Non-banking financial companies (NBFCs) are financial institutions that provide banking services without meeting the legal definition of a bank. This document provides an overview of NBFCs in India, including their history, regulations, types, and roles. It defines various types of NBFCs such as investment companies, equipment leasing companies, loan companies, and housing finance companies. It also discusses the historical committees that shaped NBFC regulations and compares NBFCs to banks.
Non-banking financial companies (NBFCs) are financial institutions registered under the Companies Act and engaged in lending and investment activities. The document discusses the history and regulation of NBFCs in India. It outlines the various types of NBFCs and their roles in providing credit to sectors underserved by banks. While NBFCs cannot accept demand deposits like banks, they play an important role in developing industries and financing first-time buyers. The Reserve Bank of India regulates NBFC registration and prudential norms in India.
Merchant banking refers to a range of financial services including underwriting shares, portfolio management, project counseling, and insurance provided by both commercial and investment banks for a fee. Merchant bankers play an important role as intermediaries between companies raising funds and investors. They perform various functions such as promotional activities, issue management, credit syndication, project counseling, portfolio management, and mergers and acquisitions. Merchant banking activities in India are regulated by the Securities and Exchange Board of India (SEBI). Other key players in the capital markets include underwriters, bankers to an issue, brokers to an issue, and registrars and share transfer agents.
Industrial Development Bank of India (IDBI) was established in 1964 as a development bank to promote industry in India. It has over 3,350 ATMs and 1,853 branches across India and one overseas branch in Dubai. IDBI provides loans, banking services, and financial products to corporations and individuals with a focus on developing small industries and rural/backward areas of India. Its subsidiaries include SIDBI, IDBI Bank, and companies focused on asset management, capital markets, and insurance.
The document summarizes the structure of the banking system in India. It outlines the different types of banks: scheduled banks and non-scheduled banks. It also discusses cooperative banks, including central cooperative banks, state cooperative banks, and district central cooperative banks. The document then covers commercial banks such as public sector banks, regional rural banks, private sector banks, and foreign banks. It provides brief descriptions of each type of bank and their roles within the Indian banking system.
Role of RBI in Indian Banking System - ITT PresentationKunal Motwani
Thank you for the presentation. I have learned about the important role played by the Reserve Bank of India in regulating and developing the Indian banking system.
There are several types of banks in India. The main types are scheduled banks, which must meet certain criteria to be included in the second schedule of the RBI Act, and non-scheduled banks. Scheduled banks can be further divided into public sector banks that are majority owned by the government, private sector banks owned by private individuals, foreign banks registered abroad but operating in India, and cooperative banks established under the Cooperative Credit Societies Act. Other bank types include regional rural banks focused on rural agriculture financing, and the State Bank of India which was formed when the government took over the Imperial Bank of India.
Financial services refer to services provided by the finance industry, such as banks, credit card companies, insurance companies, brokerages, and investment funds. There are two main types of financial services - fund or asset-based services, and fee-based services. Fund-based services involve raising funds through deposits, debt, or equity and investing those funds by lending or purchasing securities. These include services like leasing, housing finance, credit cards, venture capital, factoring, forfeiting, and bill discounting. Fee-based services involve earning income through fees, commissions, or brokerage on services like issue management, advisory, credit ratings, mutual funds, securitization, and stock broking.
Non-banking financial companies (NBFCs) are financial institutions registered under the Companies Act and engaged in lending and investment activities. The document discusses the history and regulation of NBFCs in India. It outlines the various types of NBFCs and their roles in providing credit to sectors underserved by banks. While NBFCs cannot accept demand deposits like banks, they play an important role in developing industries and financing first-time buyers. The Reserve Bank of India regulates NBFC registration and prudential norms in India.
Merchant banking refers to a range of financial services including underwriting shares, portfolio management, project counseling, and insurance provided by both commercial and investment banks for a fee. Merchant bankers play an important role as intermediaries between companies raising funds and investors. They perform various functions such as promotional activities, issue management, credit syndication, project counseling, portfolio management, and mergers and acquisitions. Merchant banking activities in India are regulated by the Securities and Exchange Board of India (SEBI). Other key players in the capital markets include underwriters, bankers to an issue, brokers to an issue, and registrars and share transfer agents.
Industrial Development Bank of India (IDBI) was established in 1964 as a development bank to promote industry in India. It has over 3,350 ATMs and 1,853 branches across India and one overseas branch in Dubai. IDBI provides loans, banking services, and financial products to corporations and individuals with a focus on developing small industries and rural/backward areas of India. Its subsidiaries include SIDBI, IDBI Bank, and companies focused on asset management, capital markets, and insurance.
The document summarizes the structure of the banking system in India. It outlines the different types of banks: scheduled banks and non-scheduled banks. It also discusses cooperative banks, including central cooperative banks, state cooperative banks, and district central cooperative banks. The document then covers commercial banks such as public sector banks, regional rural banks, private sector banks, and foreign banks. It provides brief descriptions of each type of bank and their roles within the Indian banking system.
Role of RBI in Indian Banking System - ITT PresentationKunal Motwani
Thank you for the presentation. I have learned about the important role played by the Reserve Bank of India in regulating and developing the Indian banking system.
There are several types of banks in India. The main types are scheduled banks, which must meet certain criteria to be included in the second schedule of the RBI Act, and non-scheduled banks. Scheduled banks can be further divided into public sector banks that are majority owned by the government, private sector banks owned by private individuals, foreign banks registered abroad but operating in India, and cooperative banks established under the Cooperative Credit Societies Act. Other bank types include regional rural banks focused on rural agriculture financing, and the State Bank of India which was formed when the government took over the Imperial Bank of India.
Financial services refer to services provided by the finance industry, such as banks, credit card companies, insurance companies, brokerages, and investment funds. There are two main types of financial services - fund or asset-based services, and fee-based services. Fund-based services involve raising funds through deposits, debt, or equity and investing those funds by lending or purchasing securities. These include services like leasing, housing finance, credit cards, venture capital, factoring, forfeiting, and bill discounting. Fee-based services involve earning income through fees, commissions, or brokerage on services like issue management, advisory, credit ratings, mutual funds, securitization, and stock broking.
SEBI regulates merchant bankers in India through the SEBI (Merchant Bankers) Regulations, 1992. Merchant bankers must register with SEBI and comply with various criteria to carry out activities like managing securities issues, providing corporate advisory services. SEBI classifies merchant bankers into four categories based on the nature of activities and responsibilities. They must meet capital adequacy norms ranging from Rs. 1 crore to Rs. 20 lakhs. Merchant bankers are subject to various operating guidelines set by SEBI regarding financial reporting, code of conduct, and authorization renewal.
Development banks play an important role in promoting social and economic development. They provide loans and technical support for a variety of development activities aimed at improving people's lives and reducing poverty. The major development banks in India include IFCI, IDBI, ICICI, SIDBI, and NABARD. They work to fulfill objectives like promoting industries, meeting capital needs, and aiding small businesses and rural development through financial and promotional activities.
