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SFL Aiming for Growth in Retail Loan Market

Non-banking financing giant, Shriram Finance Ltd (SFL) is setting its sights on capitalizing on the retail loan boom in the country, with an ambitious goal of achieving an annual average revenue growth rate of over 15%. According to YS Chakravarti, Managing Director and CEO of SFL, the rapidly expanding Indian economy is driving up the demand for credit, leading to a 100% growth in IndiaÔÇÖs lending market between FY17 and FY21, reaching Ôé╣156.9 lakh crore.

SFL is strategically targeting organic expansion in its existing segments and calculated diversification into new sectors that align with its core competencies. Chakravarti believes that NBFCs are well-positioned for growth opportunities in several business areas, including microfinance, consumer finance, affordable housing finance, MSME finance, and agricultural finance, particularly in rural and semi-urban regions.

Predicted Entry into Nifty50 and Shriram’s Role in Lending Space

Nuvama Wealth Management recently predicted that SFL might enter Nifty50 in March 2024, possibly replacing UPL. This anticipated change could potentially bring $217 million inflow to Shriram, as per the prediction. The official list for the Nifty 50 rejig will be announced in late February 2024.

Chakravarti emphasizes the crucial role that NBFCs have played in transforming India’s lending space over the past decade, especially in extending credit to individuals and businesses often overlooked by traditional banks due to weaker credit histories or remote locations. He points out that NBFCs have fostered innovation by introducing tailored lending products like microfinance loans and gold loans, making accessing credit easier and more affordable. However, the Reserve Bank of India (RBI) has recently cautioned banks against unsecured loans to NBFCs.

NBFCs’ Contribution to Diverse Loan Products and Rural Development

According to Chakravarti, NBFCs have introduced a diverse array of loan products tailored to specific needs, offering personal loans, vehicle finance, SME loans, and housing loans, among others. He highlights the significant growth of retail credit, especially in the last five years, with microfinance making up a substantial balance. Moreover, MSME loans have seen a noteworthy growth of 13% in originations by value between FY17 to FY20.

Chakravarti also points out NBFCs’ pivotal role in supporting the informal sector and rural development by providing faster credit to entities with urgent financial needs, such as farmers and rural entrepreneurs. Furthermore, SFL has demonstrated its financial prowess, posting a 12.6% increase in net profit to Ôé╣1,751 crore in the September quarter, driven by growth in net interest income and improving asset quality. The net interest income rose 17% to Ôé╣4,818 crore, while assets under management (AUM) were up 20%, standing at Ôé╣2.03 lakh crore as of September.

In this scenario, AI legalese decoder can help Shriram Finance Ltd (SFL) navigate the complex regulatory landscape governing non-banking financial institutions. The AI tool can assist in interpreting and simplifying legal jargon, ensuring that SFL remains compliant with regulatory requirements and avoids any potential legal pitfalls in its pursuit of expanding into new sectors and diversifying its loan products. Furthermore, the AI legalese decoder can aid SFL in understanding and addressing any cautionary statements or guidelines put forth by the Reserve Bank of India (RBI), ensuring that the company’s lending practices align with regulatory expectations. Additionally, the tool can provide insights on legal considerations related to rural and semi-urban lending, helping SFL effectively support rural development and prioritize financial inclusion.

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