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Is NBFC More Profitable than Banking Sector?

We undertake an analysis to find out that which is more profitable among NBFCs and banking sector. The analysis suggests that NBFCs are more profitable than the banking sector because of lower costs. They are able to target the grass root level without incurring much cost.

NBFCs are able to offer cheaper loans to customers. Thus NBFCs’ credit growth – the increase in the amount of money being lent to customers – is higher than that of the banking sector.

More customers are opting for NBFCs and same is visible in the fact that credit grew at an average 24.3% per year for NBFCs as against 21.4% for banks.

As per Wikipedia NBFC relate to financial services for entrepreneurs and small businesses lacking access to banking and related services. The two main mechanisms for the delivery of financial services to such clients are:
(1) relationship-based banking for individual entrepreneurs and small businesses.
(2) group-based models, where several entrepreneurs come together to apply for loans and other services as a group.

Our Take on the Subject

As a warning we will suggest that if given a choice between NBFC or Banking sector; then one must go for Banking sector as it is well organised and regulated as compared to NBFC which are still not being regulated properly and Sahara and Sharda scam in West Bengal are an eye opener that how NBFCs can take you for a ride. You must check the RBI guidelines to be followed while dealing with NBFC here.

About the Author

Author tracks financial segment and provides paid stock tips for intraday trading for Indian stock market and traders are able to capture profit by 11:30 AM every day.

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