NBFCs source majority loans from digital channels post-Covid

November 11, 2021 1:15 AM

Mid-sized non-banking finance company Shriram City Union Finance is also focusing higher on digital means to increase loan and deposit business.

The company currently receives over 60% of its collections via digital mode where customers can pay via digital wallets or a company-generated hyperlink.The company currently receives over 60% of its collections via digital mode where customers can pay via digital wallets or a company-generated hyperlink.

By Piyush Shukla

The Covid-19 pandemic has accelerated the pace of customer acquisition through digital channels by non-banking finance companies (NBFCs). Several non-bank lenders have focused on digital channels for loan applications and even the approval process, which helped with business continuity.

“Digital platforms not only enabled business continuity during the lockdown, but has also helped us process larger volumes with greater speed and efficiency. Our increased focus on online loan processing during the lockdown coupled with our quick response helped our services stay seamless and uninterrupted,” Renu Sud Karnad, managing director (MD) at Housing Development Finance Corp (HDFC), told FE.

Karnad said by September-end, HDFC received 89% of new loan applications through the digital channels, a substantial increase than below 20% pre-pandemic. The non-bank lender has witnessed 16.44% average traffic spike on its website post March 2020, while there has been a 35.58% hike in online generated leads. As on September 30, HDFC’s outstanding loan book, after sell down of loans, stood at Rs 5.21 lakh crore, up 10% year on year.

Mid-sized non-banking finance company Shriram City Union Finance is also focusing higher on digital means to increase loan and deposit business. The company currently receives over 60% of its collections via digital mode where customers can pay via digital wallets or a company-generated hyperlink.

Speaking to FE, Shriram City Union Finance MD and CEO YS Chakravarti said the NBFC’s fixed deposit programme, launched nine months earlier, has enabled it to garner Rs 20 crore of deposits every month consistently for the last three months. The NBFC is now targeting Rs 100 crore of deposits each month by the next year. The fixed deposit programme is a totally digital and paperless journey for the customer, Chakravarti said.

On the asset side, currently, Shriram City Union Finance is generating 20,000-22,000 loan applications online per month, which is significantly higher than than 2,000 applications received digitally before March 2020. Chakravarti said the company expects 25% of overall loan volume over the next 12-18 months to come from the digital mode.

The NBFC’s website presently witnesses more than 3 lakh clicks each month, over 10 times higher than 20,000-30,000 clicks it received before the pandemic hit India. As on September-end, Shriram City Union Finance’s total assets under management stood at Rs 30,425 crore, up 10.5% on year.“We are making in-roads on the digital front, with a focus on digitising the post disbursal service where we have automated a host of self-service features for our customers,” Chakravarti said.

To ensure social distancing and safe contact with customers during the pandemic, gold loan financier Muthoot Finance launched its ‘Loan @ Home’ mobile application in July 2020, and, to date, it recorded about 10,000 downloads. The NBFC’s gross loan assets under management, as on September-end, stood at Rs 55,146.8 crore, up 17% on year.

According to most non-banks, they are tailoring tech products according to customers’ needs and to reach newer geographies. “We integrated disruptive technologies such as Natural Language Processing (NLP) and Machine Learning (ML). This integration has enabled us in offering seamless services through our website chatbot by understanding and analysing user intent, effectively respond to user interaction and there by deliver an enhanced user experience,” Karnad said.

Further, HDFC also launched ‘HDFC Now’ – a completely digital top-up loan for existing customers and started offering content on its website in six regional languages, including Hindi, Marathi, Tamil, Telugu, Malayalam and Kannada. While digital lending enables faster disbursements, there are also concerns that need tackling to safeguards customers’ interest.

In a speech on October 22, Reserve Bank of India deputy governor M Rajeshwar Rao said, “We were and are inundated with the complaints of harsh recovery practices, breach of data privacy, increasing fraudulent transactions, cybercrime, excessive interest rates and harassment.”

He added that governance is more of a cultural issue than a regulatory issue. Therefore, NBFCs must create a culture of responsible governance where every employee feels responsible towards the customer, organisation and society. “Good governance is key to long-term resilience, efficiency and might I add, survival of the entities,” he said.

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