The rise of NBFCs
Non-banking finance companies (NBFCs) have recently been gaining a place of importance in the business loan ecosystem of India. According to a report from Boston Consulting Group, NBFCs have increased their share in the total number of loans disbursed, from 21% to 44% between 2014 and 2017.
The lion’s share of these loans goes to micro, small, and medium-sized enterprises (MSMEs). This is because of the relaxed lending norms from NBFCs – loans usually have a short disbursal time, they do not require collateral in some cases, and the amount disbursed can be as high as Rs. 30 lakhs.
Hence MSMEs, which traditionally have been an ignored and impoverished group of businesses, benefit greatly from loans from NBFCs.
The need for smooth loan disbursement
The rate of loan disbursements by NBFCs, however, has slowed for the first time in a decade recently, with some rates reducing by as much as 21%. Due to this, NBFCs have resorted to borrowing from major banks to cut their losses.
Additionally, the physical payment of franking charges is an added burden that decreases the loan disbursal rate.
With the prevailing situation, any improvement to the process of loan disbursement would be welcome to both NBFCs and MSMEs.
Luckily, there are innovative ways to make the loan disbursement system more seamless and thus improve the rates and ease with which loans are disbursed. One of these ways involves digital stamping, e-stamping, and online payment of franking costs.
An end-to-end digital stamping solution
SignDesk’s digital stamping and e-Stamping product – stamp.it, can be integrated smoothly into any NBFCs loan disbursal process, to make the entire loan disbursal seamless and end-to-end. SignDesk does this by making use of cutting-edge digital stamping technology. The method for this follows.
- Once the NBFC in question uses SignDesk’s onboarding solution, scan.it, to verify the customer that they’re providing a loan to, a sanction letter is generated with the customer’s details and sent to the customer for esigning.
- Upon signing with our eSign product, ink.it, the supporting documents and KYC information required to complete the loan agreement is either uploaded or auto-filled by SignDesk
- Now, our digital stamping product, stamp.it uses an API to pay online stamp duty, referred to as e-stamping, and a Digitally Stamped Loan Agreement is generated.
- The loan agreement and stamp paper are merged into a single document, which is legally enforceable by electronic signature.
- After the customer and NBFC electronically sign the agreement, which is duly electronically stamped, the signed document will be pushed to the bank, a copy will be sent to the customer, and the agreement will be electronically executed.
This process is extremely flexible and can be integrated with SignDesk’s eMandate workflow as well, to enable recurring payments on the loan by the customer.
Additionally, the Information Utilities (IU) process can be initiated in parallel with the eMandate to ensure that any loan default details are shared with other NBFCs as a preventive measure.
An Information Utility is a body formed to investigate insolvency and debt recovery. The main function of an IU is to keep track of company lending and debt so that all the stakeholders involved can make decisions based on the same information. Currently, the only authorized IU in India is the National E-Governance Services Limited (NeSL).
Hence, SignDesk’s digital stamping solution and e Stamping solution permits the loan disbursement process to be truly end-to-end. and also allows the online payment of franking charges. This will undoubtedly assist NBFCs and, in turn, help them assist MSMEs.
Digital stamping additionally reduces the turnaround time for loan documentation, allowing NBFCs to streamline and increase the rate at which loans are disbursed. Digital stamping also allows the online payment of franking charges.
Curious about our digital stamping and eStamping product stamp.it? Try it now and see how digital stamping can help you streamline the loan disbursement process.