booming stage of FinTech, NBFCs found it difficult to find some strategy partners to collaborate with for using the advanced products and technologies.
But, over time, FidyPay changed the pace of service availability, and now NBFCs in India have easy accessibility to FinTech services.
Top NBFC in India for Business
It’s essential to have access to the appropriate finance options if you own a business in India. Here are the top NBFCs in India that offer firms in various industries specialized finance solutions:
1. Bajaj FinServ: This well-known NBFC provides various financing options for companies, including working capital loans, equipment loans, and business loans. They process loan applications quickly and straightforwardly, and loans are usually approved and disbursed within a few days.
2. Tata Capital: This reputable NBFC in India offers specialized financial solutions for business requirements, such as working capital, machinery loans, and project finance. They also provide a variety of business insurance packages.
3. L&T Financial Services: This NBFC provides specialized solutions for companies in various industries, including infrastructure, agribusiness, and microfinance. They also give the firms trade finance and supply chain financing options.
4. Edelweiss Financial Services: This renowned NBFC in India offers specialized solutions for numerous business requirements, such as trade finance, business loans, and working capital loans. They also provide commercial insurance options.
5. Capital First: This quickly expanding NBFC offers specialized solutions for various business requirements, such as working capital loans, business loans, and machinery loans. Their loan application process is quick and straightforward, and it usually only takes a few days for loans to be approved and disbursed.
What Services Does FidyPay Offers to the NBFCs?
FidyPay helps the NBFCs integrate with advanced FinTech solutions, which include:
We can provide the NBFCs with the integration of eKYC API, which will speed up the customer onboarding and authentication process. Thus, it will bring down the customer acquisition. A lot of NBFCs are partnered with us, and we are expanding our workforce to help all the budding companies in the future.
The use of eKYC API helps the NBFCs lower the costs and speed up the processing times, which is 10x better than the traditional banking methods. The possibility of human error will be eliminated, and the process accuracy will increase.
We also provide our NBFC clients with eNACH APIs, which helps them ease the process of collecting recurring payments from customers. The objective of this API is to help the NBFCs reduce the follow-up time that they spend against recurring transactions.
With eNACH, businesses will be able to take a one-time authorization for debiting the installment amount directly from the customer’s bank account. There will be no need for the NBFCs to remind their customers about the due date, and the cash flow will also be stabilised by using our eNACH solutions.
This API supports all the top UPI apps, allowing companies to offer this repayment flexibility to a wide audience. With this repayment setup over the NBFC platform, the customer onboarding process will take less than a minute. Moreover, FidyPay’s UPI AutoPay API will also give you real-time insights into the payment status of different customers.
As UPI is a trending mode for making digital payments, we offer UPI AutoPay API for the NBFC platforms. With this, one can easily authenticate a UPI mandate and seek auto recollection of the monthly installments from customers for whom the money has been lent. Auto-reminders can be set for the borrowers or customers to keep their linked account funded to prevent missing out on paying the dues.
What is the difference between banks and NBFC organisations?
There are many points of difference between banks and NBFC organisations. For example, the most basic difference between a bank and NBFC is that a bank holds a government-issued banking licence, which allows the bank to act as an intermediary financial channel for lending and borrowing. An NBFC is a different one because it does not have a banking licence, and even though it offers banking-like services, it is not a bank in structure or functions.
The banks were incorporated into government financial institutions according to the Banking Regulations Act of 1949. On the other hand, NBFCs have been incorporated according to the Companies Act 1956.
Banks are operated according to government regulations after getting a licence of operation related to the sector. On the other hand, NBFC organizations do not need a license to operate, although they do follow some separate regulations.
Banks have some authority about what they can issue and cannot. For example, a registered bank can issue a demand draft. A NBFC cannot issue or remit a demand draft on behalf of a person. A bank provides transaction services so you can do transactions from your bank account to another bank account. However, NBFCs cannot provide transaction services to the people who are registered under them. Similarly, because banks work with deposits, they can also accept demand deposits from people. However, a NBFC cannot accept demand deposits from its clients.
