A future in finance

The concept of hire purchase and installment schemes have been around for a long time. The only difference is that earlier people used to view such purchase options with disdain, because it was not considered "correct" to buy something unless you had the ability to make a cash down payment. Today when credit cards, consumerism and acquisition are the key words in our fast moving metropolitan lifestyles more and more novel ways of financing and leasing are hitting the market.

You can seek financial and leasing support from established government and private institutions and banks right from automobiles, houses, commercial property to electronic items, computers and other forms of capital equipment. Big companies engaged in mining, shipping, aviation, earth moving activity and construction are largely dependent on these companies to keep their business running smoothly.

When you need to raise finance, you have to approach a bank or a non-banking financial company. You will have to choose from the various repayment options which will be made available to you. When you wish to lease something, you will have to borrow money in order to make your purchase. Here the owner of the purchase item becomes the lender. You keep paying the installment and at the same time continue using the item. The moment you have paid the last installment, you become the proud owner of that asset and the ownership rights get transferred to you.

In case of a lease, the ownership of the asset is wrested with the company. The asset is given for a specific period and the installments are worked out in a way that after six to seven years the borrower pays the lease amount and the asset then belongs to the borrower. The depreciation gets claimed by the leasing company. Now, in the case of finance, the banks or NBFCs do not own the assets. They are just security for the loan. In case of leasing, the lender can go and claim that the asset belongs to him.

The leasing market in India is growing rapidly with about 10 billion worth of assets being leased annually and about 8 billion being provided for hire purchase. Lease finance is normally provided for a period ranging from three to eight years and is currently being provided by all the Indian Financial Institutions like IDBI, IFCI, ICICI, state level institutions and various leasing companies in private and public sectors. Financial institutions also collate material and undertake extensive analysis.

Most financial institutions provide upstream operations like mobilisation of funds via fixed and term deposits and downstream operations like that of lending money. The money collected by upstream operations is used to lend in downstream operations like house and car loans, consumer durable finance and auto finance.

The two major areas of work in this fast growing field lie in the sales and marketing side and in the more technical and specialized credit assessment side. Most foreign banks and Non Banking Financial Corporations (NBFCs) employ MBAs from the IIMs or CAs in their entry level and managerial slots. Those with a grounding in finance are given the critical tasks of credit assessment, rating, monitoring of outstanding etc.

They see loans through the stages of product design and development, putting together and implementing of the communication strategy and undertaking credit appraisal before the loan can be secured. An NBFC is a direct competitor with the banking fraternity which is why it offers higher rates of interest on deposits and also more lucrative salary packages. Interests on loans and borrowings too is higher than that charged by the banks.

You will have to understand existing customer needs and work out ways of adding value to their portfolios. You will have to solicit new business, keep a track of what your competitors are offering and what effect do each of the changing government policies have on your line of business. You have to finally fit in all this with the overall ethos and culture of your financial institution.

As part of the marketing and sales departments, the onus of building a brand image for your institution would rest on you. You will have to chalk out strategies whereby you can reach out to the end consumer, "entice" him by offering exciting schemes and make available attractively packaged information at regular intervals. For this you would have to work closely with your advertising agency to create the right kind of promotional material.

Other than brochures, application forms and direct mailers you may have to devise novel ways of reaching out to the fast expanding market. This could be via a tie-up with credit card companies, by offering attractive prizes, competitions and discounted schemes, by telemarketing, phone-in services followed by personalised home visits etc.

For openings in sales and marketing, an MBA degree from a well-known institute helps. Specialisations in market research, advertising, sales, marketing, customer relations, client servicing and economics are also in demand. As with any other marketing job, you would have to be equipped with excellent communication skills. The company would in addition put you on a training to familiarise you with the financial and accounting part of the business. A banking background or experience with a nationalised or private bank can also give you a strong foothold in the finance and leasing sector.

Leasing is a favoured option with large companies and business houses especially when it entails heavy machinery or capital goods which have new and more sophisticated models hitting the market every few years. Financial heads often have to make the unappetising choice between balance sheet presentation niceties and economic sense.

Leasing capital equipment rather than making an outright purchase serves a number of corporate ends. You can use the latest piece of equipment for a few years and then replace it at the end of the lease term with the "is" thing in state-of-the-art. This way technological obsolescence is shifted to the lessor. Also it allows purchasers and financial managers to accommodate operations applicable for capital equipment without doing violence to their capital acquisition budgets or to aggregate debt-to-worth limitations, provided lease is properly structured.

Some of the large Indian companies in the finance and leasing services industry include the Indian Railway Finance Corp, HDFC, Rural Electrification Corporation, Housing and Urban Development Corporation, Power Finance Corporation, Sundaram Finance and the LIC Housing Finance Ltd. Then there are companies which specialise in housing finance, real estate, apartments, flats, buying and selling, loan, property lease, consultation on commercial lease audits on behalf of clients etc, cars and automobile finance, consumer durables etc.