Financial wealth is a crucial factor in realizing one’s dreams, whether for an individual or a nation’s economy. Funds play a pivotal role in this regard, with banks traditionally serving as the primary source of financing. However, they face substantial challenges in serving India’s extensive population, making it challenging to reach every corner of the nation. This is where Non-Banking Financial Companies (NBFCs) step in. In India, NBFCs stand as the second-most significant financial institutions, particularly in the context of loans and credit. They prove particularly valuable in regions with limited access to banking services.
What are NBFCs?
A non-banking financial company (NBFC) is a financial institution that offers various financial services without a full banking license. While NBFCs cannot accept demand deposits, they are authorized to provide services like loans, leases, investments, and insurance. In India, NBFCs play a significant role in the national economy, extending financial services to businesses and individuals who might encounter difficulties obtaining loans from traditional banks. Furthermore, they actively contribute to financial inclusion by granting loans to individuals residing in rural areas and those with unfavorable credit histories.
Categories of NBFCs in India
NBFCs are regulated by the Reserve Bank of India (RBI) in India. The RBI has classified NBFCs into different categories based on their activities. The main categories of NBFCs in India are:
- Asset finance companies (AFCs): These NBFCs provide loans for the purchase of assets such as vehicles, machinery, and equipment.
- Loan companies (LCs): These NBFCs provide loans to individuals and businesses for a variety of purposes, such as personal loans, business loans, and education loans.
- Investment companies (ICs): These NBFCs invest in securities such as stocks, bonds, and mutual funds.
- Housing finance companies (HFCs): These NBFCs provide loans for the purchase or construction of residential property.
- Microfinance institutions (MFIs): These NBFCs provide small loans to low-income borrowers.
- Infrastructure finance companies (IFCs): These NBFCs provide loans for infrastructure projects such as roads, bridges, and power plants.
- Factoring companies: These NBFCs provide short-term loans to businesses against the security of their receivables.
NBFC Market Size in India
NBFCs enjoy greater operational flexibility to take up a wider scale of activities, enter new geographies and sectors, and thus grow their operations.
In 2023, following a pandemic-induced decline, India’s non-banking financial companies (NBFCs) have exhibited resilience and innovation, effectively adapting during the COVID-19 crisis. The market share of NBFCs in India has steadily grown, with their Assets Under Management (AUM) reaching 18% of the overall credit in March 2019, up from 12% in March 2008. However, challenges in the past three years reduced their share to 16% in fiscal year 2022, with traditional banks making significant strides. Notably, the AUM of NBFCs surged from US$44.02 billion (Rs. 3.6 lakh crore) in March 2008 to nearly US$330.21 billion (Rs. 27 lakh crore) in March 2022, and this upward trend signals their critical role in facilitating credit delivery across the economy.
Top 10 NBFCs in India
1. Bajaj Finserv
- Management Head: Sanjiv Bajaj (Chairman and Managing Director)
- Customer Base: 60 Million
- Valuation: ₹2,34,545 crores
- HQ: Pune
- Services: Credit Card, Insurance, Investment, Vehicle Loan, Commercial Loan, Home Loan and Personal Loan
Bajaj Finserv was founded in 1987 as Bajaj Auto Finance. However, it was renamed Bajaj Finserv in 2007. The company has over 5,000 branches and touchpoints across India. Therefore, it has a customer base of over 10 million. Due to this, Bajaj Finserv is one of the leading financial services providers in India. It has been ranked as the 5th largest NBFC by asset size by the Reserve Bank of India. The company has been awarded the “Golden Peacock Award for Corporate Excellence” by the World Council for Corporate Governance.
2. Aditya Birla Capital
- Management Head: Vishakha Mulye (CEO)
- Customer base: 39 Million
- Valuation: Rs. 3,550 billion (USD 48 billion)
- HQ: Mumbai
- Services: Insurance, Investment, Asset Management, Loan Finance, and Real Estate Services.
Aditya Birla Capital, a prominent financial services provider in India, offers a wide range of products and services to meet customer needs across all life stages, all while remaining committed to delivering high-quality financial solutions. Serving as the holding company for the Aditya Birla Group’s financial services businesses, Aditya Birla Capital Limited (ABCL) operates as a universal financial solutions group, catering to the diverse needs of its customers throughout their life journeys. ABCL’s subsidiaries also maintain a strong presence in the areas of protection, investment, and financing solutions.
3. Muthoot Fincorp
- Management Head: Shaji Varghese (CEO)
- Customer Base: 15 Million
- Valuation: ₹ 47,816.40 crores
- HQ: Kochi
- Industries Served: Gold Loan, Insurance, Vehicle Loan, Business Loan, Home Loan, and Personal Loan.
Muthoot Finance, founded in 1939 by M.G. George Muthoot, is India’s largest gold loan company and ranks among the country’s largest non-banking financial companies (NBFCs). While its origins lie in specialized gold lending, the company has substantially diversified its product portfolio. Operating through a network of over 5,000 branches across India, Muthoot Finance is renowned for its efficient gold loan application process. It provides loans against various forms of gold assets, such as jewelry, coins, and bars, typically offering up to 80% of the assets’ appraised value. The company is also distinguished for its competitive and affordable interest rates.
4. Shriram Finance
- Management Head: Y S Chakravarti (MD & CEO)
- Customer Base: 10 Million
- Valuation: ₹ 70,941.61 crores
- HQ: Chennai
- Industries Served: Microfinance, Insurance, Personal Loan, Home Loan, Vehicle Loan, Business Loan.
