Yes, there is product difference.
Loan payment terms for NBFCs are different. They don’t require borrowers to pay the principal in emi. That comes as a big relief. Only the interest component needs to be paid.
In Bank Vs Nbfc discussion, the challenge I feel is opening a branch. It entails expenses, and a certain break even point needs to be reached.
Muthoot is seasoned. It can open a branch, and reach break even, after covering its expenses of security and assessors. But, can banks?
Banks do Gold loan as a cross selling product at its branches. And that is smart and efficient. But, to get into rural India and take market share is a different challenge.
Not surprising that Muthoot has 65% presence in rural India, where tax filing is expected to be minimum. Banks cannot do such unregulated business. And I don’t think RBI is going to relax norms for Banks to compete with NBFCs… Banks have a different and a much wider role in the economy. To put it to perspective, largest bank has Mcap of 8L Cr, and largest gold loan Nbfc has Mcap of 47K Cr.
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