Online NBFC Collaboration Procedure in India

1. SWAARIT ADVISORS INTERNATIONAL NBFC Collaboration Presented by SwaritAdvisors

2. What is NBFC Collaboration? The word collaboration refers to the synergy of two or more entities to bring about the combined results. It is quite a new term in the lending segment but is gaining popularity rapidly. The constant growth in the fintech industry worldwide is giving some realistic goals to the NBFCs to merge themselves with their technology counterparts. This is what led to the emergence of the concept of NBFC collaboration.

3. With around 9000 licensed NBFC in India, less than 1000 of them are financially sufficient. Rest are in the continuous efforts of raising funds. For the new cadre of NBFCs with diversified business plan, they are engaged in the development of innovative products and creating a niche market for themselves serving the unorganized segment. Facilitating the planning and execution of the tailored products requires time and investment. It is here the concept of collaboration is originated wherein the strategic partnerships with evolving Fintech segment allows NBFCs to lower the costs and increase the customer base, thereby reducing the customer acquisition costs and de-risking the loan book, servicing a wider part of the economy.

4. Swarit Advisors enables the NBFCs and Fintech companies to come together for this synergy by providing end to end assistance in NBFC collaboration focused to go live within a month. SWARIT ADVISORS

5. Pros and Cons of ADVANTAGES Fintech collaboration 1 3 Rapid Growth owing to fast customer acquisition with limited resources; Fulfills the requirement of lacking in- house talent and experience; 2 4 Technological advancement; Quick implementation and go live procedures.

6. DISADVANTAGES DIFFICULTY IN FINDING A SUITABLE SYNERGY PARTNER Lower return on investment DATA SECURITY THREAT AND PRIVACY ISSUES; Difficulty in cultural integration; RARE EXCLUSIVITY OF ARRANGEMENTS. Limitation over brand recognition.

7. DUE DILIGENCE FOR NBFC COLLABORATION FIRST LOAN DEFAULT GUARANTEE LEAD BASED MODEL CO LENDING MODEL Lead Based Model is a model where the leads are sourced for which NBFC is required to pay commission in the range of 1-3% of loan amount. FLDG model through Escrow account is the method adopted by Fintech companies where 30% loan book is financed by NBFC from its fund and the remaining 70% is financed by FLDG. First Loan Default Guarantee is the means through which the lender’s interest is protected in NBFC.

8. NBFC COLLABORATION BUSINESS MODEL & ITS FLOW FLDG & FUND Fintech Company is a funder which will provide FLDG & Fund. FUND MANAGER RETAIL LENDING The fund is collected by Fund Manager Retail Lending is carried out by NBFC and is incorporated in NBFC. and revenue share is decided with Fintech company.

9. COMPANY 1 (FINTECH COMPANY) Online as well as offline marketing campaign is deployed by Fintech company for the leads. Fund Manager is being provided with adequate amount of deposits and the enabler of it is Fintech company. The funds are infused by Fund Manager in NBFC which forms Inter Corporate Deposits. COMPANY 2 (FUND MANAGER) A fund is managed by a competent person who has good knowledge of law as well as finance and is CA or Lawyer; basis the instructions received from Fintech company. The fee is paid by Fintech company to avail the services of CA or Lawyer.

10. COMPANY 3 (NBFC) The activities like loan disbursement as well as underwriting are carried out by NBFC which is governed by RBI. The list of borrowers of various loan products is shared by Fintech company and the basis of risk assessment, the amount is disbursed by NBFC. Some percentage of revenue is kept by NBFC since risk assessment services as well as loan management services are done by it whereas the remaining profit goes to Fintech company which was decided.

11. BASIC TECHNOLOGY REQUIREMENTS OF FINTECH COMPANY Indian market needs Fintech company to be mobile app ready Loan Management system, Collection system as well as Loan Origination system must be in its place Fintech company must own Credit and underwriting software Fintech company must know IT security so that breach of borrower’s information is protected

12. FINTECH COMPANY AND ITS COMPLIANCE REQUIREMENT LOAN OR GUARANTEE 100% OF PAID UP CAPITAL GST ECB GUIDELINES GST is levied on Loan processing as fees which is borne by Fintech company. Fintech company need to worry as processing fee comprise GST Any loan or guarantee can be given by Fintech company but it should be through board resolution and can go maximum up to 60% of its paid-up capital and 100% of its free reserves and security premium, whichever is more. ECB guidelines must be taken into cognizance by Fintech company especially when debt or loan is raised in form of foreign fund The loan can be availed of 100% of Paid up capital but this is an exception and is applicable only when members approve it

13. OUR PURPOSE ADOPTING TECHNOLOGICAL INNOVATIONS For any concerns related to NBFC collaboration model/ tie-ups with NBFC, contact us at Swarit Advisors. We are happy to serve you and solve your concerns related to NBFC collaboration model/ tie-ups with NBFC.

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