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³Non-Banking Finance Companies´

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A genda

Introduction

DefinitionServices Provided by NBFCsClassification of NBFCsOverview of NBFCsRole of NBFCs

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Introduction

Non-Banking Financial Companies are veryimportant.

NBFCs are financial intermediaries engagedprimarily in the business of accepting depositsdelivering credit.

They play an important role in channelising thescarce financial resources to capital formation.

NBFCs supplement the role of banking sector inmeeting the increasing financial needs of the corporatesector, delivering credit to the unorganized sector andto small local borrowers.

A ll NBFCs are under direct control of RBI in India.

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NBFCs - Definition

NBFCs are defined as, Non-Banking financialcompany (NBFC), Which is a loan company or aninvestment company or a hire purchase company

or an equipment leasing company or a mutualbenefit finance company.

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Services

NBFCs provide a wide range of services such as, A Hire purchaseEquipment lease financeLoans and investments

Due to the rapid growth of NBFCs and a widevariety of services provided by them, there hasbeen a gradual confusion between Banks andNBFCs except that commercial banks have theauthority to issue cheques.

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Classification of NBFCsEquipment Leasing CompanyHire Purchase CompanyInvestment CompanyLoan CompanyMiscellaneous Non-Banking Companies

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(Continued«)

Equipment Leasing Company

Equipment Leasing Company means thecompany which is a financial institution carryingon the activity of leasing of equipments as itsmain business.

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Hire Purchase Company

It is a company which is a financial institutioncarrying on its main activity as hire purchasetransactions or the financing of such transactions.

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Loan Company

It means any company which is a financialinstitution carrying on as its main business byproviding finance whether by making loans or advances.

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Miscellaneous Non-Banking

Companies

Miscellaneous Non-Banking Companies are thecompanies engaged in the chit fund business.

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Overview Of NBFC Sector

NBFCs have seen considerable businessmodel shift over last decade because of regulatory environment and market dynamics.

Majority of NBFCs were not able to face thepressure created on, and were wiped out.

However, since 2001-2002, there has beensignificant improvement in the business model of

existing NBFCs.

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Continued«

In the early 2000s, the NBFC sector in India wasfacing following problems:

High cost of FundsSlow industrial growthStiff competition with NBFCs as well as with banking sector

Small balance sheet size resulting in high cost of fund andlow asset profile

Non performing assets

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Role of NBFCs

A s recognized by RBI and expert committees

Development of sectors like Transport & Infrastructure

Substantial employment generation

Help & increase wealth creation

Broad base economic development

Irreplaceable supplement to bank credit in rural segmentsmajor thrust on semi-urban, rural areas & first time buyers / users

To finance economically weaker sections

Huge contribution to the State exchequer

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Role of NBFCs (Contd...)

70-80% of Commercial Vehicles are finance driven

± Indian economy is more dependent on roads ± Heavy Govt. outlay for mega road projects ± Heavy replacement demand anticipated ± 3 0 lacs

commercial vehicles by the year 2007 ± A nother Rs.6000 Crores required for phasing out old

commercial vehicles ± CRISIL in its study has placed commercial vehicle

financing under ³low risk´ category ± Each commercial vehicle manufactured, sold and financed

gives employment to minimum 20 persons (direct andindirect)

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Other Customer Services

NBFCs provide financial assistance totheir borrowers in case of emergencyneedsNBFCs provide assistance and guidanceto their customers in matters relating toinsurance

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CRE A TED A ND PRESENTEDBY

A DITY A A G A RW A L

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Thank You «

nbfc ppt a

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