Brett Simmons’ Post

Big change for NBFCs! Co-lending for personal loans might dip. RBI's risk weight tweak makes personal loans seem riskier.  This means more capital for NBFCs to cover defaults. New options?  Small NBFCs could turn to co-lending for: -SME loans: Fuel small businesses with banks' help. -Mortgage loans: Tap into the housing market without huge capital. -Green loans: Finance eco-friendly projects, be part of the solution! -Co-lending could benefit everyone. ✅ NBFCs manage risk, reach new markets. Banks gain NBFCs' expertise. What's your take? Will co-lending become the new normal? Let's chat in the comments!

The SARFAESI Act provides that banks can seize the property of a borrower without going to court except for agricultural land. SARFAESI Act, 2002 is applicable only in the cases of secured loans where banks can enforce underlying securities such as hypothecation, mortgage, pledge etc. An order from the court is not required unless the security is invalid or fraudulent. In the case of unsecured assets, the bank would have to go to court and file a civil case against the defaulters. Applicability Of SARFAESI Act, 2002 The Act deals with the following: Registration and regulation of Asset Reconstruction Companies (ARCs) by the Reserve Bank of India. Facilitating securitization of financial assets of banks and financial institutions with or without the benefit of underlying securities. Promotion of seamless transferability of financial assets by the ARC to acquire financial assets of banks and financial institutions through the issuance of debentures or bonds or any other security as a debenture. Entrusting the Asset Reconstruction Companies to raise funds by issue of security receipts to qualified buyers. Facilitating the reconstruction of financial assets which are acquired while exercising powers of enforcement of securities or change of management or other powers which are proposed to be conferred on the banks and financial institutions. Presentation of any securitization company or asset reconstruction company registered with the Reserve Bank of India as a public financial institution. Defining ‘security interest’ to be any type of security including mortgage and change on immovable properties given for due repayment of any financial assistance given by any bank or financial institution. Classification of the borrower’s account as a non-performing asset in accordance with the directions given or under guidelines issued by the Reserve Bank of India from time to time. The officers authorized will exercise the rights of a secured creditor in this behalf in accordance with the rules made by the Central Government. An appeal against the action of any bank or financial institution to the concerned Debts Recovery Tribunal and a second appeal to the Appellate Debts Recovery Tribunal. The Central Government may set up or cause to be set up a Central Registry for the purpose of registration of transactions relating to securitization, asset reconstruction and creation of the security interest.

Collateral hit: ARC growth may fall to 5-6% next fiscal due to less bad assets on sale  The cumulative ARC redemption rate has been on an increasing trajectory, supported by faster settlement/ restructuring due to the deterrent effect of the IBC, increased share of cash deals, and higher exposure to retail loans, says a report. #arc #assetrestructutring #redemptionrate #ibc https://lnkd.in/grm2UYV4

RBI restricts P2P platforms from offering early withdrawals, impacting cashflows! Lenders who invested on these platforms relying on liquidity will face disruptions as new guidelines mandate fund transfers solely through escrow accounts between the respective lenders and borrowers, prohibiting lender-to-lender transactions. Previously, many platforms provided liquidity by selling existing lenders' loans to other lenders on the platform No need to panic. While cashflows are affected, repayment defaults are unlikely. Interestingly RBI also want disclosure of lenders' losses on principal or interest . This transparency mirrors SEBI's practice of disclosing trading profits, helping investors understand real risks. #P2PLending #RBI #fintech Bhavin Patel https://lnkd.in/g3gVtZ5G

Some NBFCs growing aggressively without strong underwriting practices: RBI Governor https://lnkd.in/dcCacPRS Extremely important and timely statement of our Honourable Governor of RBI. Credit Underwriting being strong, is not a privilege but a responsibility to keep the sanctity of the loan portfolio. Especially, the above is important for those lending institutions who are on a very large growth trajectory. Without a strong and determined Credit Underwriting system, no lending institution can even dream to grow, as the pull of gravity of NPA's, would bring it down much faster, than it would have grown earlier.

