Set Your NBFC Collaboration for a Win-Win in Financial Innovation
Partnerships among NBFCs, banks, and fintech companies are enhancing financial inclusion and expanding credit access. By selecting the right collaboration model with our NBFC Advisory’s expertise assistance, you can extent your reach, mitigate risks, and foster a more inclusive financial ecosystem that benefits all stakeholders.
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Why NBFC Collaboration Matters
“Each player in the ecosystem — whether it is a bank or NBFC or a fintech — brings to the table its own strengths. I think the problem happens when we all think we are ‘superman’ and we can do everything,” Parag Rao, group head, of payments, consumer finance, digital banking, and IT at HDFC Bank”
Hence once again proved— The future success of the financial sector depends on collaboration rather than mere competition.
Advantages of NBFC collaboration:
Expand your reach and tap into new markets and customer segments swiftly with our collaborative solutions. By partnering with NBFCs, bank and fintech companies, you can access underserved regions and niche audiences, drawing in high-potential borrowers that traditional methods may miss.
Imagine cutting operational costs while increasing your profit margins. By pooling resources—such as lending capital, risk management tools, and technological infrastructure—NBFCs, banks, and fintechs can unlock new revenue streams.
Effortlessly stay compliant with evolving regulations. Our partnership ensures that your collaborative initiatives meet the latest requirements, including TDS, GST, and CKYC. While we handle the intricacies of compliance, you can concentrate on expanding your business with confidence and security.
Gain a competitive advantage by harnessing fintech innovations in your offerings. Our advanced tools for credit assessment, onboarding, and loan management empower your NBFC to quickly adapt to market shifts and respond to changing customer needs. Be at the forefront of launching new financial products that cater to today’s dynamic landscape.
Each model—whether co-lending, on-lending, or FLDG—diversifies and mitigates risk, allowing for a healthier loan portfolio. By strategically managing credit exposure, especially in co-lending and FLDG models, your institution strengthens its resilience against market volatility and borrower default risks.
Process of NBFC Collaboration
To facilitate effective partnerships between NBFCs, banks and Fintechs, here are the key steps to be followed in establishing a seamless, compliant, and growth-oriented:
- Co-Origination Agreement: Establish a foundational agreement between the NBFC, bank or FinTech for smooth loan origination and collaboration terms.
- Intercorporate Deposit Agreement: Signed with a fund manager to structure deposits and ensure effective fund utilization.
- Escrow Account Setup: A dedicated escrow account for repayments and disbursements, managed by an appointed CA to oversee funds and compliance.
- Compliance Management: Meet all legal and regulatory requirements, including TDS, GST, credit reporting, and CKYC protocols.
- NPA Provisioning Norms: Ensure adherence to RBI’s NPA norms, with 45/90-day guidelines for tracking non-performing assets.
- CIC Reporting: Maintain transparency and credit tracking through monthly CIC reconciliations by both partners.
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Types of NBFC Collaboration
- Bank Partnerships: Access additional funding and broaden customer reach with a bank’s extensive network.
- Fintech Alliances: Leverage FinTech’s technological strengths and customer-focused solutions to enhance customer access and streamline operations.
Models of Collaboration for Financial Innovation
The fintech-bank-NBFC collaboration manifests through various models, each offering distinct advantages:
- Co-Lending Model
- Risk and Profit Sharing: Banks and NBFCs share loan risks and profits, supported by fintech credit assessment tools for efficient risk management.
- Interest Rate Structuring:
- Fixed Rate Loans: A blended interest rate based on each lender’s risk proportion.
- Floating Rate Loans: A weighted rate, reflecting each lender’s contribution.
- Credit Risk: NBFCs hold a minimum 20% risk, while banks manage the remaining 80%
- Loan Management: A shared escrow account and unified borrower statements simplify transactions and improve borrower experience.
- Process: Banks provide loans to NBFCs, who then lend to their end-customers.
- Benefits:
- NBFCs: Expand reach, gain additional funding.
- Banks: Achieve PSL targets and earn favorable interest rates.
- PSL Classification: Depending on end-use, banks may classify these loans as priority sector lending.
