NBFC job losses mount as lending plummets

'The people let off by the NBFCs have little bargaining power and willingly settle for a 20% to 25% cut in their existing salaries when hunting for new jobs.'
Krishna Kant and Sachin P Mampatta report.

The office of a non-banking finance company (NBFC) in Bandra, north west Mumbai, wears a near-deserted look.

There are only a few customers in the room, and the lone executive at the service desk tells you that the company has stopped giving new loans.

There has been a number of internal transfers, some employees have been asked to 'take a break', and the branch has seen its sales staff whittled down by over 75 per cent, he says.

The situation is no different at the lender's Vashi branch in Navi Mumbai. Other than two security personnel, the office has just one person manning the front desk. His job is to accept payments, loan transfers or loan closure documents from existing customers.

And yet, not too long ago, this branch had nearly 40 employees in sales and operations. Today, there are just the empty chairs and silent work stations and the entire area has its lights switched off.

Employees at the Mumbai branch of another private sector home finance company, too, are living on a prayer.

The last loan disbursed by the firm was in October 2018. While there has not been any retrenchment of full-time employees so far, everyone has been asked to sell investment products -- mutual funds, systematic investment plans and insurance -- rather than home loans.

"It's a big company and we hope there will be no branch closures and retrenchments as has happened in other housing finance companies," says an executive at one of its Navi Mumbai branches.

But she concedes that pushing investment products is not sustainable beyond a certain point. Nearly 100 jobs are at stake in the company's three branches in Navi Mumbai alone.

Another executive advises against taking on too much debt for a house, and said that people who bought homes thinking that these would become assets, ended up creating costly liabilities.

NBFCs and housing finance companies (HFCs) are seeing a similar mismatch between assets and liabilities, which may have contributed to the sharp employment slump in a sector which has driven much of the hiring in an otherwise dry job market.

"Non-bank retail lenders accounted for most of the new jobs that were created in the financial service space in recent years. In contrast, fresh hiring by banks was muted," says Siddarth Raisurana, Chief Operating Officer at ABC Consultants, a recruitment and human resource consultancy.

Raisurana says that fresh hiring by the non-bank lenders has come almost to a standstill and the industry is facing a lot of redundancy, especially on the sales and operations side.

The expenses on salary and wages for listed retail lenders grew at a compound annual growth rate (CAGR) of 21.7% in the three years ending in March 2018.

In comparison, the salary and wage bill for the rest of corporate India grew at a CAGR rate of 12.6% during the same period.

The 29 listed retail NBFCs that are part of BSE 500 index together spent Rs 19,039 crore (Rs 190.39 billion) on salaries in FY18 -- up nearly 122% in the previous three years.

Companies's numbers for FY19 shows that companies have already began to put fresh hiring on hold.

Industry salary bill was up 9.8% in FY19 over FY18, growing at the slowest pace in a decade.

The number of employees on their rolls also grew at a CAGR of 19.4% during the period to reach 210,000 by the end of March 2018.

However, even this is an under-estimation of employment in the industry, say experts, as a majority of its workforce was employed on a contractual basis and, therefore, did not show up on the companies's books.

According to rough estimates, for every full-time employee in the industry, there were nearly three workers on contract in various support functions. Most of the latter have now been laid off.

Recruiters say while some people made redundant by the NBFCs can be absorbed in other firms in the sector -- private sector banks have also resumed hiring -- most may have to wait out the downturn.

"Large and well-diversified NBFCs are still acquiring talent, but most of the openings are for mid and senior level executives with specific skills in technology and risk management," says Pankaj Dutta, CEO, Alexander Hughes, an international executive search firm.

According to Dutta, there is little demand for the army of executives who have been working in sales and operations in the NBFC sector.

"There has been a sharp decline in fresh disbursement and customers's acquisitions by lenders post the IL&FS crisis, leading to a disproportionate decline in the staff requirement at the branch and field level," he adds.

The crisis is also affecting salary levels in the industry.

"The people let off by the NBFCs have little bargaining power and willingly settle for a 20% to 25% cut in their existing salaries when hunting for new jobs," Dutta points out.