OTCEI meaning, OTCEI definition, OTCEI features, OTCEI objective, parties in OTCEI, OTCEI promoters, benefits of listed company in OTCEI, benefits of investors in OTCEI,
NBFCs, or non-banking financial companies, are registered under the Companies Act and provide banking services without a bank license. Some major NBFCs operating in India include NABARD, Shriram Transport Finance, and LIC Housing Finance. NBFCs cannot accept demand deposits, issue checks, or offer deposit insurance. They also have more lenient loan conditions than banks but charge higher interest rates. The top 10 NBFCs in India are led by Reliance Capital, L&T Finance, and Mahindra Finance.
This document discusses capital structure and financial markets, specifically the primary market. It defines the primary market as the market for new issuers, where companies can directly issue shares, bonds, or other securities to raise capital. The document outlines the key participants and processes in the primary market in Nepal, including requirements for disclosure, underwriting, and issue procedures that must follow the Company Act and SEBON guidelines. Overall, the primary market provides an important channel for companies and governments to raise funds for investment and growth.
Banking in India originated in the late 18th century with the Bank of Hindustan and General Bank of India. The oldest and largest bank still in existence is the State Bank of India, which originated from the Bank of Bengal and later merged with the Bank of Bombay and Bank of Madras to form the Imperial Bank of India. In 1955 it became the State Bank of India. The government nationalized many banks in 1969 and they remain under government ownership as public sector undertakings. The modern Indian banking sector includes public sector banks, private sector banks, foreign banks, regional rural banks, urban cooperative banks and state cooperative banks.
This document provides an overview of the evolution and types of financial services in India. It discusses how the sector has undergone liberalization since 1990, allowing private and foreign players to enter. The document defines financial services as services related to mobilizing and allocating savings. It outlines the evolution in three phases from 1960-2002, during which new institutions and instruments were established. The key characteristics of financial services are described, including their intangible nature and role in intermediating funds. The importance of financial services in channeling funds, debt management, and promoting savings is also highlighted. Finally, the document categorizes the main types of financial services in India into money markets, capital markets, retail markets, and wholesale markets.
The document provides an overview of the money market. It defines the money market as the market for short-term, highly liquid debt instruments with maturities of one year or less, such as treasury bills, commercial paper, and certificates of deposit. These instruments are traded by phone between financial institutions, corporations, brokers, and dealers. The money market helps facilitate short-term borrowing and lending for participants. It consists of various sub-markets that collectively make up this important segment of the financial system.
A mutual fund is a professionally managed investment scheme that pools money from many investors to purchase stocks, bonds and other securities. It allows individual investors to diversify their holdings and benefit from professional fund management at a low cost. The money collected is invested in different securities and the income and capital appreciation is shared by unit holders proportionate to their investment. Mutual funds provide an opportunity for common investors to invest in a basket of securities with a relatively small amount of money.
The financial system comprises intermediaries, markets, and instruments that transform savings into investments. It provides financial inputs that are crucial for economic development and improving standards of living. The system involves the activities of saving, financing, and investment. It includes various institutions like banks, non-banking financial companies, and financial markets that facilitate transactions and allocate resources. Financial instruments are traded in these markets to raise capital. The system also provides important financial services. However, the Indian financial system faces some weaknesses like a lack of coordination and inactive capital markets.
FINANCIAL SYSTEM- FORMAL AND INFORMAL - AND INTRODUCTION TO NBFC Mohammed Jasir PV
The document discusses non-banking financial companies (NBFCs) and microfinance in India. It provides definitions and explanations of key terms related to financial systems and institutions. Some of the main points covered include the evolution of India's financial system from a private sector-dominated system to a more regulated system with public sector institutions. The document also describes the components of India's formal financial system, including regulators, financial institutions, markets, instruments, and services. It discusses banks and the difference between banks and non-banking financial companies (NBFCs).
This document discusses universal banking in India. Universal banking combines commercial banking, investment banking, insurance, and other financial activities under one roof. In India, the Narsimham Committee Report and S.H. Khan Committee Report in 1998 advised consolidating the banking industry through mergers and integrating financial activities, suggesting universal banking. Some large domestic financial institutions in India have been permitted to become universal banks, such as ICICI in 2000. Universal banking allows for economies of scale, profitable diversification, better resource utilization, easy marketing using existing brand names, and one-stop shopping convenience for customers. However, it also presents challenges such as different regulatory requirements for banks versus other financial institutions, lack of expertise in long-term lending, and
Non-Banking Financial Companies (NBFCs) are financial institutions that are registered under the Companies Act and provide banking services like loans and advances but cannot accept demand deposits. [1] NBFCs must be registered with the Reserve Bank of India (RBI) and are regulated by RBI guidelines regarding public deposits, capital adequacy ratios, liquidity requirements, and other operational conditions. [2] Major types of NBFCs include equipment leasing companies, loan companies, investment companies, and residuary non-banking companies. [3]
Credit rating agencies provide independent ratings of issuers' ability to repay their debts. The document discusses major international and Indian credit rating agencies such as Moody's, S&P, CRISIL, ICRA, CARE, and others. It defines credit ratings, explains different rating scales, and provides brief histories of the large agencies. Major services of agencies include rating government bonds, corporate bonds, and other debt instruments in both domestic and international markets.
Commercial banks are the most important financial institutions for lending and borrowing money. They accept deposits from customers in various forms like demand deposits, fixed deposits, and savings accounts. They use these deposits to advance loans to businesses and individuals. Banks also provide other services like discounting bills of exchange, conducting agency services, and general services like issuing traveler's checks. In India, 14 large commercial banks were nationalized in 1969 to promote equitable development and ensure credit availability in rural and priority sectors. Nationalization led to expansion of bank branches across the country and increased deposit mobilization and lending, especially in agriculture and small businesses.
The document provides an overview of the debt market in India. It discusses that the Indian debt market is dominated by government bonds and is an important source of funds for the central and state governments to finance activities and manage budgets. It describes various debt instruments like government securities, corporate bonds, commercial papers, and certificates of deposits. It also outlines participants, regulatory bodies, and risks associated with the debt market while highlighting advantages like assured returns and disadvantages like lower returns compared to equity markets.
The Reserve Bank of India (RBI) performs several key monetary and non-monetary functions:
As the country's central bank, the RBI formulates and implements monetary policy, ensures an adequate supply of money, and monitors credit to productive sectors. It also designs, prints, and distributes currency. Additionally, the RBI acts as the government's banker, facilitates inter-bank transactions, regulates other banks, collects economic statistics, manages foreign exchange reserves, and promotes development through banking initiatives. One of its major tools for controlling the money supply is credit control.
