to follow in the Indian Financial System

The new financial entities are being promoted by professionals with work experience in their domain of expertise. They have long years of experience with limited capital. One of the segments that is getting flooded is to serve customers at the bottom of the pyramid.

Affordable, MSME has become the new fad, fashion, and style statement. Is the market big. Definitely. But does it have its own challenges? yes.

Are they floating because there are some unfilled dreams that could not be executed as a professional but now, they dare to do so as owner entrepreneur is a question to be discussed.

This split and rise of new age entrepreneurs is giving rise to the need for easy access to capital and manpower. It is great to say there is space for everyone.

But the ground realities may be different. One of the biggest worries is the repeat of 2000 boom in housing sector where every bank and HFCs penetrated giving easy access to funds. Invariably this invites operational risk and the increase in NPAs.

The future is going to see more mergers and acquisitions. Some friendly and largely ugly. This will also see a change in small FIs playing a role within the larger eco-system of lending. Probably co-lending is setting the tone of the business environment.

Two types of institutions will see growth. One is the institutions having the strength of the balance sheet to raise capital to fuel their growth and other is the nimble footed organization with deep penetration full filling the last mile reach to the retail customers.

The loss of regulatory arbitrage and bank license on tap is completely changing the financial landscape. The former is making a difference than the latter.

Institutions would move into a stage of marrying their strengths rather than competing on multiple fronts. Again, co-lending is a format that is strongly getting pushed.

It may not be the best outcome, but it is the sign of things to unfold in years to come.

Technology is making a dent. Today even retail customer is finding funny to fill a physical form. APIs, automation, , ML, and analytics-based credit approval has changed the PL market, but it will be soon seen in the entire lending products.

Open Credit Enablement Network (OCEN) is going to be the real game changer provided it is implemented in true sense. Even with automation, hunt for trained manpower is not going to be easy.

The pace of growth of Indian economy and the need to penetrate in providing financial services is going to be tough. It is important for institutions to look at grooming talent and the question is who is going to pay for it?

The customer experience is not going to be all that great with the desire of small players struggling to source at a cost, and inability to hold customers for the entire tenure of the loan.

We may see increase in consumer protection cases.

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