Bajaj Finance may breathe a sigh of relief, as Jio Financial Services Ltd, considered by market participants as a direct rival to the Pune-based non-banking finance company (NBFC), will first focus on device-as-a-service (DaaS) and supply chain financing. The much-discussed consumer durables finance and unsecured loans will also be increased, although at a later time.
Because it is not something that giant NBFCs or banks are focused on, the company's DaaS strategy for consumer devices (AirFiber, phone, laptop) is projected to generate an entirely new industry. "There is a lower risk due to asset ownership," the company noted in an investment presentation.
In today's corporate world, firms are increasingly turning to DaaS and computer leasing solutions to retain a lean fixed-cost structure. This move not only improves the overall competitiveness of firms, but it also increases productivity. These leasing arrangements are expected to open up new markets for lenders. Furthermore, such models efficiently shift the company's weight of equipment upkeep, prospective upgrades, and eventual disposal costs to the service provider.
Jio Financial Services is entering DaaS as a financing model for corporates in India, following the unprecedented success of Bajaj Finance's revolutionary consumer durable finance model, which entered into small-ticket loans that were frequently disregarded by banks and NBFCs.
This could be Jio's unique selling point in a crowded market for finance options. The organization is also exploring methods to assist suppliers with their day-to-day financial requirements.
In the MSME loans category, the company will lend money to distributors and suppliers to cover their regular expenses. They are concentrating on small enterprises, particularly those that are forced to use pricey informal channels for minor loans.
"JFS has been envisioned to address a significant gap in the financial services requirements of a substantial segment of the Indian economy, particularly in the informal and underserved sectors across rural, semi-urban, and urban areas," Mukesh Ambani told investors just a few months ago.
Ambani highlighted the necessity of creative digital-first solutions and digital finance as key differentiators. Ambani's Jio Financial Services, called the 'fourth engine' after oil, telecom, and retail, wants to capitalize on its established consumer-facing retail and telecom businesses.
Given current market and regulatory trends, the corporation has stated that there is a greater emphasis on secured lending. This is perhaps why Jio prioritizes secured items above consumer durables and unsecured loans.
With the RBI boosting the risk weights on such loans, the unsecured market is already heating up. "Home loans and consumer durable and unsecured loans are in the pipeline," the corporation said.
