30 Indian Minds Leading the AI Revolution

The Cloud Can Fundamentally Take Away The Pain Of Managing NBFCs IT Infrastructure

As India battled two waves of the COVID-19 pandemic, there was one industry that rose to the challenge of mitigating the financial and economic fallout stemming from job losses

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Published: Dec 22, 2021 04:26:10 PM IST

The 9500-strong non-banking financial company (NBFC) has assumed a systemic importance in India’s financial sector due to their links to banking, capital markets and shadow banking. The Reserve Bank of India’s latest bulletin showed the industry’s credit to India’s economic output or Gross Domestic Product (GDP) ratio increased to 12.2 percent in 2018-19 from 8.6 percent in 2012-13. It slightly moderated to 11.6 percent in 2019-20 in the wake of the pandemic.

“NBFCs continued to disburse credit despite disruptions caused by the pandemic, albeit at a slower pace,” with retail benefitting from the incremental credit by the sector, the central bank said. This was “aided by their low GNPA (gross non-performing assets) ratios and the ability of NBFCs to adapt to customer preferences,” the RBI added.

That trial by fire has led to the marrying of on-the-ground expertise with cutting edge machine learning and automation, opined the panelists speaking at the NBFC roundtable of the The Next Wave of Cloud Innovation, a series of industry-focused roundtable discussions organized by Forbes India in association with Google Cloud.

“For us, it is really about experimenting a lot, ” said Suchit Mishra, CIO, Dhani Loan & Services Ltd. “India is a very diverse market and there are so many customers that we need to support,” he added. Using cloud technology helps the lender of personal loans and credit to small and medium businesses conduct experiments faster while being able to learn from it simultaneously, Mishra added. Working on the cloud makes the firm “much faster, more agile, more nimble, to respond to our customers needs in a very expedient manner,” he said.

Belstar Microfinance Ltd.’s focus on the underbanked, especially women’s self-help groups, especially in the rural parts of India means mostly relying on innovative digital solutions,

the firm’s chief technology officer Dhanasekaran Sivaraj said. These take the form of mobile applications given to field staff who can then assess applications by checking real-time data related to credit-worthiness in the cloud, he added. “This helps us take more informed decisions to understand (the needs of) people and offer better financial services and products,” Sivaraj added.

To cater to those rapidly evolving demands, Google Cloud has put in place state-of-the-art capabilities to offer Indian NBFCs scale as well as innovation on the go, pointed out Rohit Verma, head of Industry, financial services at Google. NBFCs not only need to focus on data but also cybersecurity as well as data science, he added.

“Cloud-based systems can fundamentally take away the pain of managing and the complexity of managing IT infrastructure for NBFC organizations,” Rohit said. “In doing so we also deliver it at scale and with full reliability.”

“Google Cloud has the capability to provide auto scaling and auto healing capabilities.Now what it means to the end user is that if the workloads go up, our machines can scale seamlessly,” And when the workloads go down, it scales down seamlessly, thereby reducing costs,” he added. “And in doing all of this if at any point of time a virtual machine goes down, it auto heals itself by creating a new machine and takes over the work of the machine that has gone down.”

For example on the data sciences aspect, Rohit explained that traditionally building a model would take months. “But using a lot of the advances in artificial intelligence, you can go from idea to implementation of the model for business purposes in a matter of days,” as automated machine learning capabilities give a better and more efficient model compared to a human iterating through multiple search results and then coming to the best fit, he added.

“The Cloud kind of isolates the end user from the underlying complexity, whether it's making the machine available 24/7, whether it's making the whole process much faster, the business user does not have to worry about the complexity, the engineering complexity that's under the hood,” said Rohit. “All they have to worry about is making sure that they come in and get about doing the business and let the cloud providers take care of scaling or fixing issues and really doing the heavy engineering under the hood to make life easier for the end user.”

Sundar K, co-founder and chief technology officer, DeepQuanty Artificial Intelligence Labs agreed.

“You take any bank, even a loan disbursement process would have hundreds of sub-business processes, Sundar K said. “Majority of them are getting automated, but then there are these small small processes that need to get automated,” he added.

“So if you break down the process for any NBFC, or any banking institution, I still see a lot of scope for automation through AI because of the two reasons--the science and research behind AI, evolving our databases, and then the cloud providers,” Sundar K said.

Compared to FinTechs, NBFCs can also hold their own when it comes to leveraging AI and automation given their deep expertise in lending, opined Google Cloud’s Rohit Verma.

“There is a large amount of expertise in terms of credit evaluation, credit underwriting and entire loan management that NBFCs bring to the table,” Rohit said. “This is again an area where technology can help NBFCs enhance their distribution,” he added. For example, developing a good Application Programming Interface (API) platform and publishing them could help NBFCs partner with FinTechs and expand their reach to the furthest corners of the country even though your physical presence may not exist, Verma said.

It is then an opportune time for the next wave of Cloud Innovation in India’s NBFC sector.

“The Non-Banking Financial Companies (NBFC) sector in India has traversed highs and lows to reach where it is today,” to quote the Reserve Bank of India. “Their scale of operations and diversity in financial intermediation are testimony to their adaptability and agility in transforming their business models, gauging needs of a growing economy and the evolving regulatory milieu,” it added.

Even as they facilitate financial inclusion by providing credit to unbanked sections of the population, “NBFCs complement banks in the credit intermediation process by offering diversified, tailor-made financial products through innovative service delivery mechanisms,” the one of the financial sector’s most important regulators said.

NBFCs are playing a pivotal role in the financial inclusion of the next billion users. And a digital-first approach will prove useful in enabling financial services to parts of India that are still deprived of basic financial facilities.

As M. K. Gandhi, the father of the nation, said at the beginning of 20th century, "the soul of India lives in its villages." Bringing them into the financial fold now rests in the hands of NBFCs evolving to their next logical transformation.

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