Money Lending Scenario In India- Digital Lending & NBCs

by posted in Mixed Bag


Well, the money lending scenario in India has changed over the course of time, say since a decade now. The non banking companies have gained considerable market share across asset class, despite the fact that there is tough competition from banks. With the rise of these NBCs, the term “alternative lending” has gained a lot of attention. So, let’s understand what it is. Alternative lending is the term that includes new small business lending opportunities available outside of the traditional bank lending scenario. Traditional lending from banks is hard for small businesses. So by turning towards alternative lending options, small businesses are more likely to qualify for easy funding.

The private and online business lenders that offer alternative lending provide a variety of creative business financing solutions such as lines of credit, short term loans, invoice financing and medium term loans. This type of lending is a fast developing industry with approximately $3 billion in 2013 lent via alternative mediums. Now that you have got an idea as to what alternative lending is and how NBCs are emerging so rapidly in the Indian financial market, it is important to know everything about the non banking financial institutions.

What are NBFCs?

Non banking financial companies are the establishments that offer banking facilities as well as financial services without meeting legal definition of “bank”. These establishments are covered under Banking regulations laid down by the RBI and offer services like TFCs(Tax Free Cash which typically offers higher rates of return than bank deposits), stocking and investing in money market, loans, retirement planning, credit facilities and others. But these establishments are limited to not taking any form of deposit from the public/customers. These firms play an important role in the Indian economy as they offer the services in both urban and rural sectors, mostly granting the loans and allowing for growth of latest ventures. NBFCs as they provide monetary advices, they have become a very crucial part of India’s GDP. To be exact, NBFCs alone count for about 12.5 percent increase in GDP in India. Most people also prefer NBFCs over the traditional banks because they find the former to be safe, quick and effective in providing financial services. Also, there are different types of loans available. Apart from these NBFCs, there are online money lending options too like instant personal loans services and peer to peer lending.

Role of NBCs in Indian financial system

NBFCs or NBCs supplement the banks by offering the infrastructure to allot extra resources to companies and individuals who need finances. Also, NBFCs introduce competition in financial services like for example while banks may provide some financial services as packaged deal, on the other hand, NBCs unbundle and create these services to meet the special needs of individuals and companies. Furthermore, individual NBCs may even specialize in a particular sector and develop information benefit. So, through this process of targeting, unbundling and specializing, NBCs improve the competition within financial services sector.

Some amazing services offered by NBFCs include private education funding, home loans, personal loans, retirement planning schemes, underwriting stocks and shares, loans and other obligations. Such establishments also offer wealth management like discounting services, managing portfolios of shares and stocks, providing advice on mergers and acquisitions etc. It is surprising to see that a lot of non banking companies have expanded huge in the last few years as venture capital companies, industrial and retail companies have come up in the lending business.

We have also covered a separate detailed post on how CIBIL affects your loan taking situation and the ways by which you can improve your CIBIL score.

Though there are a lot of NBFCs operating in India but here we will be discussing the top 10 NBCs and what they provide.

Top NBCs India in 2019

1. Bajaj Finance Limited

Bajaj Finance Limited
Bajaj Finance Limited

Bajaj Finance Limited is the subsidiary of Bajaj Finserv Ltd. and one of the most successful private finance companies India. The parent company offers different types of loans like two wheeler, four wheeler loan, gold loan, personal loan, business loan and home loan. It even deals in various insurances like life insurance, health insurance, auto insurance etc.

Bajaj Finance Limited provides loans to professionals like doctors for career enhancement, gold loans, entrepreneur and business loans, individual loans and more. Apart from these, it even offers services such as lending money, wealth advisory as well as general insurance. It has more than 1400 branches all across the globe with over 2000 employees. The company is a part of Bajaj Holdings and investments and was established in the year 2007. Since then, it has become one of the best NBCs in India.

2. Mahindra & Mahindra Financial Services Limited

Mahindra Financial Services Limited
Mahindra Financial Services Limited

Mahindra & Mahindra Finance also called as MMFSCL is one of the leading financial companies if India and offers services in different fields of investment. It is a subsidiary of multinational company Mahindra & Mahindra and was introduced in the year 1991, headed by Ramesh Iyer, being the Chief Executive Officer. The main motto of the company is to provide support to general people for better financial condition.

This finance firm deals in home loans, gold loans, working capital loans, corporate loans and vehicle loans. The working capital loans are financial solutions in developing countries like India. The company has two subsidiaries- Mahindra Insurance Brokers Limited that deals in insurance sector and Mahindra Rural Housing Finance Limited which takes care of home loans for rural people.

MMFSL has more than about 1000 branches and even a customer base of around 3 million all across the nation. MMFSL is even one of the most established and renowned organizations with insurance and rural hosing financial services. It further deals in gold advances, home credits and much more.

3. Muthoot Finance Limited

Muthoot Finance Limited
Muthoot Finance Limited

Muthoot Finance Ltd. is the very first NBC in India, tracing its history back to 1888 when it started as a small lender from a village of Kerala. The company sanctions loans against pledge of your gold ornaments. It is the leader in India’s gold loan market. Apart from financing gold transactions, it even offers foreign exchange solutions, wealth management services, tourism services and money transfers. You can even get gold coins to buy at Muthoot Finance branches. The firm has its headquarters in Kerala and operates more than 4400 branches all across the country. It is even the parent company of Muthoot Housing Finance India Limited that offers home loans. The company is regarded as one of the best NBFCs in India.

