1.1 Own-book NBFC lending

This is the model where the lending business holds an RBI NBFC registration and lends from its own balance sheet. All economics, all risk, all regulatory obligations, and all upside live in one entity.

Money flow

1. NBFC raises capital — equity, NCDs, term loans from banks, securitisation, co-origination lines, working-capital facilities.
2. NBFC sanctions and disburses to the borrower directly from its current account or a designated payout account.
3. Borrower repays into an NBFC-owned collection account via NACH / eNACH / UPI AutoPay / direct transfer.
4. Repayments flow into NBFC’s books — principal reduces the receivable, interest flows to P&L.
5. Surplus cash either funds new disbursements, services NBFC’s own debt, or distributes to shareholders.

There is no external risk-sharing party in this base model. Variations layer co-lending or DLG on top.

Risk owner

The NBFC carries 100 percent of the credit risk. Every NPA, every write-off, every recovery cost lands on the NBFC’s P&L. Provisioning, capital adequacy, leverage limits, and ALM are the NBFC’s obligation.

Borrower relationship

The NBFC is the regulated lender of record. The loan agreement is between the borrower and the NBFC. Every borrower-facing communication, every Key Fact Statement (KFS), every grievance, every recovery action carries the NBFC’s name and the NBFC’s grievance officer contact.

If the NBFC uses a Lending Service Provider (LSP), DSA, or CA partner for origination, the borrower disclosure obligations of the RBI Digital Lending Guidelines still apply — the borrower must know the lender is the NBFC, not the LSP.

Underwriting owner

The NBFC owns policy. The NBFC’s credit committee approves the policy. The NBFC’s chief risk officer signs off deviations. Even when an LSP runs the application UI, the sanctioning decision must be the NBFC’s, per the Digital Lending Guidelines (Paragraph on flow of funds and credit decisions must rest with the regulated entity).

Collections owner

The NBFC owns collections — soft, hard, and legal. Field agents and tele-callers may be employees or outsourced under the RBI Master Direction on Outsourcing of Financial Services. Recovery-agent conduct (recording calls, time-of-day restrictions, no harassment) is the NBFC’s compliance obligation regardless of whether the agent is in-house or outsourced.

Loan booking and repayments

• Loan sits on the NBFC’s balance sheet as Loans and advances.
• Repayments are received into NBFC-owned bank accounts, usually one or more dedicated collection accounts mapped to virtual UPI handles and NACH presentations.
• Daily NACH presentation files are generated and submitted to the sponsor bank; bounce files come back next day.
• Reconciliation is straightforward — the receiving bank account is the same entity as the lender, so there is no inter-entity settlement.

Fees

• Processing / origination fee — collected up-front, typically 1.0% to 3.0% of sanctioned amount, plus GST.
• Documentation / stamping recovery — pass-through or fixed.
• Penal charges — must comply with RBI Fair Lending Practice – Penal Charges in Loan Accounts, DOR.MCS.REC.28/01.01.001/2023-24, dated 18 August 2023. Penal charges are separate from interest and must be reasonable, non-discriminatory, and disclosed.
• Foreclosure / prepayment — for floating-rate MSME loans the RBI bar on foreclosure charges applies (see RBI circular on foreclosure charges from 2014 and subsequent guidance). Effectively zero for working-capital lines with reset clauses.
• Late payment / cheque return charges — disclosed in KFS.
• Interest — main revenue line. Booked on accrual basis for performing loans, on cash basis for NPA.

Regulatory risks

• NBFC registration revocation for breach of any Master Direction.
• Asset classification — strict timelines for SMA-0 / SMA-1 / SMA-2 / NPA recognition per the RBI Master Circular on Income Recognition, Asset Classification and Provisioning (IRACP).
• CRAR (Capital to Risk-weighted Assets Ratio) — minimum 15% for most NBFC categories, with Tier-1 minimum of 10% for NBFC-ICC under Scale-Based Regulation (SBR). Breach triggers PCA-equivalent supervision.
• Leverage ratio — for NBFC-BL (Base Layer) capped at 7.
• Net Owned Fund (NOF) — minimum ₹10 crore for NBFC-ICC (raised in stages by April 2027 per SBR).
• Concentration limits — exposure caps to single borrower / group of borrowers, as per Scale-Based Regulation.
• Sectoral caps — internal board-approved limits required.
• Director Fit and Proper — required for every director per RBI directions.

