Shachindra Nath Proposes New NBFC Category for Micro, Small, and Medium Enterprises
U Gro Capital’s managing director, Shachindra Nath, advocates for the establishment of a distinct category of non-banking financial companies (NBFCs) dedicated to serving micro, small, and medium enterprises (MSMEs). Nath, speaking to Mint, suggests the creation of an NBFC-MSME category, similar to NBFC-MFI and HFC (housing finance companies).
Impact of RBI Measures and U Gro Capital’s Partnership with Laghu Udyog Bharati
Nath highlights the recent move by the Reserve Bank of India (RBI) to increase the risk weight on consumer loans, explaining that it will elevate borrowing costs for NBFCs. However, he emphasizes that the measure will not significantly affect NBFCs operating in the microfinance and housing finance sectors. Despite refraining from revealing specific details, Nath confirms that this modification will result in increased borrowing costs from banks.
In an effort to empower MSMEs with information about government schemes and digital credit, U Gro Capital has collaborated with Laghu Udyog Bharati, an organization committed to supporting micro-enterprises. Om Prakash Gupta, the All India General Secretary of Laghu Udyog Bharati, reveals during a press conference that a research report indicates self-financing by 28% of MSMEs, with 12% resorting to informal channels for financing. Only 10% of MSMEs secure financing from formal institutions such as banks and NBFCs.
Gupta underscores the significance of raising awareness about credit, believing that it will be a game-changer for small businesses in India. U Gro and Laghu Udyog Bharati plan to organize awareness programs in 100-150 locations across India over the next few years.
U Gro Capital’s Growth Plans and Market Share Targets
Shachindra Nath asserts that large NBFCs have a limited exposure of just 12-15% in terms of lending to MSMEs. U Gro Capital has already built a loan book of ₹8,000 crore and has provided financial assistance to approximately 90,000 MSMEs. In the coming three years, the organization aims to capture 1% of the market share in MSME credit, which currently amounts to about ₹22 lakh crore. To achieve this goal, U Gro Capital plans to build a loan book of ₹25,000 crore and serve a customer base exceeding 10 lakh MSMEs.
U Gro Capital’s Co-lending Model and Recent Funding Initiatives
U Gro Capital operates on a co-lending model, collaborating with seven public sector banks and four private sector banks. Under this arrangement, the NBFC finances 20% of the loan amount, while traditional banks finance the remaining 80%.
Earlier this year, the Delhi-based NBFC raised nearly ₹340 crore in equity funding led by IFU (Investeringsfonden for Udviklingslande) through its Danish Sustainable Development Goals Investment Fund. In 2018, Shachindra Nath acquired the listed NBFC ‘Chokhani Securities Limited,’ subsequently renaming it U Gro Capital. During the acquisition, the organization secured funding of over ₹900 crore from NewQuest, PAG, ADV Capital, Sameena Capital, and other domestic family offices and public market investors.
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