sticking on for this panel because I promise you this is one panel that I have been looking forward to to have, uh, everybody loves talking about banks and the potential of the banking sector. But there's an equally, if not more important aspect to the non banking transfer company sector with respect to the economy. And we have the best possible speakers to discuss that further. I want to take both the gentlemen to the first question that I have lined up for this panel. And that is with regard to the emergence of the sector. Uh, NDFC have always. I mean, they've been around for more than 40 years, if I'm not wrong. And there's, uh they've always played a significant role in terms of intermediation of credit, uh, better dissemination of credit. But over the years it has. The role has grown bigger. So I want to get both your views on what? How that has changed in the, uh, in the last 40 years, Mr. Ivanka First and then next. Yeah. Thank you. I think, uh, if you look at the way, uh, NBC have grown over the period. NBFC used to be very asset specific companies, right? Geography, specific companies, highly localised. And, uh, they started with the vehicle financing as, uh, hire, purchase loan, uh, hire purchase agreement kind of a company. And now it has grown big with the gold financing, housing, house financing and mortgage financing SME financing. Not many segment getting added over the period, even though there were traditional lenders who are doing SME separately. Shop separately. There were the ecosystem was there, but it has grown big Now. We are growing at around 20 per cent year on year when overall credit is growing anywhere between 12 to 15%. That means NBFC is growing faster than the overall credit. Uh, and the share of NBFC, which used to be around 11 12% around 78 years back two days around 20%. That means a significant large role NBFC are playing. I think the way NBFC have a corporatized governance ability to raise resources, bring in more equity and the participation from the FIIS and maybe venture V, CS and P that all have made it possible to make this happen. I think the only advantage what NBFC bring in, uh is we go to the customer MBF CS typically have an approach of going to the customer, right. Whereas typical bank would like customer to walk into the bank, there is a totally different approach and because we create an opportunity to go to the customer and try to find out what he needs and, uh, meet his requirement, we are going a little faster and I think we are complementing the system. I don't think it is a competition to bank. I have no way We try to say that we are competing or trying to take a market share from the bank. It's not necessary, not needed. We are only creating that comfort because as more financial inclusion happens as there is more organised credit, getting distributed or disseminated or underwritten for the benefit of the overall customer, customers ultimately will benefit. OK, uh, your views on this Thank you and thank you BQ team for having me here. So I would agree with Mr Ome in terms of NBC has actually created new categories and, you know, kind of refine the playbooks for banks to participate in certain categories. Clearly, auto loans is one example within auto also, if you look at tractor lending right PSU banks that stopped lending a period of time. But then the whole playbook of NBFC is ushered in a whole new way of doing tractor lending a new category in the form of microfinance lending. I mean, the whole NBFCMFIS created a category in my last job. By the way, I was in a bank for 20 years and the last two years in an NBFC. So we were able to use a lot of these playbooks created by NBF CS and now expand that horizon. And we can go on gold as a category SME as a category, you know, even maybe educational loans in its new. So I think, uh, very clearly to the point that Umesh made creating new categories and resetting new categories and creating a sustainable playbook is is what NBF CS have done. And going forward as we look at the head room for financial, you know, intimidation and and the whole UNCA segments which are now getting into, uh, into the fold, I believe NDF CS might have some challenge purely with the arbitrage cost of fund arbitrage. But RB again has come to the rescue and very progressive kind of structures of coal lending co origination, et cetera, which makes it possible even for NBC if they can't bring their balance sheet to the table. But bring distribution to the table, which is overall good. And it sits to the point. What are those kind of partnerships that mainstream financial players can get into to actually proliferate financial services? So I do think, in a nutshell, being an important constituent 20% of the whole, uh, you know, share of of lending, uh, driven. Certain categories continue to be at the forefront of technology adoption, and now it's a good time for looking at partnerships and collaboration. OK, um one, I want to get this out of the way earlier than later, the one sort of difficult period that, as far as NBC comes up, of course, Covid was difficult for everybody. Uh, but when NBC the I NFS crisis of 2018 was the one period where everybody had started building a sort of a negative view on the sector itself, even though you know, vast majority of the sector was not involved in any of that, neither were they accused of any of that. But Still, there was generic view that N DC may not be possibly trusted. At least at that