Non-banking finance companies (NBFCs) are well-positioned to establish a stronger presence in the retail finance space and match the non-mortgage retail lending portfolio of banks by end-March 2013.
Further, the competitive landscape in the retail finance sector could change, given the likelihood of some NBFCs converting to banks as the central bank would announce the new guidelines for banking licences by the end of this month, and entry of new players, including captive finance entities.
Nevertheless, NBFCs may face challenges on other fronts. Given their increasing role in the financial sector, NBFCs will need to adapt to a more stringent regulatory environment over the medium term.
Competition
Competition in the NBFC sector will also intensify, and players will need to diversify their resource profiles, maintain competitive borrowing costs, and ensure availability of skilled human resources to maintain growth.
“NBFCs continue to play a critical role in making financial services accessible to a wider set of population, including semi-urban and rural areas, which account for majority of the NBFCs' business,” said Roopa Kudva, Managing Director and CEO, Crisil.