- Structure:
- FinTech-originated loans are partially guaranteed by the LSP, with risk-sharing defined by RBI guidelines.
- Risk Sharing: Fintechs cover a percentage of initial losses, while the bank/NBFC manages servicing and collections.
- Regulatory Compliance: Aligns with RBI guidelines, ensuring transparency and legal compliance.
Our Services for NBFC-Fintech-Bank Collaboration
Regulatory Compliance Advisory
Ensure full adherence to RBI guidelines, including TDS, GST, credit reporting, and CKYC compliance for smooth operations.
Co-Lending & On-Lending Support
Assistance in drafting agreements, setting up escrow accounts, and establishing risk-sharing and profit-sharing mechanisms for both models.
Risk Management Setup
Facilitate secure escrow accounts, monthly CIC reporting, and transparency protocols to maintain effective risk management practices.
Escrow Account & Compliance Handling
Support in setting up and managing escrow accounts with a dedicated CA to oversee repayments, disbursements, and fund compliance.
Customer Segment Expansion
Leverage fintech innovation to tap new customer segments and streamline onboarding and loan servicing, reaching underserved markets effectively.
Why Partner with NBFC Advisory?
By partnering with us, NBFCs, banks, and fintech firms can gain access to:
Expert Guidance on Regulatory Compliance:
Ensure adherence to evolving RBI guidelines, including TDS, GST, NPA provisioning, and CIC reporting, so compliance concerns won’t hinder your progress.
End-to-End Support for Collaborative Models:
Benefit from our strategic expertise in co-lending, on-lending, and FLDG partnerships, including documentation and management support for seamless execution.
Risk Management & Transparency:
We assist in setting up secure escrow accounts, implementing CIC reporting protocols, and facilitating monthly reconciliations, providing you with clarity and minimizing financial exposure.
Operational Efficiency:
Our Co-Lending & On-Lending Support establishes clear structures for risk and profit-sharing, helping you achieve smooth operational flows.
Access to New Markets:
Through Customer Segment Expansion, we help you tap into new demographics by partnering with fintech firms, making customer onboarding faster, more personalized, and resource-efficient.
Future-Proofing Against Market Shifts:
Our Flexible Collaboration Models and advisory services keep your NBFC adaptable and aligned with the latest fintech and banking innovations.
Before NBFC Advisory
- Relying on guesswork for decision-making
- Risking costly errors due to lack of expertise
- Struggling to coordinate effectively with partners
- Feeling overwhelmed by multiple options
- Unable to achieve goals
After NBFC Advisory
- Strategic insights that eliminate guesswork and inform decisions
- Reduced risk of errors through expert oversight and support
- Seamless coordination with partners for enhanced collaboration
- Simplified decision-making with tailored, effective solutions
- Empowered to achieve business goals and accelerate growth
Unlock Financial Opportunities through Collaboration with NBFC Advisory!
Our mission is to Make it Count. Partnering with our expert team will help you build sustainable, compliant, and growth-oriented financial solutions. Together, we can create a resilient, future-ready financial ecosystem that benefits both you and your customers.
Simplifying Regulations, Empowering Growth
FAQs
Non-Banking Financial Companies (NBFCs) provide financial services like loans and asset financing but do not hold a banking license. Unlike banks, they cannot accept demand deposits and have different regulatory requirements.
Partnerships can enhance financial inclusion, expand credit access, and leverage each entity’s strengths, ultimately driving growth, innovation in the financial ecosystem and encouraging customers.
We assist in drafting agreements, setting up escrow accounts, and establishing risk and profit-sharing mechanisms, ensuring a seamless execution of collaborative lending models.
Risks include loan defaults and compliance challenges. These can be mitigated through effective risk management practices, transparent agreements, and regular monitoring. NBFC Advisory helps firms exactly with that!
We offer continuous support to ensure compliance and operational efficiency, along with regular updates on regulatory changes and market trends to keep your business adaptable.
You can schedule a free consultation call with our experts to discuss your needs, explore suitable collaboration models, and receive tailored support for your NBFC.
