FINTECH START UPS TO GO FOR LENDING BUSINESS

BE/RBI NOTE/02/2019

Financial Technology has now reached its advanced stage.

  • Fintech Start-up companies have now applied for RBI license to operate as Non-Banking Financial Companies.
  • This would help the consumers availing credit facilities from such financial institutions to have a greater advantage and reach to various schemes and loan facilities.
  • While some have applied for a license from RBI others are said to be in the queue.

Shubh Loans:

Bangalore based Shubh Loans is already in the process of applying for an NBFC license.

  • This is expected to facilitate these institutions in penetrating into the unserved segments of the economy
  • Shubh loans has reached a monthly disbursal rate of Rs. 15 crores and they are doing around 5000 loans a month in partnership with nine lenders.

Moneytap:

Another institution namely Moneytap is planning its own lending license.  They are exploring into various options viz

  • Getting their own NBFC license
  • Partnering with someone who has recently received the license
  • Working with an established entity

Moneytap had started their lending process by partnering with RBL Bank.

Reasons for Entrepreneurs entering the NBFC route:

  • The liquidity crunch in the financial sector is said to be a wake-up call for many tech platforms
  • Entrepreneurs after several lending companies have switched off their channels came to the conclusion that being at the mercy of these companies would pay no dividend.
  • Another reason is Aadhar based verification which impaired the digital lending industry.

Advantages:

  • If a license is procured, that would bring down the borrowing cost, increased margins, and pave way for easy operations.
  • These Start-ups are in the trade for over 3-4 years and have terrible underwriting capabilities.
  • Furthermore, they are conversant with the delinquency of the Indian consumers and makes it comfortable for them to enter the lending market.

Disadvantages:

Of course it would be a challenge for these companies to go through the strict regulatory guidelines and get over them before getting a license.

 

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Author: Admin Bankedge

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