point in time, I want to I want to ask you how is it that when it comes to the borrowing market, when it comes to your own borrowers as well as your lenders people who extend you the funds that you can do business with changing this sort of viewpoint away from island affairs and bring it close to what your business is doing? How How did that sort of evolve in the last five years? See, the challenges faced by NBF CS are every cycle you have certain challenges. It is not that, Uh uh, this was the first time we faced a certain challenge. Uh, right from my three decades plus career, I have seen. So what happens is whenever there is some kind of economic ups and downs, people do feel that people borrowers who are in the lower bottom or in the small and medium, and maybe the individual borrowers, they will default first. And if they default first, the lenders will get not affected. So this is the kind of impression people do have. But the resilience of our customer that makes us stronger. It is not our own resilience that matters much. It is the resilience of the borrowers that is really helping us. That's the first thing because of them, we are able to, you know, get get our money back and service our loan. Then, of course, you have the other side. Where is the liability side where a certain market will suddenly become cold? We have a multiple borrowing lines. Bank, you have. You have capital market. Sometimes you also have, like international capital bonds or markets, and you have deposits. Uh, both of us are deposit taking NBC. But one thing I have seen is in all these crises, the depositors have always stayed with us, right? And we have never seen depositor having a loss of confidence on us because maybe we are there. For quite a long time we have been servicing them. So that's one very positive. Banks have been reasonably supportive, and even the regulators have been consistently supportive of, uh, well run NBFC the one market that gets suddenly. Coal is a capital market because there is immediately there is some kind of vacuum there. That's what happened during the IF. Even in the covid, that particular market was virtually nonexistent closed for us, then you have other avenues to manage it. So ultimately it is a balancing between having a multiple source of resources and the one that makes you strong. And the deposit taking is definitely a strong for the NBFC like us, the larger NBF CS. Then, of course, the resilience of the borrowers who are able to manage the crisis and pay the loan if not on time. At least they delayed. So I think that helps NBFC and because of our relationship with them, 1 to 1. So ultimately we are able to connect with every one, whether it's a borrower and or the depositor, our ability to connect, having a reach, having a branch from the beginning, building that relationship model. All these things have helped by and large and business sector OK, all you were on the other side during this crisis. But But how did you view then? And has it changed since? I think they always say you shouldn't let a crisis go waste and you know you learn a lot from crisis. But II, I echo what Mr Said. I think whether it's on the library side or the asset side, how do you really get a bit more formidable here on the library side? Yes, Deposit taking NBC are slightly better placed because you know when lines get crunched. If you have built a decent granularity in your library base, you are better off. Uh, but I think when I when I look at my organisation, I just, you know, view of what what really happened? I think the whole focus on compliance functions, audit functions, risk functions I think that really took a step up because the regulator was expecting also after that that, you know, NBFC is also pretty much have these functions which are akin to a bank, right. And when I look at the maturity levels of these functions post maybe the IFS crisis, I think that's really taken a big step up. Yeah, so for me, that's been a good reset of sorts specifically, like a risk function right, And NBC is which you would say, a style and underwriting or a credit function would would oversee, but having a separate risk function and the kind of it has on every element of risk, whether it's risk market risk, credit risk, etcetera. I think those functions really took a step up, but otherwise I'll be repeating what said. And I completely agree. Those are learning from a crisis that NBC have incorporated. This was a period where the core of your business, which is reaching out to the customer You said that that's something that the banks did not do. Banks expected people to come to the branch. So you go to the customer that was stopped, right? Uh, for a for a extended period of months on end, you just could not reach the people that you are supposed to deal with. Uh, coming out of that was was it Did it change anything on the borrower side or your relationship with the borrower? Did it change anything at all? In fact, the way we operated was totally different. 