The document provides an overview of the Indian banking system. It discusses the history and evolution of banking in India from the establishment of the first bank in 1786 to the current system. It describes the key components of the current banking system including the Reserve Bank of India (RBI), scheduled commercial banks, cooperative banks, and tools used by RBI to regulate the system like cash reserve ratio, repo rate, and statutory liquidity ratio. The banking system has transitioned India to a strong economy with robust banking.
This document provides information about non-banking financial companies (NBFCs) in India. It defines NBFCs as non-banking institutions that conduct lending, acquisition, and leasing activities but do not accept demand deposits. NBFCs are divided into categories including asset finance companies, investment companies, and loan companies. Key differences between NBFCs and banks are that NBFCs cannot accept demand deposits or issue checks. The Reserve Bank of India regulates NBFCs and places restrictions on their acceptance of public deposits.
This document provides an analysis of India's non-banking financial company (NBFC) sector. It discusses the industry structure, nature of business, and differences between NBFCs and banks. NBFCs complement the banking system and account for 12.7% of the financial system's total assets. The document also analyzes NBFCs' sources and uses of funds, financial performance metrics like return on assets and non-performing assets, and recent regulatory changes affecting the sector. Overall, it presents an overview of the NBFC industry in India.
SEBI regulates merchant bankers in India through the SEBI (Merchant Bankers) Regulations, 1992. Merchant bankers must register with SEBI and comply with various criteria to carry out activities like managing securities issues, providing corporate advisory services. SEBI classifies merchant bankers into four categories based on the nature of activities and responsibilities. They must meet capital adequacy norms ranging from Rs. 1 crore to Rs. 20 lakhs. Merchant bankers are subject to various operating guidelines set by SEBI regarding financial reporting, code of conduct, and authorization renewal.
Development banks play an important role in promoting social and economic development. They provide loans and technical support for a variety of development activities aimed at improving people's lives and reducing poverty. The major development banks in India include IFCI, IDBI, ICICI, SIDBI, and NABARD. They work to fulfill objectives like promoting industries, meeting capital needs, and aiding small businesses and rural development through financial and promotional activities.
OTCEI meaning, OTCEI definition, OTCEI features, OTCEI objective, parties in OTCEI, OTCEI promoters, benefits of listed company in OTCEI, benefits of investors in OTCEI,
NBFCs, or non-banking financial companies, are registered under the Companies Act and provide banking services without a bank license. Some major NBFCs operating in India include NABARD, Shriram Transport Finance, and LIC Housing Finance. NBFCs cannot accept demand deposits, issue checks, or offer deposit insurance. They also have more lenient loan conditions than banks but charge higher interest rates. The top 10 NBFCs in India are led by Reliance Capital, L&T Finance, and Mahindra Finance.
This document discusses capital structure and financial markets, specifically the primary market. It defines the primary market as the market for new issuers, where companies can directly issue shares, bonds, or other securities to raise capital. The document outlines the key participants and processes in the primary market in Nepal, including requirements for disclosure, underwriting, and issue procedures that must follow the Company Act and SEBON guidelines. Overall, the primary market provides an important channel for companies and governments to raise funds for investment and growth.
Banking in India originated in the late 18th century with the Bank of Hindustan and General Bank of India. The oldest and largest bank still in existence is the State Bank of India, which originated from the Bank of Bengal and later merged with the Bank of Bombay and Bank of Madras to form the Imperial Bank of India. In 1955 it became the State Bank of India. The government nationalized many banks in 1969 and they remain under government ownership as public sector undertakings. The modern Indian banking sector includes public sector banks, private sector banks, foreign banks, regional rural banks, urban cooperative banks and state cooperative banks.
This document provides an overview of the evolution and types of financial services in India. It discusses how the sector has undergone liberalization since 1990, allowing private and foreign players to enter. The document defines financial services as services related to mobilizing and allocating savings. It outlines the evolution in three phases from 1960-2002, during which new institutions and instruments were established. The key characteristics of financial services are described, including their intangible nature and role in intermediating funds. The importance of financial services in channeling funds, debt management, and promoting savings is also highlighted. Finally, the document categorizes the main types of financial services in India into money markets, capital markets, retail markets, and wholesale markets.
The document provides an overview of the money market. It defines the money market as the market for short-term, highly liquid debt instruments with maturities of one year or less, such as treasury bills, commercial paper, and certificates of deposit. These instruments are traded by phone between financial institutions, corporations, brokers, and dealers. The money market helps facilitate short-term borrowing and lending for participants. It consists of various sub-markets that collectively make up this important segment of the financial system.
A mutual fund is a professionally managed investment scheme that pools money from many investors to purchase stocks, bonds and other securities. It allows individual investors to diversify their holdings and benefit from professional fund management at a low cost. The money collected is invested in different securities and the income and capital appreciation is shared by unit holders proportionate to their investment. Mutual funds provide an opportunity for common investors to invest in a basket of securities with a relatively small amount of money.
The financial system comprises intermediaries, markets, and instruments that transform savings into investments. It provides financial inputs that are crucial for economic development and improving standards of living. The system involves the activities of saving, financing, and investment. It includes various institutions like banks, non-banking financial companies, and financial markets that facilitate transactions and allocate resources. Financial instruments are traded in these markets to raise capital. The system also provides important financial services. However, the Indian financial system faces some weaknesses like a lack of coordination and inactive capital markets.
FINANCIAL SYSTEM- FORMAL AND INFORMAL - AND INTRODUCTION TO NBFC Mohammed Jasir PV
The document discusses non-banking financial companies (NBFCs) and microfinance in India. It provides definitions and explanations of key terms related to financial systems and institutions. Some of the main points covered include the evolution of India's financial system from a private sector-dominated system to a more regulated system with public sector institutions. The document also describes the components of India's formal financial system, including regulators, financial institutions, markets, instruments, and services. It discusses banks and the difference between banks and non-banking financial companies (NBFCs).
This document discusses universal banking in India. Universal banking combines commercial banking, investment banking, insurance, and other financial activities under one roof. In India, the Narsimham Committee Report and S.H. Khan Committee Report in 1998 advised consolidating the banking industry through mergers and integrating financial activities, suggesting universal banking. Some large domestic financial institutions in India have been permitted to become universal banks, such as ICICI in 2000. Universal banking allows for economies of scale, profitable diversification, better resource utilization, easy marketing using existing brand names, and one-stop shopping convenience for customers. However, it also presents challenges such as different regulatory requirements for banks versus other financial institutions, lack of expertise in long-term lending, and
Non-Banking Financial Companies (NBFCs) are financial institutions that are registered under the Companies Act and provide banking services like loans and advances but cannot accept demand deposits. [1] NBFCs must be registered with the Reserve Bank of India (RBI) and are regulated by RBI guidelines regarding public deposits, capital adequacy ratios, liquidity requirements, and other operational conditions. [2] Major types of NBFCs include equipment leasing companies, loan companies, investment companies, and residuary non-banking companies. [3]
Credit rating agencies provide independent ratings of issuers' ability to repay their debts. The document discusses major international and Indian credit rating agencies such as Moody's, S&P, CRISIL, ICRA, CARE, and others. It defines credit ratings, explains different rating scales, and provides brief histories of the large agencies. Major services of agencies include rating government bonds, corporate bonds, and other debt instruments in both domestic and international markets.
