The non-banking finance company (NBFC) sector in India is seeing a surge in the number of financial sector professionals looking to start a second innings of their careers.
Anshu Jain and Bhupinder Singh, once top executives at Deutsche Bank, are reportedly doing the groundwork to set up an NBFC backed by Japan’s SoftBank Group.
The proposed NBFC will be looking at lending to small and medium enterprises (SMEs) and will look at a largely online business model with sparse brick and mortar presence, according to a report in The Economic Times on Tuesday.
Former chief executive of Standard Chartered’s Asia Pacific business, Jaspal Bindra, took over as chairman of Centrum Group last month.
Chandir Gidwani, former chairman of the group, divested 25% of his personal holdings in Centrum to Bindra. Through it’s an NBFC business that is largely retail-focused currently, Centrum aims at growing its SME book to Rs.5,000 crore, Business Standard reported on 21 April.
Similarly, Pramod Bhasin and A.N. Chawla, former executives at GE Capital, announced in March that they will acquire the financial services business of GE Capital India. The deal is being backed by AION Capital Partners, an India-focused special situations fund. GE Capital India, too, is reported to be interested in the SME lending space.
In November 2014, former chief executive of Citigroup Inc., Vikram Pandit, announced an investment of Rs.540 crore in JM Financial Ltd’s real estate financing business, in exchange for 50% equity.
“What professionals bring to the table is international experience in scaling the financial services business as well as access to pedigree funding. Whether they can actually grow the business in India or not remains to be seen,” said the chief executive of an NBFC focused on SME lending, on condition of anonymity.
According to the chief executive, the SME lending space will see a lot of fresh inclusions over the next 12-18 months since the penetration of financial services providers is low and there is a great opportunity to do analytics-backed lending.
As these lending businesses grow, more customer behaviour will be officially recorded, which will allow lenders to take up more informed lending in the future, solving the asset quality issues in the SME business, he added.
“Currently businesses are not entirely online since a lot of paperwork has to happen after the initial application for a loan. While the Internet can be a great on-boarding tool for these customers, there is still a need for new solutions which are truly online,” the executive said.
Another option that these companies might be looking at is conversion to a bank after establishing themselves in the next 3-5 years, industry officials said.
According to a senior executive at another local NBFC looking at small business financing, professionals can inspire trust of the regulator which is now looking at giving banking licences on tap.
“It is quite natural for them to progress into the banking world, since that is the next logical step for any successful NBFC,” the second executive cite above said, also on condition of anonymity.