Updated: Nov 29, 2019
NBFC (Non-Banking Financial Companies) are responsible for doing a lot of things a bank does, and are regulated by Reserve Bank of India. By providing loans to acquiring financial assets, NBFCs prove to be mighty useful despite their shortcomings. NBFCs play a huge role in economic development:
1. Providing employment.
2. Aiding the financial market.
3. Mobilizing resources.
4. Incrementing national income.
5. Bettering the economy.
And so on. Essentially, an NBFC is a financial body that is a company. These companies are tasked with work to develop the financial markets and increment wealth. We have NBFCs all across the country today with over 500 authorized to accept public deposits. NBFCs predominantly cater to commercial requirements like financing equipment, vehicles, etc.
This births the question, when banks exist, what’s the need for NBFCs?
· Though there are several banks in India, catering to commercial needs is still a tough task. The presence of NBFCs eases this strain.
· NBFCs aren’t regulated, but financial institutions recognize their capability to assist efficiently and provide better facilities in terms of finance.
· Companies approach NBFCs over banks for activities like equipment leasing/purchase, vehicle loans and other such investments for the same.
· Banks can’t facilitate all the businesses and startups. NBFCs help by aiding entrepreneurs and startup establish themselves.
As of 2018, banks are outsourcing lending to NBFCs! A number of bank frauds has let people to lose hope in them and turn to NBFCs for their financial needs. Here’s why people prefer NBFCs over banks:
1. Aggressive interest rates: Though NBFCs initially started off with high interest rates, that percentage has dropped significantly over time. Now they charge equal to or lesser than the banks, thereby making them the first choice for anyone looking for a loan. The rates aren’t constant, however. Based on the income and credit score, it varies from one individual to the other.
2. No stringency: The driving factor for NBFCs is the fact that they don’t have lengthy rules and regulations to be followed. This is because NBFCs come under companies act, so their policies are different. However, the high risk of default makes their price loans and interest rates higher than usual.
3. Efficient processing: Unlike banks, NBFCs cater without much hassle and eligibility check. The plight of banks is at a point where borrowers are willing to settle for higher interest rates in return for a quicker loan grant. NBFCs capitalize on this aspect and provide borrowers with the money immediately at competitive rates of interest.
So, how does this seemingly complex system function seamlessly?
Monitoring an entire NBFC’s work physically is close to impossible. Managing hundreds of records, making sure deadlines are obeyed, assigning work, and evaluating the overall performance of the workplace – these are some of the various roles a manager has to carry out in an NBFC. On the outset this might seem doable since it “pays more”, but the reason a managerial position is given said respect, is because of the immense burden it carries and the sheer grit needed to carry it out!
Since one person filling all the shoes at the same time is impossible, MIS (Management Information System) was created. Rather than a system, it’s a concept for making the managerial tasks efficient to carry out and with relative ease. To be put simply, MIS is a hardware and software setup that provides managers with information for decision-making, organizing, planning and monitoring a firm – all in a synergetic and efficient manner.
The harmonious arrangement of a software for processing and organizing, hardware for the efficient running of elements and a database for organizing all the data – this makes up an MIS. With companies getting bigger, and several elements emerging to govern the success of a firm, managers have to up their game and enhance their workflow as well.
NBFCs follow a hybrid architecture which places them somewhere between a company and a bank – they’re a centaur of sorts. This mechanism calls for the need of an MIS – a financial MIS to be precise. The objective of an MIS in NBFCs will be to generate and maintain information related to the customers, bankers and that pertaining to the organization’s finance.
In an organization, a Management Information System plays the following roles:
1. Expedites efficient planning: Running an organization requires the manager to keep an eye on every aspect. Sadly, two eyes can only see so much. Which is why MIS is kept in place to help manager plan operations with ease and speculate outcomes.
2. Efficient information management: The predecessors of MIS are normal information systems. These systems help organize and manage a company’s information. Typically, big companies have multiple departments, and each department generates enormous amounts of data regularly. Managing them physically on paper is impossible! MIS provides an efficient way to organize and contain information and auto-update it regularly.
3. Improved relational hierarchy: A subtle benefit provided by MIS is the underlying ability to analyze customer relations. Customer trends are the heart and soul of a business. Different seasons bring different customer needs. With an efficient MIS, a manager can analyze the various requirements a customer has and this trend helps speculate what a customer might need next – all in all, this helps make the business more efficient.
4. Overall coordination: An organization will have numerous departments, from production to HR to development. No two departments are stand-alone. A company is an entity which is driven by the entwinement of the various departments it houses. It is a manager’s job to ensure that each team coordinates with the other and the union is ultimately productive and beneficial for the company. Aided by an MIS, a manager can efficiently coordinate the work between respective departments and enhance integration.
Do you think MIS can get any more complex? Definitely. MIS have several categories:
· Executive Information System
· Marketing Information System
· Customer Relationship Management System
· Sales Force Automation System
· Business Intelligence System
· Transaction Processing System
· Knowledge Management System
· Financial Accounting System
· Human Resource Management System
· Supply Chain Management System
Each system is used to govern one particular aspect of the company from the managerial point of view.