Commercial banks are the most important financial institutions for lending and borrowing money. They accept deposits from customers in various forms like demand deposits, fixed deposits, and savings accounts. They use these deposits to advance loans to businesses and individuals. Banks also provide other services like discounting bills of exchange, conducting agency services, and general services like issuing traveler's checks. In India, 14 large commercial banks were nationalized in 1969 to promote equitable development and ensure credit availability in rural and priority sectors. Nationalization led to expansion of bank branches across the country and increased deposit mobilization and lending, especially in agriculture and small businesses.
The document provides an overview of the debt market in India. It discusses that the Indian debt market is dominated by government bonds and is an important source of funds for the central and state governments to finance activities and manage budgets. It describes various debt instruments like government securities, corporate bonds, commercial papers, and certificates of deposits. It also outlines participants, regulatory bodies, and risks associated with the debt market while highlighting advantages like assured returns and disadvantages like lower returns compared to equity markets.
The Reserve Bank of India (RBI) performs several key monetary and non-monetary functions:
As the country's central bank, the RBI formulates and implements monetary policy, ensures an adequate supply of money, and monitors credit to productive sectors. It also designs, prints, and distributes currency. Additionally, the RBI acts as the government's banker, facilitates inter-bank transactions, regulates other banks, collects economic statistics, manages foreign exchange reserves, and promotes development through banking initiatives. One of its major tools for controlling the money supply is credit control.
The document provides an overview of the Indian banking system. It discusses the history and evolution of banking in India from the establishment of the first bank in 1786 to the current system. It describes the key components of the current banking system including the Reserve Bank of India (RBI), scheduled commercial banks, cooperative banks, and tools used by RBI to regulate the system like cash reserve ratio, repo rate, and statutory liquidity ratio. The banking system has transitioned India to a strong economy with robust banking.
This document provides information about non-banking financial companies (NBFCs) in India. It defines NBFCs as non-banking institutions that conduct lending, acquisition, and leasing activities but do not accept demand deposits. NBFCs are divided into categories including asset finance companies, investment companies, and loan companies. Key differences between NBFCs and banks are that NBFCs cannot accept demand deposits or issue checks. The Reserve Bank of India regulates NBFCs and places restrictions on their acceptance of public deposits.
This document provides an analysis of India's non-banking financial company (NBFC) sector. It discusses the industry structure, nature of business, and differences between NBFCs and banks. NBFCs complement the banking system and account for 12.7% of the financial system's total assets. The document also analyzes NBFCs' sources and uses of funds, financial performance metrics like return on assets and non-performing assets, and recent regulatory changes affecting the sector. Overall, it presents an overview of the NBFC industry in India.
NBFCs are non-banking financial institutions that are registered under the Companies Act and engage in financial activities like lending but do not hold bank accounts. They differ from banks in that they cannot accept demand deposits or issue checks. This document discusses the role of NBFCs, their regulation by the RBI, types of NBFCs, requirements for accepting public deposits, and recourse for depositors if an NBFC defaults. It provides definitions of key terms like "deposit" and explains rules around NBFC ratings, interest rates, and downgrading of credit ratings.
This document defines and categorizes different types of financial intermediaries. It discusses insurance companies, mutual funds, non-banking finance companies, investment brokers, investment bankers, escrow companies, pension funds, and collective investment schemes. The main advantages of using financial intermediaries are that they help reduce costs compared to direct lending/borrowing, and help reconcile the conflicting needs of lenders and borrowers to prevent market failure. Financial intermediaries play a vital role in bringing together those with surplus funds to lend and those with shortage of funds to borrow.
Cooperative and commercial banks in indiaNirav Shah
Commercial banks provide services like deposits, loans, and investments to large businesses while cooperative banks are owned by their members who are both customers and owners. Recent trends in cooperative banks show that many are facing issues with minimum capital requirements and license cancellations, while commercial banks are adopting new technologies and pursuing financial inclusion. Both bank types play important roles in India's economic development through capital formation, banking services to various sectors, and expanding access to more customers.
This document discusses value-based management (VBM) and its implementation. It defines VBM as a management approach that puts shareholder value creation as the core philosophy. VBM is intended to effectively link strategy, measurement, and operations to create shareholder value. The document outlines the generic VBM framework, key value drivers, example metrics like EVA and ROIC, and challenges in implementing VBM like gaining manager buy-in. It provides examples of successful VBM implementations at companies like Coca-Cola and notes that top management support is critical to smooth adoption of VBM.
State Financial Corporations (SFCs) were established by state governments to provide financing support to small and medium enterprises. SFCs obtain financial resources from various sources like share capital, loan repayments, bond sales, and borrowings. They offer various forms of assistance including direct assistance like term loans and equity investments, and indirect assistance like guarantees. SFCs have struggled due to poor investment decisions and long gestation periods for supported small businesses, leading to losses. For SFCs to be sustainable, business decisions must prioritize financial viability over political factors.
This document provides an introduction to cooperative banks. It defines a cooperative bank as a financial institution that is owned and controlled by its members, who are both customers and owners. Cooperative banks take deposits and lend money, especially in rural areas for farming, cattle, and personal financing. They differ from stockholder banks and follow prudent banking regulations. Cooperative banks are owned and managed democratically by their members on principles of cooperation, self-help and mutual assistance.
This presentation provides a quick overview of the the purpose, goals and role of the Board of Directors. Finally, it includes a checklist of what information Directors should receive in order to adequately perform their duties. (Quite surprisingly, this information is not provided, or is poorly organised)
The document summarizes microfinance as small loans provided to low-income individuals who lack access to traditional banking. It discusses the history and philosophy of microfinance, how it works through peer lending circles, and its growth centers globally. Key risks for microfinance investors include foreign exchange risk, difficulty assessing credit risk for many small borrowers, and potential volatility. The document also analyzes financial performance and growth metrics for microfinance institutions.
L&T Finance Holdings Ltd is a large NBFC operating in finance sector in India. It provides various financial services including loans, insurance, factoring etc. The company follows frameworks like GRI, NVG, UNGC to report on economic, environmental and social performances. It ensures ethics and transparency in business operations and incorporates social/environmental factors. The company focuses on talent acquisition and development, transparency, learning and good governance in its HR policy.
The document outlines the Startup India initiative launched by the Indian government. It aims to build a strong ecosystem for nurturing innovation and empowering startups in India. Key aspects include self-certification to reduce regulatory burdens, a Rs. 10,000 crore fund to support startups, tax exemptions for three years, and establishing research parks and incubators. The current scenario finds India as one of the top countries for startups with over $5 billion invested and 4000+ startups established in 2015. The conclusion states this initiative will create jobs, support entrepreneurship, and help showcase India's talent globally.