Technology modules needed

Out of the Section 3 module map, the minimum subset is:

• A — Borrower acquisition (partner portal, DSA portal, lead capture).
• B — Application journey (full borrower onboarding).
• C — KYC / KYB.
• D — Data ingestion (bank statement, GST, bureau, AA).
• E — Underwriting engine (rule engine + scorecards).
• F — Manual underwriting workflow (analyst queue, maker-checker, deviation).
• H — Loan documentation (sanction letter, KFS, agreement, NACH, eSign, eStamp).
• I — Disbursement.
• J — LMS (schedule, accrual, NPA tagging, provisioning, write-off).
• K — Collections (NACH presentation, DPD buckets, tele-calling queue, field queue).
• L — Portfolio monitoring (vintage, cohort, ECL).
• M — Accounting and finance (loan accounting, GL, GST, TDS).
• N — Reporting and compliance (RBI returns, bureau reporting, CKYC uploads).
• O — Admin (RBAC, approval matrix, product configuration).

Skip at MVP: G (co-lending), most of P (advanced analytics).

Integrations needed

• All four credit bureaus (CIBIL, Experian, Equifax, CRIF High Mark) for consumer + commercial reports.
• CKYC for KYC fetch and upload.
• PAN / GSTIN / Udyam / MCA verification APIs.
• Account Aggregator (via a TSP — Finvu, OneMoney, Saafe, Anumati, NeSL).
• Bank-statement analyser (Perfios, FinBox, Precisa) for both PDF and AA-fetched data.
• GST data API (via GSP — Cygnet, Karix, Webtel, MasterIndia, Taxgenie).
• eSign + eStamp (Leegality, Digio, SignDesk).
• NACH / eNACH mandates (Digio, Razorpay, Cashfree, Setu, Decentro).
• UPI AutoPay (NPCI rails via PSP partner).
• Payment gateway for borrower top-ups / repayments (Razorpay, Cashfree, PayU).
• Bank payout APIs for disbursement (sponsor bank API or RazorpayX, Cashfree Payouts, Setu).
• SMS + WhatsApp + Email (Gupshup, Kaleyra, MSG91, Karix, Sinch).
• IVR / dialer for collections (Knowlarity, Exotel, Ozonetel).
• Field-agent app with geo-tagged photo (custom build or vendor like FieldEZ).

Unit economics

For a ₹30 Cr book of SME working-capital, 90-day average tenure, fully revolving:

Line	Annualised rate or ₹
Gross yield (interest)	18% – 24%
Processing fees (annualised over 90-day tenure)	4% – 12% of avg book
Cost of funds	11% – 14%
Operating cost (origination + servicing)	3% – 6% of avg book
Credit cost (expected credit loss)	1.5% – 3.5% for SME WC, stable book
Tech and vendor cost	0.5% – 1.5% of avg book
Pre-tax ROA	2.5% – 6% of book in steady state

Working capital, short tenure, repeat-customer-heavy lending annualises fees aggressively because each ₹1 lakh of book turns over ~4× per year at 90-day tenure. A 2% per-disbursal processing fee becomes ~8% of average book per year. This is the primary reason short-tenure WC is economically attractive at sub-₹100 Cr scale.

Pros

• Highest unit economics at small scale — keep ~100% of interest and fees on own book.
• Simplest data model and reconciliation — no inter-party settlement.
• Fastest credit decisioning — no partner sign-off required.
• Direct borrower relationship — full lifetime value retention.

Cons

• Capital intensive — ~₹3 Cr of equity supports ~₹20 Cr of book at 15% CRAR, before any leverage haircuts.
• All risk lands on you — single NPA shock can wipe a quarter’s P&L.
• Slow growth — book is bounded by capital + debt raised.
• All regulatory compliance owned — every Master Direction applies in full.

Scalability

Linear in equity + leverage. To grow book from ₹30 Cr to ₹300 Cr, you must raise ~₹30 – 50 Cr of additional equity plus secure ~₹250 Cr of debt (NCDs, bank lines, securitisation). The capital requirement is the binding constraint, not technology.

This is exactly why co-lending is the natural pair — see Co-lending. Co-lending lets the platform scale book without proportional equity.

Fit for SME working-capital ₹20–50 lakh, 60–180 days, repeat borrowers

Excellent fit. This is the model the rest of the spec assumes for own-book lending. The combination of:

• Short tenure (high fee annualisation)
• High repeat rate (low marginal acquisition cost)
• Anchor / CA / Tally origination (good data, low fraud)
• Cash-flow underwriting (uses GST + bank + Tally rather than collateral)

…fits balance-sheet lending well. The constraint is capital, addressed by adding co-lending on top.

Sources

• RBI Master Direction — Non-Banking Financial Company – Scale Based Regulation Directions, 2023, available at rbi.org.in.
• RBI Fair Lending Practice – Penal Charges in Loan Accounts, DOR.MCS.REC.28/01.01.001/2023-24, 18 August 2023.
• RBI Master Direction on Outsourcing of Information Technology Services, dated 10 April 2023.
• RBI Master Direction – Information Technology Governance, Risk, Controls and Assurance Practices, 7 November 2023.