If not for these systems and the MIS in general, all of the data collection and conveyance would have needed staffing to accomplish results in a waste of money and resources. However, with MIS at disposal, managers can breathe a sigh of relief.
Now that the concept of both MIS and NBFC are clear, how do management systems help the roles in NBFC companies?
The various roles of NBFCs and how MIS affects it:
Facilitating funding: One of the core features of NBFCs is aiding the economy by turning sales into investments. This is done by resource rotation, asset distribution and income regulation. Having a MIS to support this process will make it much more efficient and yielding. With several resources present, maintaining a record for each and monitoring its movement physically is impossible. A management information system can enhance this process by automating the mobilization process and increasing the sales-investment ratio.
Long-term loans: Another reason people prefer NBFCs over banks is because banks don’t provide long-term credit. NBFCs ease this requirement by providing ample levels of funding to small and large industries alike. Statistics report that NBFCs have shown nearly 22% growth in comparison to banks. This means a majority of people take help from NBFCs and not from banks. The number of borrowers NBFC houses can’t be charted easily. Management information systems help hugely with this requirement. Managing customers in thousands is not possible with the 100 employees an NBFC houses. An MIS will radically change the process of managing the customer information of money borrowed, interest percent, loans pending, etc. efficiently.
Increasing national economy and creating employment: A substantial role NBFCs play is creating jobs and in turn boosting the economy. Startups and businesses predominantly go to NBFCs for loans. Though not regulated or in partnership with the government, NBFCs indirectly boost a country’s economy by funding companies, which in turn create jobs and ultimately lead to more vacancies for individuals. Management systems will prove of tremendous use in this case by keeping a record of the various companies funded and in turn, the jobs created. Further branching down, employment creation and procurement is an MIS module which companies employ to hire and maintain staff. The management system has implications directly and indirectly in NBFCs!
Enhanced operational excellence: NBFCs have a huge architecture. From clerical level to the managerial ones, the work done and records maintained are astronomical. A management information system helps hugely in keeping track of data and monitoring it. Customers choose to work with NBFCs because of their speed of functioning and operational efficiency. To maintain a speedy yet impeccable workflow, there is a need for an MIS to be in place. From the various tasks across multiple branches of the NBFC to the data going up and down – an MIS will keep track of all this without any hassle.
The key application of MIS: Loan Management Systems in NBFCs
In an NBFC, lending loans, manual verifications, collection, and cross-checking data can be a hassle. With the advent of MIS in several organizations, NBFCs are benefitting from a particular software system that are known as Loan Management Systems. Automating several critical processes, these systems create a cohesive network for seamless collection of data, processing and simplify lengthy, cumbersome tasks into easily executable functions.
While the market is flooded with a host of Loan Management Systems, most of the prominent software share a few characteristics in common. A good Loan MIS will let an NBFC achieve the following:
1. Paperless Onboarding: By enabling data collection in a digitized manner, an MIS can eliminate the paperwork involved, reduce the time taken to process the applications, and allow access to loans in an easy, hassle-free manner.
2. Multi-user system: Multi-level access is provided to different employees based on the hierarchy in the NBFC to enable effective tracking of data, escalations, and easy delegation of the task to respective individuals.
3. The power of AI: What the average human brain can’t do, an MIS can! Some Loan Management Systems are integrated with advanced AI features, allowing easy detection of fraud or fake documentation.
4. E-KYC: KYC of customers can be done completely in an electronic manner, minimizing the overheads involved and reducing application—processing times to a large extent.
5. Organized management: Data is centrally collected on a cloud storage, that allows safe, secure and reliable access to sensitive information and provides more control over how the data is used.
6. Automate loan collections: On receiving the mandates from the system, it sends out auto-messages to the desired loan payers for collection, collates the funds received and generates auto-reports.
7. Track defaulters: Instead of sifting through a massive pile of data, a loan management system can easily pick up on defaulters, allowing easy tracking.
8. Real-time updates: Considering the dynamic nature of the financial world, any efficient loan management system should work in real-time, and deliver updates as and when they occur.
9. Access restriction: Since a loan management system provides access to sensitive information, the access, as such, needs to be highly restricted. Admins can assign roles based on the hierarchy in the NBFC.
10. Comprehensive Accounting: From calculating Income to expenditure to interests levied, an efficient Loan Management System will be able to execute lengthy accounting calculations in a matter of seconds.
Every small operation needs management. Imagine the coordination a billion-dollar company will need! The bigger the company, the more the resources, and the more the resources, the higher the need for immaculate management. With MIS now present, managers can efficiently monitor their complete company without having to go through towers of records and hours of searching. Especially NBFCs, they have long since overtaken banks and are continuing to stay people’s favourites in terms of financial activities are in dire need of an efficient Loan Management System like Habile Technologies’ CloudBankIN solution.