Nbfcs Welcome The Current Spate Of Liberalisation But Expect A

Krishnan: If by the term NBFC, we refer to committed leasing and hire purchase companies, then a possible shakeout may not really take place. Since, however, NBFCs constitute a less-defined segment (as the name itself suggests), a very substantial shakeout should be expected. The ones particularly affected would be those that are either too small to survive or do not have a niche market and have only ridden the boom of financial-service expansion.

Financial services is a small-margin business whose success rests on the ability to raise resources at minimal costs and which is supported by a high degree of credit administration. Notwithstanding that, I believe that the majority of, say, the 50 largest NBFCs will survive and continue to grow, albeit at a slower pace.

 

Chaukar: A shakeout among NBFCs is imminent. The shakeout itself would extend over a period of two to three years depending upon the type of activity the NBFC is engaged in. The most visible shakeout will be in the case of NBFCs primarily engaged in proprietory trading in equities and debt. It will also be soon visible in the case of NBFCs whose capital base is low and whose major source of income is related to equity markets issue management, underwriting, broking in the primary markets. For NBFCs engaged essentially in the spread business auto finance, housing finance, consumer finance it will be some time before the shakeout is experienced by the market. The NBFCs that are engaged in leasing as their primary activity will also experience a shakeout in the future but here again, the impact of the shakeout would take time before it hurts.

The NBFCs that are well-capitalised and have reasonably good risk-management skills and systems coupled with good internal control/compliance systems will not only survive the shakeout but will probably emerge stronger. The NBFCs that have banked on the boom in the capital market for their growth and profitability, paying scant attention to capital, risk management and compliance, are likely to face the brunt of the shakeout. In this context, it is worth noting that the concept of risk assessment and management is undergoing considerable change. Hitherto, dormant dimensions of risk