This slideshow will give you a wide insight on National Company Law Tribunal, which marks the new era for corporate adjudication. Henceforth all the pending cases in High Court relating to companies stand transferred to this tribunal. This presentation shall provide information updated with the latest government notifications of the year 2016. Hope this helps.
The role of a finance manager is critical to an organization's success. A finance manager is responsible for securing funding, making investment and financial forecasting decisions, managing liquidity and working capital, and making capital budgeting, dividend, and risk management decisions. Additionally, a finance manager must analyze the financial health of the organization and prepare budgets while managing payments, receivables, and the firm's credit policy. Proper financial management is needed to maximize shareholder value and ensure the firm's long term viability.
How to Structure a Venture Capital Fund by Himanshu MandaviaStartupCentral
This document discusses structuring and regulations for venture capital funds in India. It outlines typical fund structures involving investors, a pooling vehicle like an AMC, and target companies. It also summarizes the key Alternative Investment Fund (AIF) regulations introduced by SEBI in 2012, including the three categories of AIFs and conditions applying to all AIFs like minimum corpus, maximum investors, and sponsor contribution. The document also discusses foreign investment in the domestic pooling vehicles, noting that FIPB approval is not required if set up as a Category I AIF company but is required for trusts or other AIF categories.
The document summarizes IFC's Access to Finance programs in Africa, which have three pillars: increasing access to financial services for individuals and small businesses, strengthening banks and financial institutions to serve SMEs and specific sectors, and strengthening financial systems through institutions, technologies, and standards. It provides details on IFC's focus on financial infrastructure like credit bureaus and collateral registries to address market failures in access to finance in Africa. The document outlines IFC's approach, including building stakeholder capacity, impact monitoring, and knowledge sharing. It highlights the positive impacts of IFC's financial infrastructure programs in countries/regions like West Africa, Ghana, Afghanistan, and others.
The document discusses SME lending in India. It notes that SMEs contribute significantly to the Indian economy, providing over 40% of exports and employing over 60 million people. However, SME lending as a percentage of GDP in India is lower than other major countries. The document then provides details on the classification of SMEs, key stakeholders in SME lending like banks and government bodies, the loan approval workflow, and value parameters from the perspective of both lenders and borrowers.
This document provides information on non-banking financial companies (NBFCs) in India. It defines what an NBFC is, provides historical background on regulations of NBFCs, discusses various committees formed to address NBFC regulations, compares NBFCs and banks, outlines key NBFC regulations, and describes the different types of NBFCs including their roles and business models. The types of NBFCs discussed include mutual benefit companies, investment companies, housing finance companies, equipment leasing companies, loan companies, chit funds, and factoring companies.
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of Loans , Advances, Acquisition of shares/stock/bonds/debentures/ securities issued by Government or local authority or other securities of like marketable nature, Leasing, Hire-purchase, Insurance business, Chit business.
A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company).
This document defines and describes non-banking financial companies (NBFCs) in India. It states that NBFCs are companies registered under the Companies Act of 2013 that are engaged in financial activities like lending, leasing, investments, but do not carry out regular banking activities. NBFCs must be registered with the Reserve Bank of India and comply with regulations around minimum capital, liquid assets, public deposits, interest rates, and credit ratings. The document also outlines different types of NBFCs including mutual benefit companies, investment companies, equipment leasing companies, hire purchase companies, and loan companies.
All you want to know about the NBFC - EntersliceAnujRathore15
An NBFC is a non-banking institution that provides banking services like loans and advances. It is registered under the Companies Act and regulated by the RBI. The key types of NBFCs include asset finance companies, investment companies, loan companies, and infrastructure finance companies. NBFCs play an important role in extending credit to underserved segments. While they are less stringently controlled than banks, deposits with NBFCs are not insured. The future of NBFCs in India looks promising as they can help meet the large unmet credit demand, especially as banks face rising bad debts. However, NBFCs must comply with various RBI regulations regarding capitalization, branches, audits, and reporting.
A Non Banking Financial Company (NBFC) is a company registered under the Companies Act that engages in financial activities like lending, but does not have a banking license. NBFCs cannot accept demand deposits or issue cheques. They must register with the Reserve Bank of India and are regulated differently than banks. NBFCs are classified into categories like Asset Finance Companies, Investment Companies, and Loan Companies. NBFCs can accept public deposits if authorized by RBI and if they meet minimum capital requirements. There are also regulations around interest rates, gifts/incentives, and disclosures for deposits accepted by NBFCs.
Presentation on non bank financial companiesbhattapankaj
This presentation provides an overview of non-bank financial companies (NBFCs) in India. It defines NBFCs as non-banking institutions that provide banking services without a banking license. It outlines the different types of NBFCs according to the Reserve Bank of India and describes their key functions. These include accepting deposits, providing loans, asset financing, investment services, chit funds, and leasing. The presentation notes that while NBFCs cannot maintain demand deposits like banks, they play an important role in India's financial sector by promoting inclusive growth and contributing to key areas like infrastructure and small business lending.
NBFCs provide important financial services like lending and investing. They help drive economic development by creating employment, supplying long-term credit for infrastructure and commerce, mobilizing funds, strengthening financial markets, and contributing to growth in national income and GDP. However, NBFCs have some restrictions compared to banks like not accepting demand deposits or issuing cheques.
This document discusses non-banking financial institutions (NBFIs) in India. It defines NBFIs as financial institutions that provide banking services without a full banking license. It outlines key differences between NBFIs and banks, importance of NBFIs, functions of NBFIs like mobilizing savings and channeling funds, types of NBFIs including insurance companies and mutual funds, regulations NBFIs must follow, guidelines on fair practices, and top performing NBFIs in India like HDFC and Bajaj Finance.
This document provides information about non-banking financial companies (NBFCs) and banks in India. It defines NBFCs as financial intermediaries registered under the Companies Act of 1956 that are engaged in activities like lending, acquiring shares/stocks, leasing, hire purchasing, and insurance. NBFCs are classified into traditional and modern types, and include entities like equipment leasing companies, hire purchase companies, loan companies, and investment companies. The document also outlines some key features of NBFCs like mandatory RBI registration and restrictions on accepting public deposits, and compares NBFCs to banks in terms of functions like accepting deposits and granting loans.
NON - BANKING FINANCIAL COMPANIES IN INDIA & IT'S LEGAL FRAMEWORK Vishnu Rajendran C R
What is a Non-Banking Financial Company (NBFC)?
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).
This document provides information on non-banking finance companies (NBFCs) in India, including their classification and types. It discusses that NBFCs are divided into three categories based on whether they accept public deposits. It also outlines several types of NBFCs such as asset finance companies, investment companies, loan companies, infrastructure finance companies, and microfinance institutions. The key roles and qualifying criteria for each type are summarized.