Founded in 1979 as Shriram Transport Finance and now a subsidiary of the Shriram Group, Shriram Finance operates from a vast network of over 3,000 branches across India. Known for its efficient and straightforward loan process with interest rates typically lower than those offered by banks and other non-banking financial companies (NBFCs), the company has seen its customer base expand steadily at a CAGR of 10% over the past five years. This customer base is distributed across India, with the highest concentration found in the southern and western states.
5. L&T Finance Holdings
- Management Head: Dinanath Dubhashi (CEO)
- Customer Base: 10 Million
- Valuation: ₹ 31,746.04 crores
- HQ: Mumbai
- Industries Served: Credit Card, Insurance, Investment, Vehicle Loan, Business Loan, Home Loan and Personal Loan
L&T Finance Holdings, a subsidiary of Larsen & Toubro, one of India’s largest engineering and construction companies, is a leading non-banking financial company (NBFC) known for its reliability and trusted financial services. Committed to delivering high-quality financial solutions, the company was founded in 1994 and has established a widespread presence with over 2,000 branches and touchpoints across India. This extensive network has earned it the 10th position among NBFCs in asset size, as recognized by the Reserve Bank of India.
6. Mahindra & Mahindra Financial Services
- Management Head: Ramesh Iyer (Vice-Chairman & MD)
- Customer Base: 5 Million
- Valuation: ₹ 1,05,084 crores
- HQ: Mumbai
- Industries Served: Insurance, Personal Loan, Home Loan, Vehicle Loan, Business Loan.
Mahindra Finance, originally established in 1987 under the name Mahindra Tractor Finance, stands as a subsidiary of the Mahindra Group, one of India’s largest business conglomerates. With a vast network of more than 2,000 branches spanning across India, the company is steadfast in its commitment to delivering an exemplary customer experience while continuously adapting to evolving customer demands. Furthermore, Mahindra Finance has witnessed a noteworthy 10% Compound Annual Growth Rate (CAGR) in its customer base over the past five years. This customer base extends throughout India, with the greatest concentration residing in rural and semi-urban regions.
7. Mannapuram Finance
- Management Head: V.P. Nandakumar (MD & CEO)
- Customer Base: 5 Million
- Valuation: ₹ 12,438 crores
- HQ: Thrissur
- Industries Served: Gold Loan, Insurance, Commercial Vehicle Loan, Home Loan, and Personal Loan.
Established in 1992 by P.V. Nandakumar, Manappuram Finance began as a specialized gold loan company and has since evolved into one of India’s largest providers of gold-backed loans. Today, the company offers a diverse range of financial products and services, operating an extensive network of over 4,500 branches across India. Their primary focus remains on offering loans secured by gold jewelry, coins, and bars, typically extending up to 80% of the gold’s appraised value. Over the past five years, Manappuram Finance has enjoyed steady customer base growth, with a compound annual growth rate (CAGR) of 12%. This clientele is spread throughout India, with a significant presence in the southern states.
8. Motilal Oswal Financial Services
- Management Head: Navin Agarwal (Director)
- Customer Base: 2 Million
- Valuation: ₹ 1,34,183.60 crores
- HQ: Mumbai
- Industries Served: Insurance, Home Loan, Vehicle Loan, Business Loan, Investment Products, and Wealth Management.
Motilal Oswal Financial Services Limited (MOFSL) is an Indian financial services company that offers a wide range of financial products and services. Founded in 1987 by Motilal Oswal and Raamdeo Agrawal, the company operates from more than 550 branches across India. Over the past five years, its customer base has experienced a Compound Annual Growth Rate (CAGR) of 15%. It is worth noting, however, that the majority of the company’s customers are located in urban areas. Consequently, Motilal Oswal’s market capitalization has exhibited a CAGR of 18% during the same five-year period.
9. Cholamandalam Investment and Finance Company
- Management Head: Arun Kumar Chola (CEO)
- Customer Base: 2.74 Million
- Valuation: ₹ 1,14,795.62 crores
- HQ: Chennai
- Services: Vehicle finance, Home loans, Loans against property, SME loans, Secured Business Personal Loans (SBPL), Consumer & Small Enterprises loans (CSEL), and a variety of other financial services.
Cholamandalam was established in 1978 as a company specializing in equipment financing. It operates as a subsidiary of the Murugappa Group, which stands as one of India’s oldest and largest business conglomerates. With a network spanning 1,204 branches throughout India, Cholamandalam has witnessed a consistent annual growth rate of 11% in its customer base over the past five years. Simultaneously, the company has experienced a 15% annual growth rate in its market capitalization over the same period. Furthermore, Cholamandalam’s customer base is widely distributed across India, with the most significant concentration found in the southern states.
10. Poonawall Fincorp
- Management Head: Adar Poonawalla (Chairman)
- Customer Base: 1 Million
- Valuation: ₹ 30,909.90 crores
- HQ: Pune
- Industries Served: Credit Card, Insurance, Investment, Vehicle Loan, Business Loan, Home Loan, Loans Against Property, Loan Against Securities, Personal Loan, and Wealth Management.
Poonawalla Fincorp, established in 1978, is a subsidiary of the Poonawalla Group, one of India’s largest business conglomerates. With a customer base exceeding one million, the company operates through a network of over 200 branches across India. Over the last five years, the company’s customer base has experienced steady growth at a Compound Annual Growth Rate (CAGR) of 10%, while its market capitalization has similarly increased at a CAGR of 12%. Poonawalla Fincorp’s clientele spans the entirety of India, with the highest concentration residing in the western and southern states.
India currently boasts the world’s fastest-growing economy. Consequently, these financial institutions are poised to maintain their growth momentum. It’s worth noting that the list of top players in this sector may undergo periodic changes. For up-to-date information on the leading NBFCs in India, stay connected with Business APAC. We trust that this information has enriched your understanding.
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