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Indian Financial Services Sector continues to attract foreign players – BMW to set up a NBFC

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BMW group, known for their luxury cars, have decided to enter the Indian Financial Services Business by setting up its own independent business unit.

BMW Financial Services

BMW Financial Services India is seeking a license to operate as a Non-Banking Finance Company (NBFC) in India to offer solutions for Retail automobile financing for BMW customers and multi make customers, Financing for Fleet Owners and Commercial Financing for BMW Dealerships and multi make dealerships.

It already operates under the BMW group of companies through a channel of co-partners and will continue to provide insurance solutions to its customers.

As per the press release President of BMW pointed out

BMW Financial Services has been successfully operating in India as a part of BMW India with its three business lines: Retail finance, Commercial finance for the BMW India Dealerships and Insurance solutions through cooperation partners for BMW customers.

The services offered through BMW Financial Services have been significantly valuable to the premium clientele who require exclusive and flexible financial solutions. The foundation for the formation of BMW Financial Services India was established from the achievements in the Indian market in the last three years.”

The setting up of a non-banking financial services arm will allow BMW to enter vehicle finance business on its own. This move is a well thought out one since India is still considered a great market for credits / loans.

BMW is one of the Auto companies whose car sales have grown even during this downward Market. Moreover, with the Indian economy still very much on the growth track, the demand for vehicle loans should go up.

With the global economy still bleeding badly over credit crisis, the Indian markets are comparatively a safer haven for credit based businesses.

But, if the past is anything to go by, NBFC’s has been the best alternative path to enter the Indian Financing Services sector. With the government not keen on opening the banking sector, the foreign players vying for the target Indian customer have been actively taking the NBFC route.

It is notable that there were around 12,809 NBFC’s registered with India in June 2008 with a good share of foreign players primarily in the insurance business.

With the foreign players indirectly invading the Indian Financial Services(non-deposit) markets, does it sound alarming bells for the existing Indian players in the segment?

We have seen that the Indian and foreign firms in the sector have co-existed very well till now, but the foreign participants were too few till now. With the recent global slowdown and the deep trenching U.S. credit crisis, the foreign firms are looking for new avenues to flourish.

So, with the norms relatively eased for the foreign players, will we see a lot of foreign companies making in roads into the price sensitive Indian markets?

It will all depend on how whether the foreign players are able to feel the pulse of the Indian consumer who is very price sensitive and credit is something that is seen as the last resort by many. The foreign players will have to mould their packages differently to attract the Indian customer. For the consumer though, the entry of foreign players will provide them with more options then they ever had.

The entry of BMW financial services suggests that the Indian economy is still attractive for domestic and foreign players at large.

What are your thoughts on the same?
Do you think The entry of foreign players will make the financial sector more competitive and better or the sector should be closed to guard the interest of national/state run banks?

[This post is written by Ankit Agarwal, an ERP Consultant by profession, a wannabe entrepreneur and stock market stalker by passion]

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