NBFC Collaboration

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What is NBFC Collaboration?

NBFCs are offering a significant contribution to enhance the growth of the economy. At the same time, FinTechs are improving the experience of banking by making it more personalized and intuitive. An increasing number of NBFC license holders are collaborating with FinTechs to enhance the workflow of their Company and expand the customer base. About 8900 companies are holding a valid certificate of NBFC registration out of which only around 950 are running their business activities and has a capital size of more than 40 crores. Rest of the NBFCs are mere license holders and are only able to meet the regulatory cap of 2 crore rupees. NBFC license holders are actively collaborating with FinTechs to create innovative loan products, offer quick disbursement of loan and many other user-friendly benefits by using cutting-edge technology.

Process of Collaboration of NBFC with FinTech Company

  • To begin with the process of collaboration of FinTech and NBFC, there must be an Indian Entity registered with FinTech business model.
  • Next, the FinTech Company will have to finalize the NBFC Company that holds a valid Certificate of Registrations (CoR).
  • Both the FinTech Company and NBFC undergo discussions and negotiations before entering into the Co-operation Agreement.
  • The NBFC involved in the collaboration is required to sign a platform service agreement for the repayment of technology services provided by the FinTech Company.
  • Next step for NBFC is to open a seperate Bank Account for loaning purpose.
  • After opening an Escrow Bank Account, a Highly skilled professional shall be appointed for the management of funds and operations of Bank Account.
  • Once the business has started the FinTech Company should keep a close watch over compliances (GST, TDS, CKYC, Credit Reporting etc.).

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Compliance Requirements of FinTech Company

  • A FinTech Company can offer any loan or any guarantee up to 60% of its paid-up capital or up to 100% of its free reserves and security premium after taking approval of the Board of directors of the Company.
  • Under certain exceptions, FinTech Company can give loan up to 100% of its paid-up capital after approval from taking approval of members.
  • A FinTech Company has to pay GST on Loan processing fees.
  • In case the FinTech company has raised foreign fund as debt/Loan, it should comply with the guidelines of External Commercial Borrowings (ECB).

Compliance Requirements for NBFC

  • Online verification of Identity proof including appropriate documents like PAN Card, Aadhar Card of the borrowers.
  • Store data of the borrowers for five years.
  • Live picture of the borrowers should also be captured.
  • E- stamp duty should be paid on the execution of Loan agreements.
  • Comply with CKYC norms as prescribed by the Reserve Bank of India (RBI).
  • NBFC also have to comply with rules & regulations prescribed under taxation laws, Companies Act and RBI Act.
  • A highly skilled professional should be appointed for surprise check and Audit of the Fintech Company to assess the business risks.

Basic Technology Required with FinTech Company

  • A Mobile app as per the Indian Market.
  • A robust system of Loan origination, Loan management and Loan collection.
  • The FinTech Company shall own a Credit Underwriting Software.
  • Cyber Security Compliances.
  • The Loan app developed should be able to integrate various APIs and should not be limited to Aadhaar, PAN, Driver license.
  • Live profile verification of Borrowers should be there.
  • The face of the borrower must match with the ID submitted online.
  • Online Verification of the employment profile of the Borrower.
  • The FinTech Company should follow the privacy norms as per the Law of India.
  • Server location verification by the professionals.
  • IT audit intervals.

Different Models of NBFC - FinTech Collaboration

Before collaborating with a FinTech Company, NBFC should check the background of the Company and necessary due diligence should be conducted. If everything is found satisfactory, NBFC collaborates with FinTech Company and opt one of the models discussed below

Lead-Based Model (Only Bank Model)

In this model, the FinTech Company source leads and provides a technologically advanced underwriting and risk assessment software to NBFCs. Usually, NBFC pays a commission to the FinTech as per market price.

Co-Lending Model

In this model, a FinTech firm comes together with NBFC to disburse loans. This collaboration of FinTech firm and NBFC allows FinTech firms to source clients, perform credit appraisals etc. FinTech firms provide services like risk assessment to NBFCs and help them expand their digital reach at mass level.

Only FinTech Model

This is a FinTech led model where the FinTech company works as a lending company by entering into a FLDG agreement with the NBFC.

Benefits of NBFC-FinTech Collaboration

NBFCs are playing a pivotal role in fulfilling the diverse financial needs of businesses and individuals across the country. NBFCs are serving as an alternative to the traditional banking system by offering quick, innovative and methods of lending money by using advanced technology. New-age NBFCs are embracing the technological advancements and collaborating with FinTech Companies to ease borrowing for customers and eventually increase their customer base.

Key Benefits of NBFC-FinTech Collaboration

  • Technology-driven business model of NBFC reduces dependency on manual tasks.
  • Use of technological advancements like Data Analytics, Artificial Intelligence (AI), Big Data, powers NBFCs with robust collections of payments and monitoring decisions.
  • Tools like eligibility calculators and mobile applications (Android/iOS/Window) help customers with managing debt and providing the best options to clear loans.
  • Deployment of technology in functioning of NBFCs has transformed trade finance into digital financing and has lowered the turnaround times (TATs).

NBFCs have outperformed Banks over the years in the Mortgage industry by infusing technology in their credit lending process. An increasing number of NBFCs are collaborating with FinTech Companies and eventually disrupting the traditional banking system. Conventional lenders usually take much longer time in processing loan application as compared to technology-driven NBFCs. The collaboration of NBFCs with FinTech companies is reducing the dependency on manual tasks and create a more refined experience of financing.

Clearly, NBFCs are embracing cutting-edge technology which is being offered by FinTech Companies. FintechAsia is focused on simplifying the NBFC-FinTech collaboration process for our clients and offer dedicated assistance to navigate through the compliances involved in the Collaboration process.

Why Choose Us

  • Comprehensive NBFC Registration Process
  • Technology-driven Business Model
  • Experienced Team of Legal and Financial Advisors
  • 24 x 7 Customer Support Service

Frequently Asked Questions

NBFC license holders are actively collaborating with FinTechs to create innovative loan products, offer quick disbursement of loan and many other user-friendly benefits by using cutting-edge technology.
NBFC collaborates with FinTech Company and opts one of the following models:

• Lead-Based model

• Co-lending Model

• Only FinTech Model

This is a FinTech led model where the FinTech company works as a lending company by entering into an FLDG agreement with the NBFC.
In case the FinTech Company has raised foreign fund as debt/Loan, it should comply with the guidelines of External Commercial Borrowings (ECB).

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What Our Client Is Saying

Wuhan Ching

Wuhan Ching

China

Right from NBFC consultation to Auditing Services, Fintechasia is a one stop shop for all your professional needs. They were very courteous and professional in their approach. We would definitely recommend their service to anyone seeking professional help

Tobby Carioca

Tobby Carioca

Malaysia

Fintechasia has provided me exceptional service when I consulted them for my NBFC business. From initial consultation to registering my NBFC business they were proficient and expert in their advice. I would highly recommend them for NBFC services.

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