20.

OT Analysis of NBFCs
NBFCs
20.1 Opportunity in NBFC
Virgin business segments are likely to have NBFC as innovators. The NBFC will leverage
their first mover advantage to make reasonable profits in these segments. NBFC will play the
role of innovators; they will help identify new business, or new ways of doing traditional
business. They will build business models that will attain a measure of stability over time,
before the banks step in.

NBFC

When that happens, it will be difficult for some NBFC it hold their own against the
competition, and some will move out, others will enter into partnership with banks, resulting
in a win-win relationship for both.
Some NBFC will become originating agents working for a fee, but others likely to have more
substantial partnership with banks. Such a partnership could, for instance, involve the NBFC
performing credit appraisals, & sharing credit risk on assets that it has originated & sold to its
partner bank. The success of this business model will depend critically on the NBFC ability
to assess the risks involved in the exposures it originates.

20.2 Threats in NBFC

Factors such as ability to sustain good asset quality, provide prompt and customized services,
enter into franchise or tie up arrangements with manufactures & dealers, & build large
networks to reach out to customers, are vital for success on the business front. So, are strong
collection & recovery capabilities NBFC lack such facilities.
On the Financial side, competitive cost of funds & the ability to capitalize at regular intervals,
in line with growths requirements for maintaining competitive positions. Slowly & steadily
NBFC is losing ground to banks & it only way out is go for partnership with banks.

A Study on Non Banking Financial Companies in India