This document provides information on non-banking finance companies (NBFCs) in India, including their classification and types. It discusses how NBFCs are classified into different categories based on whether they accept public deposits and their principal business activities. Some key NBFC categories mentioned include asset finance companies, investment companies, loan companies, infrastructure finance companies, and microfinance institutions. The document also briefly outlines the regulations for mutual benefit finance companies and the leasing and hire purchase services that can be provided by NBFCs.
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 or 1956 carrying on the business listed under Section 45 I (c ) of the RBI Act, 1934, i.e.
Non banking financial company- P. SAI PRATHYUSHA (PONDICHERRY UNIVERSITY)SaiLakshmi115
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Securitization is the process of combining various financial assets, such as mortgages, car loans, and credit card debt, into securities that are sold to investors. This is done through a special purpose vehicle (SPV) that purchases the assets from their originator and repackages them into new securities backed by those assets. Mortgage-backed securities are a common example, where mortgages are pooled, divided into tiers of risk, and sold as securities. SPVs play an important role by isolating risk, allowing assets to be securitized without affecting the originator, and providing bankruptcy protection for investors.
NBFCs play an important role in consumer finance and factoring in India. They provide financial services like loans, acquisition of financial instruments, leasing, hire purchase, and insurance to those underserved by banks. While they perform bank-like functions, NBFCs cannot accept demand deposits and do not have the same deposit insurance and payment system access as banks. To operate legally, NBFCs must register with the RBI and meet requirements on net owned funds, public deposit acceptance, and credit ratings. NBFCs help expand access to credit for consumers and small businesses.
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CRYPTOCURRENCY REVOLUTIONIZING THE FINANCIAL LANDSCAPE AND SHAPING THE FUTURE...itsfaizankhan091
Cryptocurrency, a digital or virtual form of currency that uses cryptography for security, has revolutionized the financial landscape. Originating with Bitcoin's inception in 2009 by the pseudonymous Satoshi Nakamoto, cryptocurrencies have grown from niche curiosities to mainstream financial instruments, reshaping how we think about money, transactions, and the global economy.
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Bitcoin was conceived as a peer-to-peer electronic cash system, aimed at providing an alternative to the traditional banking system plagued by inefficiencies, high fees, and lack of transparency. The underlying blockchain technology, a distributed ledger maintained by a network of nodes, ensures that every transaction is recorded and cannot be altered, thus providing a secure and transparent financial system.
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CRYPTOCURRENCY: REVOLUTIONIZING THE FINANCIAL LANDSCAPE AND SHAPING THE FUTURE
Cryptocurrency: Revolutionizing the Financial Landscape and Shaping the Future
Cryptocurrency, a digital or virtual form of currency that uses cryptography for security, has revolutionized the financial landscape. Originating with Bitcoin's inception in 2009 by the pseudonymous Satoshi Nakamoto, cryptocurrencies have grown from niche curiosities to mainstream financial instruments, reshaping how we think about money, transactions, and the global economy.
#### The Genesis of Cryptocurrency
The birth of Bitcoin marked the beginning of the cryptocurrency era. Unlike traditional currencies issued by governments and controlled by central banks, Bitcoin operates on a decentralized network using blockchain technology. This technology ensures transparency, security, and immutability of transactions, fundamentally challenging the centralized financial systems that have dominated for centuries.
Bitcoin was conceived as a peer-to-peer electronic cash system, aimed at providing an alternative to the traditional banking system plagued by inefficiencies, high fees, and lack of transparency. The underlying blockchain technology, a distributed ledger maintained by a network of nodes, ensures that every transaction is recorded and cannot be altered, thus providing a secure and transparent financial system.
#### The Proliferation of Altcoins
Following Bitcoin's success, thousands of alternative cryptocurrencies, or altcoins, have emerged. Each of these altcoins aims to improve upon Bitcoin or serve specific purposes within the digital economy. Notable examples include Ethereum, which introduced smart contracts – self-executing contracts with the terms of the agreement
2. What is NBFC?
A Non-Banking Financial Company (NBFC) is a company
registered under the Companies Act, 1956 and is engaged in
the business of
Loans , Advances, Acquisition of
shares/stock/bonds/debentures/ securities issued by Government
or local authority or other securities of like marketable nature,
Leasing, Hire-purchase, Insurance business, Chit business.
A non-banking institution which is a company and which has
its principal business of receiving deposits under any scheme
or arrangement or any other manner, or lending in any
manner is also a non-banking financial company (Residuary
non-banking company).
3. HISTORICAL BACKGROUND
The Reserve Bank of India Act, 1934 was amended on 1st
December, 1964 by the Reserve Bank Amendment Act, 1963
to include provisions relating to non-banking institutions
receiving deposits and financial institutions.
With a view to review the existing framework and address
these shortcomings, various committees were formed and
reports were submitted by them.
4. THE COMMITTEES
James Raj Committee (1974)
It was formed by the Reserve Bank of India in 1974.
Suggested for a ban on Prize chit and other schemes.
Based on these suggestions, the Prize Chits and Money
Circulation Schemes (Banning) Act, 1978 was enacted.
Dr. A.C. Shah Committee (1992)
Agenda for reforms in the NBFC sector.
Wide ranging recommendations covering
compulsory registration of large sized NBFCs,
prescription of prudential norms for NBFCs
more statutory powers to Reserve Bank for better regulation
of NBFCs.
5.
Vasudev Committee (1998)
RBI
should consider measures for easing the flow of
credit from banks to NBFCs
Consider prescribing a suitable ratio as between secured
and unsecured deposits for NBFCs.
Appointment of depositors’ grievance redressal
authorities with specified territorial jurisdiction.
A separate instrumentality for regulation and
supervision of NBFCs under the aegis of the RBI should
be set up, so that there is a great focus in regulation and
supervision of the NBFC sector.
6. NBFC’s Versus Bank’s
BANKS
NBFCS
Definition
Banking is acceptance of deposits
withdraw able by cheque or demand;
NBFC cannot accept demand deposits
NBFC are companies carrying
financial business
Scope of business
Scope of business of the bank is limited
by sec 16(1) of BR Act.
There is no bar on NBFC
carrying activity other then
financial activity.
Major limitation on
Business
No non banking activity are carried.
Cannot provide checking
facilities.
Foreign investment
Up to 74% is allowed to private sector
bank
Up to 100% is allowed
Need for a license
License norms are tightly controlled and
generally it is perceived to be quite
difficult to get a license for a bank
It is comparatively much easier
to get a registration as an
NBFC.
Regulations
BR Act and RBI Act lay down the
stringent control over the bank.
