'Big Daddies will not be able to do much without NBFCs,' says Avinash Gupta of Dun and Bradstreet

At the Business Today Banking & Economy Summit in Mumbai, Non-Banking Financial Companies (NBFCs) industry leaders noted that big banks would not be able to cater to the varied customer segments of India without the assistance of NBFCs. 

Avinash Gupta, the Managing Director-India of Dun and Bradstreet, an American financial services company, said in a conversation with Sourav Majumdar, Editor, Business Today: “I think, the Big Daddies in certain segments of the market will not be able to do much without the capabilities of NBFCs, which some of these folks bring to the table in terms of making things up in terms of sourcing things, in terms of structuring things.”

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Similar thoughts were echoed by Manish Shah, Managing Director and Chief Executive Officer of Godrej Capital. Shah noted that although banks and NBFCs have similar roles, they have been able to better serve customers by catering to their specific needs. 

He said, “In theory whatever an NBFC can do, a bank can do too. The question really is what are the areas you add value in? Sometimes it is looking at risk differently. Sometimes it is looking at customer segments differently. Other times it is looking at the similar customers or customer segments but just delivering outsized value because you're very, very focused on that particular customer segment.”

He further explained with an example of an NBFC creating a niche to serve different types of customers. “You know, in some cases, it would be how do you finance a tractor in our case it would be how do you make a home purchase possible? And therefore, for a customer, it is about how are you fulfilling my needs?”

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Ramesh Iyer, Vice-Chairman and Managing Director of Mahindra Finance, highlighted that NBFCs have not played standardised roles, like banks usually do. He said, “I don't think NBFC have played a very standardised role of saying, Oh, this is what we have, please buy it.”      

Iyer added that the industry has created a niche for itself by designing products customers need.

 “I think what NBFCs have done well for themselves, is [that they have] very clearly identified the customer segment that they want to work with, right, and at every stage, having identified that segment, we've come out with products that suits the customer," Iyer said. 

He noted that this has been the sole reason why the industry has been able to overcome disruptions.  

“We've always designed product that suits the customer needs. And which is the reason we've been able to overcome any disruption at any point of time,” the MD of Mahindra Finance highlighted.