How are NBFCs better than Banks?
NBFCs have gained a major popularity over the last few years. Their financial performance is steadily improving, and they are growing at a rate that is much higher than that of banks. Let us try to find out the reasons what makes NBFCs better than banks.
The Reserve Bank of India said in a recent FSR (Financial Stability Report) report that the financial performance of NBFCs is growing at a better rate than that of banks. The balance sheet of the NBFCs has expanded at a rate of 15.5% in the period between 2015 and 2016.
What is the reason behind the steady growth of NBFCs in the past few years? Why do people prefer going to an NBFC rather than going to a private or commercial bank? Let us try to find out.
What are NBFCs?
To understand how NBFCs are better than banks, it is first important to know what NBFCs are. NBFCs or Non-Banking Financial Companies are companies that are registered under Companies Act of 1956. They are regulated by Reserve Bank of India under the RBI Act of 1934. Just like banks, a Financial Services Company in India offers services and products which the banks usually don’t provide.
Why are NBFCs better than Banks?
Some reasons make NBFCs a better choice as compared to banks. Let us have a look at some of them.
1. Wide-Range of Loan Products
NBFCs offer a broad range of loan products, especially industrial loans. Some of their offerings include loans of buying industrial machinery and equipment, industrial property loans, loans to pre-owned purchase machines, working capital loan, etc. The majority of these loan products are not offered by banks and as a result, NBFC is the most suitable option for such industries.
2. Enhanced Flexibility
When you take a loan from an NBFC to purchase industrial property, they calculate the loan amount by assessing the property’s value along with the statutory charges, like registration and stamp duty. On the other hand, banks do not include these charges while calculating the loan amount. Even the time taken by NBFCs for processing a loan is shorter than that of banks, and the process is pretty transparent too.
3. Better Services
If we talk about the services, over the years NBFCs have developed a variety of specialised tools for assisting and counseling their customers. Moreover, they also offer doorstep services for enhanced convenience. They are highly approachable and offer personal attention to every customer and their financial needs.
NBFCs regularly communicate with their customers to ensure that the customers have all the help they need not just while taking a loan but throughout the tenure of the loan. Also, NBFCs have a wide network spread all over the country, and they offer their services not just in Tier I, but Tier II and Tier III markets as well.
NBFCs offer a wide range of loan products at highly competitive rates. They simplify the whole process of taking a loan, making it easier for customers to approach them rather than approaching a bank. While taking a loan from an NBFC, make sure that you choose a reputable company and read the loan documents very carefully to avoid any disputes in future.