Much lesser control over NBFC
7. REGULATIONS
In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that
every NBFC should be registered with RBI to commence or carry on
any business of non-banking financial institution. However, to obviate
dual regulation, certain categories of NBFCs which are regulated by
other regulators are exempted from the requirement of registration with
RBI viz. Venture Capital Fund/Merchant Banking companies/Stock
broking companies registered with SEBI.
Should have a minimum net owned fund of Rs 25 lakh (raised to Rs
200 lakh wef April 21, 1999).
NBFC have to maintain 10 and 15 per cent of their deposits in liquid
assets effectively from January 1 and April 1,1998, respectively.
All NBFCs are not entitled to accept public deposits. Only those
NBFCs holding a valid Certificate of Registration with authorization to
accept Public Deposits can accept/hold public deposits.
8. REGULATIONS
They have to create reserve fund and transfer not less than
20 per cent of their net deposits to it every year.
The NBFCs are allowed to accept/renew public deposits
for a minimum period of 12 months and maximum period
of 60 months. They cannot accept deposits repayable on
demand.
NBFCs cannot offer interest rates higher than the ceiling
rate prescribed by RBI from time to time. The present
ceiling is 11 per cent per annum.
They have to obtain a minimum credit rating from anyone
of the three credit rating agencies.
NBFCs cannot offer gifts/incentives or any other
additional benefit to the depositors.
9. Role of NBFCs
Development
of
sectors
like
Transport
&
Infrastructure
Substantial employment generation
Help & increase wealth creation
Broad base economic development
Major thrust on semi-urban, rural areas & first time
buyers / user.
To finance economically weaker sections
10. IMPORTANCE OF NBFCs
In the present economic environment it is
very difficult to cater need of society by
Banks alone so role of Non Banking Finance
Companies and Micro Finance Companies
become indispensable.
The role of NBFCs as effective financial
intermediaries has been well recognised as
they have inherent ability to take quicker
decisions, assume greater risks, and
customise their services and charges more
according to the needs of the clients.
11. At present, NBFCs in India have become
prominent in a wide range of activities like
hire-purchase finance, equipment lease
finance, loans, investments, etc.
To help in developing the large number of
industries as well as entrepreneur in different
sectors of different areas.
To cover all the areas which is being
untouched or uncovered by RBI or other FCIs.
13. MUTUAL BENEFIT FINANCIAL
COMPANY (MBFC)
Nidhis or Mutual Benefit Finance Companies are
one of the oldest forms of non-financial
companies. It is a company structure in which
the company's owners are also its clients.
That is, the mutual company's profits are
distributed to its participating customers each
year in proportion to their individual exposures
to the company.
Many insurance companies are structured as
mutual companies.
14. Some of the important objectives of Nidhis are to
enable the members to save money, to invest their
savings and to secure loans at favorable rates of
interest.
They work on the principles of complete mutuality
of interest and are generally well-managed.
The Government has granted certain concessions
under Section 620A of the Companies Act, 1956.
Primarily regulated by Department of Company
Affairs (DCA) under the directions / guidelines
issued by them under Section 637 A of the
Companies Act, 1956.
The Government of India constituted an Expert
Committee in March 2000 (Chairman: Shri
P.Sabanayagam)
15. INVESTMENT COMPANY
Investment
Company is any financial
intermediary whose principal business is that of
buying and selling of securities.
It is a company whose main business is
holding securities of other companies purely
for investment purposes.
The investment company invests money on
behalf of its shareholders who in turn share in
the profits and losses.
Example : Mutual Fund Companies
16. CONCEPT OF MUTUAL FUNDS
• BENEFITS OF MUTUAL FUNDS
•
Diversification
•
Relatively Less Expensive, Well Regulated
•
Liquidity
•
Transparency, Professional Expertise , Flexibility
17. CLASSIFICATION OF MUTUAL
FUNDS
BY STRUCTURE:
Open Ended
Closed Ended
BY MANAGEMENT STYLE:
Actively managed
passively managed
BY INVESTMENT STYLE:
Value investing
Growth investing
Blend investing
•
BY CAPITALIZATION:
Large cap funds
Mid cap funds
Small cap funds
18. EQUIPMENT LEASING COMPANY
Equipment leasing company is any financial institution whose principal
business is that of leasing equipments or financing of such an activity.
Leasing
Leasing is a process by which a firm can obtain the use of a certain fixed
assets for which it must pay a series of contractual, periodic, tax
deductible payments.
The lessee is the receiver of the services or the assets under
the lease contract and the lessor is the owner of the assets. The
relationship between the tenant and the landlord is called a tenancy, and
can be for a fixed or an indefinite period of time (called the term of the
lease). The consideration for the lease is called rent.
20. Disadvantages
A net lease may shift some or all of the
maintenance costs onto the tenant.
If circumstances dictate that a business must
change its operations significantly, it may be
expensive or otherwise difficult to terminate a lease
before the end of the term.
If the business is successful, lessors may demand
higher rental payments when leases come up for
renewal. If the value of the business is tied to the
use of that particular property, the lessor has a
significant advantage over the lessee in
negotiations.
Example:
Shriram Transport Finance
Corporation
21. HIRE-PURCHASE COMPANY
Any financial intermediary whose principal business
relates to hire purchase transactions or financing of
such transactions.
A method of buying goods through making
installment payments over time.
Under a hire purchase contract, the buyer is leasing
the goods and does not obtain ownership until the
full amount of the contract is paid.
Hire purchase combines elements of both a loan and
a lease. You reach an agreement with the dealer to
pay an initial deposit, typically anything between
10% and 50%, and then pay off the balance in
monthly installments over an agreed period of time.
At the end of this period, the product is yours.
22. PROS & Cons
The main advantage of a hire purchase
agreement is that you can buy something you
couldn’t otherwise afford. Your monthly
payments are effectively secured against your car
– and this has both pros and cons. Positively, this
means you’re more likely to secure finance than
you would be by shopping around for an
unsecured loan as the lender has some ‘security’
in the form of your car – this is often reflected in
better interest rates.
23. On the downside however, you must be sure
you can keep up with payments or the lender
will have the right to repossess the vehicle.
For most however, this is a safer form of
finance than a regular secured loan – which
puts your house at jeopardy if you can’t meet
repayments.
Interest rates can be high.
24. LOAN COMPANY
Loan company means any financial institution whose principal
business is that of providing finance, whether by making loans
or advances or otherwise for any activity other than its own
(excluding any equipment leasing or hire-purchase finance
activity).
A loan is a type of debt. Like all debt instruments, a loan entails
the redistribution of financial assets over time, between the
lender and the borrower.
Types of loans:
Secured
:
A secured loan is a loan in which the
borrower pledges some asset (e.g. a car or property)
as collateral.
25. Unsecured : Unsecured loans are monetary loans
that are not secured against the borrower's assets.
