The non-banking finance companies (NBFCs) are now in the thick of action with many opportunities and challenges. What tops their wishlist is a growth-oriented Budget which spurs business in areas served directly and indirectly by NBFCs.
Significant contribution
The importance of NBFCs to the economy is significant. There are 11,769 NBFCs with an asset size of ₹16,10,729 crore at end September 2015. The share of NBFC assets as a percentage of scheduled commercial banks’ assets has increased from 7 per cent in 1998 to 14.8 per cent in March 2015.
There are 202 entities with assets of ₹500 crore or more, with a total asset size of ₹14,126 billion, according to RBI data.
However, what these NBFCs want now is revival of growth which automatically boosts business for them.
V Vaidyanathan, who founded Capital First with ₹800 crore equity support from Warburg Pincus, told BusinessLine that he has no specific Budget wishlist as he feels that if the economy grows, the businesses will also grow.
“I am of the opinion that there is no need for any specific support or wishlist for the finance industry, I am only hoping for a great growth-oriented Budget and bold reforms,’’ he said.
“I have always wished for a progressive tax rate structure for the corporate sector, so that small enterprises pay low taxes, and as they grow they can pay higher slabs on incremental income,” he said.
Further, he sees the need for removal of all exemptions and a progressive tax rate. The business environment of NBFCs is ‘fantastic’ with robust demand for growth, he said.
Though there is greater diversity of NBFCs such as general finance, transport finance and gold loans, among others, there is positive sentiment on the business environment.
Better treatment The long-pending demand of ending ‘step-motherly treatment’ to NBFCs in comparison with banks and creation of a level playing field, special focus on finance to small business where NBFC can play a better role than the banks also figure in the expectations. For NBFC-MFIs (microfinance institutions), the business environment is both promising and challenging.
Small finance banks The creation of small finance banks will take away some portfolio from MFIs and some big names, such as Bandhan, have ventured into banking.
“The MFIs are doing quite well now but will have to face competition from small finance banks,” said Suresh K Krishna, co-promoter and Director of Bengaluru-based Grameen Koota Financial Services.
MFIs also feel the Budget should address the shortage of domestic equity funds by expanding the SIDBI Microfinance Equity Fund, launched with ₹500 crore.