When compared with each other, a bank can create and provide Credit, but an NBFC organisation cannot create or provide Credit to people. Banks are, therefore, part of the payment and settlement system of finances, as the NBFC organisation is not a part of the same system. Banks can also make cheques payable to themselves, whereas NBFCs cannot make cheques payable to themselves.
Is the bank or NBFC better?
Now that these basic differences are clear, here is a discussion on how NBFC and banks have different functions. For example, banks are the financial organisations that are responsible for overseeing the whole nation’s financial sector. The banks maintain the credit and demand market to run the financial sector. Businesses and people take loans to create revenue and buy assets. The surplus money is deposited as deposits in banks. Banks are, therefore, a major part of the BFSI sector and the key channels between borrowers and lenders of money.
Banks, the main scaffold of the country’s economic distribution system, establish credit, raise money for businesses to loan out, and transfer money from one account to another as per the requirements that arise within the system. They are therefore more important than NBFCs.
On the other hand, there are NBFCs that are not the same as banks, but they engage in indirect financing as well as numerous other banking-related activities. Although they engage in these activities, the real authority lies with the banks of India, with which the NBFCs create tie-ups. An NBFC is also relevant to businesses because the organisation offers business corporation services and facilities such as the purchase of stocks, equities, bonds, securities, and other government-issued securities so that business owners can invest their profits and increase their capital.
How NBFCs in India Are Driving Financial Inclusion and Economic Growth
There are a number of other services like rent-to-own, renting, and startup capital financing services so that people can start their own entrepreneurship and invest in real estate. Some of the NBFCs also offer insurance services and are included in the BFSI sector. NBFCs are of many types, and they cater to different sections of the Indian population. There are many objectives that NBFCs work with.
For example, NBFCs promote financial inclusion because they are open to low-income households and people. The NBFCs also play a huge role in supporting SMEs by providing them with startup capital services and funds. Most of the low-income groups approach NBFCs because getting loans from such financial companies is easier and faster. These NBFCs also play a crucial role in powering the economy because they help in improving customer spending.
There are a number of services offered by NBFCs that people avail. For example, NBFCs can help in getting personal loans, home loans, or vehicle loans so people can increase their personal assets and value. Sometimes, when people do not have collateral, NBFCs also provide gold loans against gold jewellery and objects. These types of loans are very popular among the lower-income population of India.
There are some micro financing services that NBFCs also offer. Many sectors of the Indian economy, like agriculture, SMEs, and infrastructure, are depending more and more on NBFCs. NBFCs are preferred by many people because there is less documentation involved when compared with banks. However, when choosing a NBFC for its services, a customer needs to look at its reputation and service offerings. Compare the benefits of bank vs NBFC to get a clearer picture of where you should invest.
Difference Between Banks and NBFC in India
Non-Banking Financial Companies or NBFCs and banks differ in several ways. The following are some considerable differences that you must know before doing any banking.
Legal Status: NBFCs are registered and subject to regulation under the Reserve Bank of India Act, of 1934, whereas banks are licensed and subject to regulation under the Banking Regulation Act, of 1949.
Acceptance of Deposits: Public demand deposits cannot be accepted by NBFCs; only public deposits can be accepted by banks. Only term deposits with a minimum 12-month maturity duration may be accepted by NBFCs.
Issue of Cheques: Bank customers can obtain checks from them, but not from NBFCs, which you must keep in mind.
Interest Rates: While NBFCs are free to establish their interest rates on loans and deposits, banks are bound by Reserve Bank of India-imposed interest rate rules.
Capital Adequacy: The capital adequacy ratio (CAR) for banks must be kept at a minimum of 9%, while the CAR for NBFCs must be kept at a minimum of 15%.
Scope of Activities: Banks can provide a large choice of financial services and products, such as savings accounts, current accounts, loans, credit cards, and insurance coverage, whereas NBFCs are limited to a more limited selection.
