In the years immediately after getting independence, there were many improvements in the Indian banking system but were not sufficient to meet the needs of the customers. Hence, in the 1960s, NBFCs were introduced to overcome the challenges faced by banks. During the initial days, NBFCs were operating on a small scale which was not sufficient to make a huge impact on the industry. With few reforms and changes, there were a lot of improvements that helped new borrowers. Drawbacks such as the long documentation process, delay in disbursal, and the long wait for personal loan application and approval were eliminated by the new-age NBFCs in recent times.
Traditionally, the banking sector was the only organized source of funding (loans) for customers. However, there has been significant growth in the lending market in India which has motivated new-age NBFCs to enter the market. Advancements in technology, banking reforms, economic development, etc. have resulted in the spawning of new NBFCs in the market. Currently, new-age NBFCs offer the best-in-class services to their wide customer base. It offers various types of loans including online Personal Loan, Business Loans, Professional Loans, Loan Against Property, Pre-Owned Car Loans, etc. Below are a few of the factors that are helping NBFCs to grow in India:
- Better Customer Experience: One of the factors that have helped NBFCs to grow rapidly is their unique customer experience. With the amalgamation of technology and customer services, NBFCs have been offering better and faster services such as quick loan approval, processing, documentation, etc. The seamless customer experience has resulted in the rapid growth of instant personal loan in india since products such as these are now available easily and quickly.
- Customised Products: The entry of NBFCs led to the emergence of tailor-made offerings catering to specific customer requirements. Customers got a wider bouquet of products with flexible repayment tenure, attractive interest rates, flexible loan amounts, and best-in-class service. Customized offering means that Personal Loan interest rate is now very competitive in the case of many NBFCs. So, if you wish to have a low Personal Loan interest rate or any other loan at a lower interest rate, you may try comparing the rates offered by a NBFC to traditional banks.
- Leveraging Technology: The major roadblock that the banking sector faced during the initial days was the implementation of technology. With the introduction of technology, new-age lenders are more efficient in terms of loan offerings to their customers. Online documentation, secure mode of loan transfer, and digital processing has helped customers to gain confidence in NBFCs.
- Risk Management: The emergence of digital platforms has led to better systems and practices in terms of risk and operations, that aim to safeguard customer data.
- Availability: Technology has made banking and related services available to customers 24×7. Most services can be availed of without visiting the branch or waiting for “working hours”. This round-the-clock availability ensures that customers are never far away from getting any service, whenever and wherever they wish to.
- Wider reach: Compared to banks, NBFCs have a wider reach to the customers as it has advanced technology which seamless connectivity to various remote locations. With 24×7 customer support and availability, reaching out to the wider customers is easy and manageable to the NBFCs.
Bank VS NBFCs
| Aspect | Banks | NBFCs |
| Incorporated under | Banking regulatory Act 1949 | Companies Act 1956 |
| Banking license | Operates with a banking license | Operates without a banking license |
| Primary Services | Saving accounts, current accounts, fixed deposits, home loans, business and personal loans, mortgages, debit and credit cards | Purchase and selling of shares and stocks, insurance products, loans of individuals and businesses, sales and purchase of bonds etc. |
Conclusion
To conclude, NBFCs have better reach and customer support as compared to traditional banks. Now, customers have wide options to choose from including public banks, private banks and NBFCs. Alongside, as a customer – it is important that you are aware of the reforms that are happening around you. This makes you an aware customer which directly reduces the chances of fraudulent activities. Lastly, before selecting your lender and giving your final approval, please read all the documents carefully.