1st 21 days, uh, definitely none of our offices were open, and I we started communicating to them over phone customers trying to ask them well, being and all we did not really try to push on the EM I collections, but the second month post 21 days I said. If you can open our branch, if you can visit our customers, if you can meet them, we should start doing it. And we started opening a branch wherever it is convenient and possible. We also start meeting the customer, even though we had social restrictions. What we did is we met them in a common place, like a farm, uh, medical store or grocery shop, and try to because we wanted to encourage our truckers, especially truckers, tractor owners and the vehicle owners that you can operate because you are essential to this economy and you are essential to the community around today. Your moment because only when the goods get supplied, the economy we continue to thriving. People can have milk or the bursaries or whatever is possible today. It's only because of the transportation that was continuing. So this encouragement we try to give them because there was definitely a pushback from their own families. Why you are you going? Don't go. Your health is important. You are more important. Yes, but you can take a precaution. We supplied the free mask free, whatever the required to protect themselves. We supplied them and we said that you can do and you are now able to. In fact, it's more viable to do business. Now you get a better earning, so we create them, and that made us continue to be in touch. So we were never out of touch, and we introduced a novel method of pushing the MS for collecting a payment and everybody adopted, see even a vegetable vendor would have observed. He started using QR code for collecting money, no cash. So people moved. Every businessman moved, and our collection also started happening in the second month itself. The even the monitoring was given for five months. I think the percentage of people who really use the moratorium was coming down every month. So hardly only the tourist buses or maybe office buses, which was fing the employees only there the morta fully used because they not playing at all. But the rest of everything got normal in the second or third month, and we were all working virtually so even though we made the social distancing all those things. Now we kept advising our employees what to do, what not to do, never visit to home. All those things we did but I think every other NBFC would have adopted a different method. But we did this. And I think it's quite a great experience going in and out of it in a a very successful manner. No. Has anything changed post covid? Uh, for my friends. Oh, absolutely. I mean, uh, I I joined in the thick of the crisis. Uh, I joined two years back, so it was actually the second wave. Uh, the first wave did not disrupt really so much because there was a very generous restructuring, moratoriums, et cetera. But if you remember, the second wave, uh, really disrupted the informal segment much more than the the first wave. And, uh, and just to contextualise it, the finance hit a 16% NP. Yeah, uh, at that point of time. And, uh, there were questions on the business model, et cetera. Uh, I think you know to what Mr said you first of all have to have conviction in your own business model. You have to have conviction that your consumers, your customers, are disrupted. It's not the fact that they have become intentional defaulters. There is a disruption, etcetera. But I think in reflection what we have done since then is realise that when you're of a certain size you have to have a meaningful amount of diversification. I'll just expand on diversification. Uh, both of us are very heavy auto players, right? Two years back, my finance €60,000 per 97% was only in the auto space, of course, three wheelers upwards. But that was our exposure. And, um, you know the question at that size and scale, can you be? Can your fortunes only be linked to one industry? Because the disruptions and the cyclicality of those industries then hit you so much harder. So one thing we learned is that at this scale and size, meaningful diversification is a must. Today that 97 is down to, say, 93 within your customer segment. Also, we were typically a financer to the very semi urban, rural, self employed nonprofessional customer segment. Now that customer segment again gets much more. The stress gets that much more amplified. And when you're an auto player, you can decide also to bring in a slightly more less volatile customer segment. So today we have 15% of our consumers who we call Prix customers right. So diversification in customer segment diversification in asset category is one lesson we learned. Number two is to the point again on on the dependence on branches. You know, if you're an NBFC who is totally dependent on the branch, where if if there's a local restriction and your branch closes, you can't engage with customers. And then you realise there normal BC P as keeping maybe an Omni Channel kind of presence making contact centres or centralised offices. So now that's got also set in place. If a branch closes or a local administration shuts down an area, I don't think everything comes to a standstill. We have realised how to operate in a more agile and Omni channel manner, and lastly, I would again link to a point that Mr Raker made. I think the crisis taught us how to step up our own empathy. How do you interact with customers? How do you really realise? You know, partner them not just in good times, but partner them in bad times. Do you really kind of understand each customer person, or what kind of stress they've gone through and also empathy to your employees? So I think These were three big lessons, uh, which are invaluable and, uh, have helped. Thank you so much, Mr and Mr Bello, for joining us on this conversation. It was a pleasure having you here. Thank you so much, guys.