Besides the fact that both banks and NBFCs offer financial services, their operating environments and business models are distinct. While NBFCs typically offer loans and other financial products to specialized market niches, banks have a wider range of operations and can take public deposits.
Why NBFCs are a Catalyst in Urban and Rural Areas’ Growth?
Financial services are essential for both urban and rural parts of India. Therefore, non-banking financial companies or NBFCs play a critical role in this. Some of the explanations about why NBFC is crucial in both areas are as follows:
Access to Credit: NBFCs offer loans to underdeveloped economic sectors such as rural areas, self-employed people, and small and medium-sized businesses (SMEs). These groups frequently lack access to traditional banking services for a variety of reasons, including a lack of collateral, poor credit, and insufficient paperwork. NBFCs are a blessing in disguise for them.
Customized Products: NBFCs provide a variety of financial services and products that are specifically suited to the requirements of various societal sectors. For instance, NBFCs offer loans for micro businesses, agriculture, housing, and education, among other things.
Services enabled by technology: NBFCs have embraced technology to connect with a larger customer base and offer financial services via mobile banking, online portals, and digital payments. This has made it possible for them to provide for the needs of clients in remote and rural locations where traditional banking services might not be accessible.
Employment Opportunities: By extending finance to start-ups and small businesses, NBFCs can create employment possibilities, especially in rural areas. Also, this may help the economy’s general growth.
NBFCs have grown to be a significant component of the Indian financial system, giving underserved groups of society, notably those in rural areas, access to loans and financial inclusion. Overall economic growth in the nation has been aided by this. Anyone can now apply for loans and develop their businesses with the assistance of NBFCs.
NBFC Formation Criteria
If you want to avail the service of NBFC in India, you need to fulfill the requirements listed below:
Registration as a company: The business must be incorporated and registered under the 2013 Companies Act or an earlier version of the Act.
Minimum Net Owned Fund: A minimum net owned fund (NOF) of Rs. 2 crores are needed to launch an NBFC. The difference between the company’s total assets and total liabilities is used to compute the NOF.
Primary Business: The main objective of the company should be to provide financial products and services, such as loans, advances, and the purchase of shares, stocks, bonds, debentures, and other assets issued by federal, state, or municipal governments.
Company management: the organization must have a solid management structure and at least one director in the financial industry. All directors must also be suitable and meet the requirements established by the Reserve Bank of India.
RBI Registration: An NBFC certificate of registration must be obtained, and the business must register with the Reserve Bank of India (RBI). Many documents, including the company’s incorporation certificate, memorandum and articles of association, and the names and contact information for its directors, must be submitted as part of the registration procedure.
Compliance with Regulatory Requirements: From time to time, the Reserve Bank of India will issue regulatory requirements that the company must follow.
Compulsory Reporting: The business is required by law to submit to the Reserve Bank of India several statutory reports, including yearly audited financial statements, monthly returns, and other periodic reports.
It is mandatory for you to fulfill these requirements to register as an NBFC in India. The Reserve Bank of India controls NBFCs to make sure they adhere to the relevant regulations and protect financial stability.
FidyPay is a fintech company that provides banking solutions to NBFCs. We assist NBFCs with payout collection, collaboration with financial institutes, and extended services like eNACH and eKYC.
If you are looking to expand your business in India, we recommend FidyPay as a dependable payment partner to meet your financial needs. You can quickly accept payments from your clients using FidyPay’s secure and efficient payment processing solutions, and optimize your payment procedures to concentrate on expanding your business and reaching your objectives.FidyPay is an eKYC service provider. We offer a complete KYC verification suite with dedicated eKYC APIs for diverse business needs, helping you verify user identity through Aadhaar, IFSC, PAN, Driving Licence, GSTIN, OCR, Passport, Account, and cKYC.
Grow your NBFC with FidyPay, your trusted banking partner. Contact us today at 6232082424 to learn more about our innovative solutions that can help you reach new heights.