4. Power Finance Corporation Limited

Power Finance Corporation Limited
Power Finance Corporation Limited

Power Finance Corporation Limited was established in 1986 and has the badge of being a Navratna Status company. The Managing director and chairman of the company is Mr Mukesh Kumal Goel. Power Finance Corporation Limited is renowned for offering financial help to various power projects in India. It even supports companies involved in power generation and distribution. The firm is even listed in NSE i.e. the National Stock Exchange and Bombay Stock Exchange. It is considered to be one of the top 10 NBFCs in the country as it caters to power generation, transmission, management as well as distribution projects all across the country. It was established in the year 1986 and since that, it has played a considerable role in overall infrastructure development of the country.

As it first issued the public share in 2007, the issue was then oversubscribed by more than 76 times, which is actually one of the biggest numbers for any IPO of Indian company. The finance company has also provided huge amounts to the State Electricity Boards, State Sector Power Utilities, Central Sector Power Utilities and other private sector firms for developing their overall infrastructure.

5. Cholamandalam Investment and Finance Company Limited

Cholamandalam Investment and Finance Company Limited
Cholamandalam Investment and Finance Limited

Cholamandalam (Chola) was established in 1978 as financial services sector of Murugappa Group. It started as the equipment finance company and surged ahead as a full financial solutions provider serving all types of services like home loans, SME loans, stock broking, vehicle finance loans, home equity loans, investment advisory services and other financial services. Chola has 725 branches all across India with assets under management over INR 35,000 cr. Cholamandalam has a whopping $5 billion in assets under management. Earlier it started as equipment finance company but then it diversified its business to complete finance service provider. Cholamandalam Investment and Finance Company Limited offers solutions like home loans, medium enterprise loans, car loans, two wheeler loans, stock broking, stock trading, commodity trading and other financial services to customers all over the country.

6. Rural Electrification Corporation Limited

Rural Electrification Corporation Limited
Rural Electrification Corporation Limited

Rural Electrification Corporation Limited is the government owned infrastructure finance firm that provides loans to Central Sector Power Utilities, State Electricity Boards, NGOs, Rural Electric Cooperatives, State Sector Power Utilities and private companies for the rural electrification projects all across India. The company was established in 1969 in order to fight with severe drought situations at that time.

Initially the firm helped electricity boards to actually energize pump sets across the country to enhance agriculture and also to overcome drought. But the company has since then established itself to be one of the most important public sector finance companies in India. The company also provides project financing, technical appraisal, consultancy, project monitoring and other services to Government of India for different projects.

7. Shriram Transport Finance Company Limited

Shriram Transport Finance Limited
Shriram Transport Finance Limited

Shriram Transport Finance Company Limited serves to be one of the top NBFCs that target commercial and business vehicles. The company has been providing funding services for light duty trucks, mini trucks, heavy duty trucks, farm vehicles, passenger vehicles and construction vehicles since 1979. Shriram Transport Finance was basically founded 38 years ago and since then it has made itself as one of the top 10 NBFCs in India, providing financial investment services and schemes in the country. The private finance firm offers various categories of financing services like stock broking, micro credits, mutual funds and insurances etc.

As far as lending is concerned, it offers Indian citizens light duty and heavy duty truck loans, loans to farmers to buy farming equipment, general passenger vehicle loans etc. The company also offers financial aid to construction companies for construction equipment purchases.

8. Tata Capital Financial Services Limited

Tata Capital Financial Services Limited
Tata Financial Services Limited

Tata Capital Financial Services Limited is top leading NBFC in India. Established in the year 2007, it is basically a subsidiary of Tata Sons Limited. It describes itself as one stop financial solution provider which caters to needs of corporate, retail and institutional customers across businesses. The company is registered with RBI as ‘systemically important non deposit accepting non banking financial company’. Apart from various solutions provided to families, individuals and businesses, the company also offers infrastructure finance, consumer loans, commercial finance wealth management and Tata cards marketing etc.


9.HBD Finance Services

HBD Finance Services
HBD Finance Services

HDB Finance Services is actually operated by HDFC Bank itself. The company offers a range of secured as well as non secured loans like doctor loans, credit loans, tractor loans, gold loans, business loans, personal loans, auto loans, etc. HBD operated via a well knit network of more than 1000 branches that are spread all through the nation. It has further shown great growth in the market and thus this is what makes it one of the top NBCs in India.

HDB Finance Services offers the secured and non secured loans through the wide number of branches in 22 states and 3 UTs. Apart from the loans mentioned above, it also provides enterprise business loans, new to credit loans, construction equipment loans, equipment loans, new and used car loans and consumer durables loans. The company operates through BPO services and lending business segments and is believed to be the fastest growing NBFC today.

10. Indiabulls Housing Finance Limited


Indiabulls Housing Finance Limited
Indiabulls Housing Finance Limited

With its headquarters in New Delhi, Indiabulls Housing Finance serves to be the second largest home loan service provider in India. This company is a part of Sameer Gehlaut led Indiabulls. Since its establishment in the year 2005, the finance company has developed its functions and operations to international markets like UK and UAE. In 2016, the firm invested about INR 1,000 cr. for upgrading its technology and it became the first company to digitize loan sanction procedure in India.

Indiabulls also has a branch office in Dubai wherein the NRIs can get a wide range of mortgage lending services to buy homes in India. NAREDCO awarded Indiabulls with the title “Fastest Growing Housing Finance Company of the Year 2013-2014”. And then in year 2015, Realty Plus awarded it as the Best Housing Finance Company and ASSOCHAM awarded it to be the Best Affordable Housing Finance Company title.

So, coming to end of the post, this is the list of the top NBFCs in India. From social engagement and variety of financial services to customer satisfaction, these NBFCs are the actual driving force behind rapid economic growth of our country.