NBFCs are offering a big contribution to reinforcing the expansion of the economy. At an equivalent time, FinTechs are improving the experience of banking by making it more personalized and intuitive. A growing number of NBFC license holders are collaborating. That collaboration is with all the FinTechs to strengthen the workflow of their Company and expand the customer base.
About 8900 companies are holding a legitimate certificate of NBFC registration out of which only around 950 are running their business activities and features a capital size of quite 40 crores. The remainder of the NBFCs are mere license holders and are only ready to meet the regulatory cap of two crore rupees. All the NBFC license holders are actively working with FinTechs through the use of cutting-edge technology to develop creative loan products, deliver quick loan disbursement, and many other user-friendly benefits.
Ensuring adequate market liquidity
Advancing creditors’ credit
Meet lending goals in priority sector sectors
Giving priority and other sectors a boost
Liquidity crisis at Dodge (Also known as credit crunch)
Expand and improve financial integration
Matching Invoices with Purchase Orders
Processing Purchase Orders
Processing Standard Pricing Information
Preparation and Processing of AR Aging Reports
Processing of Monthly AP Ledgers
Processing of Monthly Sales Tax
Company 1 (Fintech Company)
The online and offline marketing campaign is still being promoted by Fintech Company with leads. The Fund Manager is provided with a sufficient number of deposits and is empowered by Fintech Company. These funds are funded by the Fund Manager at NBFC which forms Inter Corporate Deposits.
Company 2 (Fund Manager)
The Fund is managed by a competent person with good legal and financial knowledge and who is a CA or a lawyer; basically, the instructions received from Fintech Company. Fees are paid by Fintech Company for assistance from CA or Attorney.
Company 3 (NBFC)
Tasks such as loan repayments and transcripts are performed by the RB-controlled NBFC. A list of lenders for various loan products was provided by Fintech Company and the risk assessment base, the price is released by the NBFC. The rest of the revenue is retained by the NBFC because the risk assessment services and loan control services are made by it and the remaining profits go to Fintech Company which is decided upon.
Fintech has streamlined the NBFC’s internal and external roles. It also helps to ensure the smooth running of non-banking financial companies. It also encourages NBFCs to revise their back-office-related practices, resulting in productivity growth.
Special and new product offerings launched
The Non-Banking Financial Companies are making revolutionary improvements to their new products through the assistance of Fintech’s latest technology-based instruments. The partnership between NBFCs and Fintech Players helps to launch special and on-trend products such as Payday Loans, POS Financing, Durable Consumer Loans, Invoice Financing, etc.
Using Digital Modes-Less and Modernized Paper
NBFCs become acquainted with the exceptional techniques after coming together on board along with a Fintech Company. Instead of the conventional, obsolete manual method, it dragoons NBFC into selecting the paper-less digital modes. Several importantly, digital onboarding and confirmation save the costs incurred on operations.
Step 1 : Sign the co-origination agreement
Sign the co-origination agreement between the two parties (NBFC and Fintech Company). An Indian Entity affiliated with the FinTech business model must be registered to begin the process of partnership between FinTech and NBFC. Signing the co-origination scheme agreement is mandatory for both the NBFC Business and the Fintech Company.
Step 2: Sign the Inter-Corporate Deposit Agreement with a Fund Manager
Until entering into the Partnership Agreement, both the FinTech Business and the NBFC will undergo consultations and negotiations. Fintech Company would enable the Fund Manager to sign (inter-corporate deposit agreements)
Step 3: Sign a platform service agreement
The NBFC incorporated in the collaboration is needed to sign a platform service agreement. That too for the repayment of technology services provided by the FinTech Company. NBFC is to open a separate Bank Account for lending purposes.
Step 4: Open Escrow Account
The NBFC steps forward and maintains an Escrow Account (a separate disbursement Escrow Account coupled with the intent of repayment). Open an ESCROW account for refund and repayment purposes.