Unfortunately the pressure on the banking industry continues. The combination of a meaningful concentration of commercial real estate loans underwritten during a time of significantly lower interest rates and the current higher rate environment has caused concern with both regulators and the rating agencies. This focus and related pressure will likely cause commercial bank underwriting standards for new and refinanced loans to further tighten. The silver lining is that the alternative financing market continues to be active. These private capital sources can provide the required funding for commercial real estate and middle market C&I loans when the bank appetite wanes. Reach out to me at tom.kessel@rainstarcapitalgroup.com to review your situation and explore the funding options available to you and your business or project.

As DeFi loans hit multi-year highs, the volume of high-risk loans is also surging. On Aave, the total volume of high-risk loans has reached $1 billion. These loans are secured against volatile collateral and are within 5% of the liquidation threshold, posing significant risks.

❓Fractional Reserve Banking...What is it ❓ ❓Money creation out of thin air❓ 🏦 The Banks, cornerstone of contemporary financial institutions, operates on the principle of managing deposited funds while simultaneously catalyzing economic growth through lending. That's FRB Process 💡 For simplicity : The depositor (You and Us — people) entrusts a sum such as $100 to the bank and initiates a sequence of financial transactions. A predetermined fraction of the deposited amount (often 10%) is designated as a Reserve and kept safely in the bank for withdrawal. The remaining $90 is leveraged into loans, and expanding the original deposit in the form of credit. 💲The Money Multiplier Effect:💰 The metamorphosis of Deposits into Loans is referred to as the Money Multiplier Effect (Controlled expansion of the money supply). The borrower — whether an individual or enterprise, utilizes the loaned funds to use. 🤔 Where will the borrower keep the loan funds or reintroduce them into the financial system, how ? 🏛️ Transactions through Banks only, right!? This is a self-repeating process as subsequent deposits become the foundation for new loans, hence fostering an illusion of money multiplication. One major Flaw of this system : ➡️ Maintaining Equilibrium, While the FRB system creates a dynamic element of Deposits-to-Loans-to-Deposits again, It is paramount that banks always have to keep an adequate supply of funds reserved to meet sudden withdrawal demands of depositors. 🚩🚩🚩 However, if a large enough number of depositors around the same time put in their withdrawal requests...the banks won't be having the required funds to fullfill them. And Banks will collapse. 💥🤯

Liquidator Profits on AAVE v2 👻 AAVE is a decentralized lending platform where users can collateralize assets to receive loans, with the loan-to-value (LTV) ratio determining the amount received. To maintain solvency, loans must remain overcollateralized, and if the collateral value drops, liquidation occurs. Liquidators can profit by paying off undercollateralized loans and receiving a portion of the collateral plus a bonus. This report by Pat Doyle and Noah Swerhun analyzes AAVE v2 liquidations, particularly for stablecoin loans collateralized by ETH, and reveals that liquidations offer a low-risk profit opportunity. The profitability is influenced by factors like gas fees and the size of the loans, with top liquidators earning substantial profits. Learn more about Aave in this recent Amberdata research: https://hubs.la/Q02KCnCc0

As champions of financial clarity, we at Onendf are enthused to support the RBI's latest initiative for enhanced transparency in lending practices. According to the new regulations, banks and other financial institutions are now mandated to secure explicit borrower consent before levying any fees not disclosed in the Key Facts Statement (KFS). This move promises to significantly reduce information asymmetry and fortify borrower confidence.    At OneNDF, we see this as another step towards empowering our clients, ensuring they make informed decisions with a full understanding of their financial commitments. Dive into the full details of how these changes might benefit you here.. https://lnkd.in/gU42gqvn #RBI #Loans #Borrowers #KFS #NBFCs #Banks #BankNews #KeyFactsStatement #FinancialProducts