JM Financial goes digital, pools in FDs to help cash-strapped NBFCs

To help liquidity-starved NBFCs by widening the supply-side, JM Financial Group has launched an online aggregator to collect fixed deposits from companies and its distributors for key clients like HDFC, Bajaj Finance, and Mahindra Finance among others.

The platform, which JM Financial Services claims to be an industry first in a segment that still works in paper format, can also be used for IPOs and MF subscriptions by those with Central-KYC registration.

Surajit Misra, the head of JM Financial Services said here that the platform is a digital solution that allows its over 20,000 independent financial distributors to book fixed deposits from companies for their end clients.

Initially the platform will be to collect fixed deposits for HDFC, Bajaj Finance, and Mahindra Finance, he said, which will be scaled up later and will work on a fee- based model.

He said corporate fixed deposit is a market with a monthly volume of at least Rs 5,000 crore or around Rs 60,000 crore annually, which has grown manifold since the IL&FS crisis that left NBFCs/HFCs high and dry.

The depositors' flight to safety since the IL&FS went belly is the main reason for this spike in corporate FDs and NBFCs/HFCs' dependence on such funds, Misra said, adding the main reason for this digital solution is to widen the fund sourcing market as corporate FDs are a metro-phenomenon and that mostly limited to Mumbai and Gujarat.

JM Financial Services reportedly does a business of Rs 350 crore a month in sourcing corporate FDs and is also the largest distributor of capital gains bonds for by entities like PFC, REC, and NHB among others.

With this tool, the company hopes to cover 60 percent of FD investors, he said, as the toll allows investors to control the process by way of authentication/approval of the transaction, without giving any power of attorney to debit their account.