Step 5 : Employ a Chartered Accountant for proper fund management
After opening an Escrow Bank Account, a very experienced expert shall be selected for the management of funds and operations of Bank Account. Appoint a highly trained and professional Chartered Accountant for the management and handling of Escrow Bank Account funds and services
Step 6 : Compliances like GST, TDS, CKYC, Credit Reporting
After the start of business, the Fintech Companies must completely see and make sure on regular compliance (CKYC, TDS, GST, Credit Reporting, and others).
Step 7 :Reconciliation with CIC Reporting
Monthly reconciliation and the monitoring of the CIC Reporting. A mandatory point to remember for NBFCs meeting NPA provisioning requirements of 45-90 days.
Identity proof-verification online including required documents such as the borrowers’ PAN Card, Aadhar Card.
Storing borrowers’ data for five years.
It is also important to capture live photos of the borrowers.
E- stamp duty on the execution of loan agreements should be paid.
Comply with KYC requirements as prescribed by India’s Reserve Bank (RBI).
NBFC also has to comply with tax laws, Corporations Act, and RBI Act regulations & regulations.
To determine the business risks, a highly qualified specialist should be named for surprise control and audit of the Fintech Company.
The Fintech Company can have any loan or guarantee, but it should be by a board resolution and can go up to 60 percent of its paid-up capital and 100 percent of its free reserves and security premium, whichever is greater.
The loan can be used for 100% of the paid-up capital, but this is an exception that only happens when it is accepted by members.
GST is imposed on the collection of loans as fees charged by the Fintech Firm. Fintech companies need to worry because the transaction fee involves GST.
Fintech Businesses must take cognizance of ECB guidelines in particular when debt or loan is raised in the form of foreign funds.
In this Model, Fintech company source leads and supply advanced tech-driven underwriting and risk assessment software. NBFC usually pays a commission to Fintech within the range of 1% to three of the Loan Amount.
in this model, Fintech company provides the required information and decision-making tools for quick loan processing by the NBFC. Fintech Companies are performing on the FLDG model Via a fanatical Escrow Account. FLDG Maybe Up to 70% and therefore the Remaining 30% Loan book financed by the NBFC from it’s fund. Fintech company shares about 24- 36% ROI with NBFC. Also, Fintech company covers 100% NPA & Expense.
First Loan Default Guarantee
The First Loan Default Guarantee (FLDG) is that the means to guard the lender’s interest in NBFC. Lenders invite collaterals so as to safeguard their advances made through Fintech Company.
What is NBFC Collaboration?
NBFC Collaboration is an exercise in which the financing and procurement of leads include active collaboration between NBFC and Fintech companies/banks.
How to do NBFC Collaboration?
NBFC Collaboration can be made easily online. But you will require an expert to process your application. Take consultation by giving a call on 8750008881
. Even you can visit the website Legalraasta.
What is the cost of the NBFC Collaboration?
NBFC Collaboration License cost usually starts from Rs.9,000 and goes high according to the service you choose. For extra major details visit our website Legalraasta or you can call us on 8750008881
What are the documents required in an NBFC Collaboration?
The most important documents required are phone number, mail id, and address proof of the applicant. Moreover, mention the for more details call us on 8750008881
What is the procedure to get NBFC Collaboration?
Legalraasta will give end to end help when it comes to NBFC Collaboration procedure, and it will solve all the queries related to this process in no time.
What are a FinTech company’s regulatory conditions that have accumulated foreign funds as debt?
If the FinTech Business has received international debt/loan assets, it should comply with the External Commercial Borrowings Guidelines (ECB).
What is the primary reason behind the NBFC collaboration?
In order to collect funds and source leads, the key reason behind NBFC collaboration.
Why is a different bank account opened by the NBFC?
To satisfy the loan requirements, the NBFC opens a new bank account
Who offers First Loan Default Guarantee and funds within the NBFC Collaboration Business Model?
At the initial stage of the NBFC Partnership Business Model, the Fintech Firm offers FLDG and funds.
What are the necessary technologies for a Fintech Company?
Loan Management System, Origination System, Collection System, Credit and Underwriting Software, IT Security, Income Check Mechanism, Job Profile Online Verification, and Privacy Laws are the technologies needed.