Many non-banking financial companies are diversifying their revenue sources by focusing on distributing insurance products to increase fee income. Lenders like Capri Global Capital, Grihum Housing Finance, and HomeFirst Finance have obtained approval from the Insurance Regulatory and Development Authority of India for a corporate agency license to distribute insurance products.
Similarly, Mahindra and Mahindra Financial Services plan to apply for a corporate agency license for life, general, and health insurance. The expected net fee income from these new segments is estimated to be around 0.1-0.2% of the company’s average assets over the next three years.
Capri Global Capital’s managing director, Rajesh Sharma, believes that collaborating with insurance partners and recent changes in insurance guidelines have motivated NBFCs to pursue corporate agency licenses. Capri Global plans to leverage its branch network to cross-sell insurance products and expects to generate considerable insurance income. Many lenders are focusing on providing tailored insurance products to customers to diversify their income sources and mitigate credit risks.
Experts anticipate more entities will seek corporate agency licenses to provide a wider range of products. Smaller NBFCs may need to reconsider their income sources as competition and rising fund costs pose challenges.
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