Credit card debt
personal loans
Bank overdrafts
corporate bonds (may be secured or unsecured)
Demand: Demand loans are short term loans that
are typical in that they do not have fixed dates for
repayment and carry a floating interest rate which
varies according to the prime rate. They can be
"called" for repayment by the lending institution at
any time. Demand loans may be unsecured or
secured.
26. MISCELLANEOUS NON-BANKING
COMPANIES (MNBCS)
MNBCs are mainly engaged in the Chit Fund
business.
Conducting or supervising as a promoter, by
which the company enters into an agreement
with a specified number of subscribers that
every one of them shall subscribe a certain sum
in instalments over a definite period and that
every one of such subscribers shall in turn, as
determined by lot or by auction or by tender or
in such manner as may be provided for in the
arrangement, be entitled to the prize amount.
27. A chit scheme generally has a predetermined
value and duration. Each scheme admits a
particular number of members (generally equal to
the duration of the scheme), who contribute a
certain sum of money every month (or everyday)
to the ’pot’. The ’pot’ is then auctioned out every
month. The highest bidder (also known as the
prized subscriber)wins the ’pot’ for that month.
The bid amount is also called the ’discount’ and
the prized subscriber wins the sum of money
equal to the chit value less the discount. The
discount money is then distributed among the
rest of the members (or the non-prized
subscribers)as ’dividend’ and in the subsequent
month, the required contribution is brought down
by the amount of dividend.
28. The Chit Fund companies have been
exempted from all the core provisions of
Chapter IIIB of the RBI Act including
registration.
In terms of Miscellaneous Non-Banking
Companies (RB) Directions, the companies
can accept deposits up to 25 per cent and 15
per cent from public and shareholders,
respectively, for a period of 6 months to 36
months, but cannot accept deposits
repayable on demand/notice.
29. RESIDUARY NON-BANKING
COMPANIES (RNBCS)
Company which receives deposits under any scheme or
arrangement, by whatever name called, in one lumpsum or in instalments by way of contributions or
subscriptions or by sale of units or certificates or other
instruments, or in any manner are called RNBCs.
RNBCs are a class of NBFCs which cannot be classified
as
equipment
leasing,
hire
purchase, loan, investment, nidhi or chit fund
companies, but which tap public savings by operating
various deposit schemes.
The deposit acceptance activities of these companies
are governed by the provisions of Residuary Non
Banking Companies (Reserve Bank) Directions, 1987
30. These directions include provisions relating to
the minimum (not less than 12 months) and
maximum period (not exceeding 84 months) of
deposits, prohibition from forfeiture of any part
of the deposit or interest payable
thereon, disclosure requirements in the
application forms and the advertisements
soliciting deposits and periodical returns and
information to be furnished to the Reserve
Bank.
Ten NBFCs are still functioning as RNBCs, the
total deposits of which amounted to nearly Rs.
11,000 crore, constituting about 57.0 per cent of
the total deposits of all reporting NBFCs.
31. HOUSING FINANCE
The shelter sector of the
Indian financial system
remained
utterly
underdeveloped till 1980.
The lack of adequate
institutional supply of
credit for house building
was the main gap in the
process
of
financial
development in India.
32. The
Indian housing industry is highly
fragmented, with the unorganized sector,
comprising small builders and contractors,
accounting for over 70% of the housing units
constructed and the organized sector
accounting for the rest.
The organized sector comprises large
builders and government or government
affiliated entities.
33. Banks now control 40% of this market and
continue to show explosive growth.
Finance for housing is provided in the form of
mortgage loans.
The suppliers of house mortgage loans in India
are : HUDCO, SHFSs, central and state
governments, HDFC, Commercial Banks, LIC
(Jeevan Kutir & Jeevan Niwas) and NHB.
34. FACTORING
Factoring is defined as ‘a continuing legal
relationship
between
a
financial
institution(the factor) and a business
concern (the client), selling goods or
providing services to trade customers (the
customers) on open account basis whereby
the Factor purchases the client’s book debts
(accounts receivables)either with or without
recourse to the client and in relation thereto
controls the credit extended to customers
and administers the sales ledgers’.
35. FACTOR : A factor is a financial institution
which manages the debt collection on
behalf of its clients and bears the credit
risks associated with these.
For servicing the receivables and bearing
the risk, the factor charges a fee which is
usually 1-3 % of the face value of the
receivables. As to the payment to the
client, the factor may do so as the amount
is collected, or he make an advance
payment. In the later, the factor will
charge an interest in addition to a fee.
36. Factoring mechanism
The parties involved in a factoring arrangement
are:
1. The Client or the seller
2. The Debtor or the buyer
3. The Factor (International factoring may have a
correspondent factor in addition to the domestic
factor)
37.
38. FINANCIAL SECTOR REFORMS
NBFCs having foreign investment more than
75% and up to 100%, and with a minimum
capitalisation of US$ 50 million, can set up
subsidiaries for specific NBFC activities,
without any restriction on the number of
operating subsidiaries and without bringing
in additional capital :RBI
39. NBFC-MFI norms modified: . In order to
provide encouragement to NBFCs operating in
the north-eastern region, the minimum NOF is
to be maintained at Rs.1 crores by March
31, 2012, and at Rs.2 crores by March 31, 2014.
Operational flexibility : To allow operational
flexibility, the RBI has asked the NBFCs to ensure
that the average interest rate on loans during a
financial year does not exceed the average
borrowing cost during that financial year plus the
margin, within the prescribed cap.
40. Overview of Present Position
NBFCs are highly heterogeneous, continue to
offer wide range of niche and tailor-made
financial services.
In terms of relative importance of various
activities financed by them, hire purchase finance
is the largest activity, accounting for greater than
1/3rd of total assets, followed by loans and
equipment leasing.
The number of NBFCs have declined after 2000
due to mergers, closures, cancellation of licenses,
regulatory strictness.
41. The maximum rate of interest that NBFCs can
pay on their deposits has been reduced from
12.5 % to 11% per annum w.e.f March 4, 2003.
The NPAs of NBFCs has not shown a clear
decline over the years.
There has been a decline in the shares of
deposits in their total sources of funds which
has made them rely more on market
borrowings which has ultimately caused
increase in their cost of funds.
RBI has decided to impose penalties on NBFCs
having deposits of Rs. 50 crores & above if they
don’t submit periodic returns to RBI.
42. CONCLUSION
The NBFCs have not been very much profitable.
The operating cost of NBFCs has increased and
it stands much higher than co-operative banks.
This is one area in which improvement is
needed.
Enhancing the credit delivery mechanisms: The
credit delivery mechanism needs to be more
transparent and hassle free. There should be more
stringent norms for the defaulters.
43. Strengthening the professionalism of
NBFC sector through education and
training, making them more organised, RBI
needs to educate people about NBFC, to
reduce interest cost and hence benefit the
ultimate consumer.
Editor's Notes
After studying the various money circulation schemes which were floated in the country during that time and taking into consideration the impact of such schemes on the economy, the Committee after extensive research and analysis had