Mr. Nikhil Shah
D.G.M. - Loan Portfolio – NJ Group
Mr. Nikhil has over 24 years of corporate experience in diverse areas of product development, marketing, product management, etc., and across industries like consumer appliances, insurance and real estate. He also has prior experience in reviving sick units and was a visiting faculty to management institutes. Nikhil joined NJ about nine months back and is responsible for developing the loan business at NJ. Nikhil is a BE in Industrial Engineering and is an MBA in Marketing.
Q] What is LAS and how does it work?
A] LAS stands for Loan Against Securities. As the name suggests, it is a loan which is offered against financial investments. Loan is sanctioned and disbursed against investments in stocks, Mutual Funds – Equity & Debt, RBI Bonds, LIC Policies and Corporate Bonds. Usually the banks have a pre-approved list of shares and mutual funds, which they accept as a collateral.
The process for availing the loan is very simple for applicants and there is minimum documentation required. The securities are pledged and withdrawal limit is set against the same. The sanction amount is a percentage of the securities pledged. The client can operate the loan as an over draft account and can withdraw the money as per his requirements. Interest is charged usually on a daily basis for the amount drawn from the bank. In LAS, interest is thus charged only on the fund utilized and the borrower can repay the loan anytime and often there are no foreclosure charges.
Q] Why LAS should be a preferred source of funds?
A] LAS is an ideal source of funds especially if you have investments and the need is for short term loans. It is a boon for the investor as he can get funds without liquidating his investments. In addition to the pledged securities, no other guarantee is required. There is also minimum documentation required and often only details of securities are asked for in addition to the basic verification documents. The processing fee for LAS is also very reasonable and the sanction is given very fast, usually within a TAT of 7-10 days.
The client alsobenefits as he does not need to redeem his investment for short term fund requirements. The rate of interest on such loans is also very reasonable, especially when compared with personal loans. Another benefit is that LAS is often given in the form of over-draft facility and the interest is charged only on the amount you withdraw and for the period you withdraw. Thus, your actual cost of funds can effectively be much lower as your investments continue to deliver market returns.
We believe that LAS is an ideal solution for any investor needing funds for variety of reasons like for emergencies, family events, business working capital, purchase of goods and so on.
Q] What are the types of opportunities available to an advisor in the home loan space?
A] Home loans can be seen as an umbrella product area. Within home loans category, we can broadly identify three types of opportunities or solutions:
- New home loans:
This is the most common among all. A person is likely to buy a home multiple times in his life span for various reasons. - Transfer of home loan balance:
With interest rates being on a downward cycle, there is an opportunity for transferring client's existing loan to another lender at a lower rate. A large number of our investors or their children having existing home loan can be interested in this solution. - Loan against property:
This is an option similar to LAS wherein the loan can be taken against property when required.
We all can understand the opportunity which the new home loan business offers to us. I would like to highlight the opportunity which transfer of home loans offers to us. There is very high probability that a lot of your clients or their family members would have taken home loans at higher interest rates than what is currently offered in the market. The lower rates prevalent today offers a greater chance for you to intervene and offer better deals in the client's own interest. This is a great way to further deepen your client relationship and get additional business /wallet share of client.
Q] Why is home loans an important advice area for a financial advisor?
The home loan industry in India is growing between 18% - 22% p.a. We believe that with major trust on affordable housing in India and the PM's vision of a home for everyone by 2022, the demand will continue to grow going ahead.
Apart from the previously mentioned different types of opportunities within the home loan space, there is an opportunity for repeat business in new home loans alone. Every investor today is likely to purchase at least 3 to 5 properties in his life time for any of the following reasons...
- First home for personal use at a younger age
- Second or a bigger home for a growing family
- Home for children
- Holiday home for leisure
- Home as a real estate investment for long term appreciation and rental income
Needless to say, the overall home loan space presents a tremendous opportunity for our channel Partners and can be seen as a must have solution in their advisory basket.
Q] What role can an advisor be expected to play in the loan space?
A financial advisor is responsible for the overall financial well-being of the client. The loan space is a high-value, low-volume segment where an advisor can provide immense value to the client and indeed his/her entire family. A Partner can act both as an advisor and a facilitator for loan products.
Firstly, an advisor can suggest which type of loan would be most appropriate for a client given his requirements and profile. For eg., an advisor can suggest a client to not sell his investments but rather go for LAS to meet his short term fund needs.
Secondly, an advisor can help research and filter the best deal by a Bank/NBFC within a loan product category for the client. Today, the market is very competitive but the client may not get to know the best deals available and often he relies solely on his banking relationship.
Thirdly, the advisor can help coordinate and manage operational processes on behalf of the clients and give them some relief. This facilitation will be greatly appreciated as often a lot of time and visits are required to be made before funds are disbursed.
Lastly, even after a loan a taken, the advisor's role will continue and he can always help him reset/revise the interest (interest rate) the customer is paying so as to save the client's money.
Q] What are the plans of NJ Wealth on the loan product vertical? At NJ Wealth, the aim is to always empower the Partner with client oriented products and services. Loan is a product vertical being currently very actively researched and attempts are on finding a way to design a proper business model for Partners. Within the loan vertical, we are primarily focusing on two products to begin with as has been already mentioned. They are …
- Loan Against Securities
- Home Loans (includes all 3 types of loan business)
We have already completed some tie-ups and are in the process of further expansion. We have also test launched these products at select branches to study the market. We are very happy to report that we have received tremendous response, both from Partners and their clients.
At NJ it's our endeavor is to always be on developing strong processes for ease of transactions, backed by good research and a very strong technology platform/support. An online portal for LAS is about to be launched beginning the next financial year.
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