NBFCs.pdf

8/13/2019 NBFCs.pdf

1/22

Non-Bank ing Fin an cial In st i tu t ions

Chapt er VI

1. In troduct ion

6.1 Non-bank ing financial institutions (N BFI s)

are an important part of the Indian financial

system. T he NB FI s at pr esent consi st of aheterogeneous group of institutions that cater to

a wide range of financial requirem ents. T he major

interm ediaries include financial institutions (F Is),

non-bank ing financial companies (N B FC s) and

pri m ary dealers (P D s).

6.2 T hi s chapter provides an analysis of the

financial performance and soundness indicators

related to each segm ent of N BFI s duri ng 2011-12.

T he chapter i s organised i nto five sections. Section

2 analyses the financial perform ance of FI s, whi le

Section 3 discusses the financial perform ance of

NB FC s-D and NB FC s-ND -SI , including R NB C s.

Section 4 provides an analysis of the perform ance

of PD s in the pri m ary and secondary m ark ets,

followed by the overall assessm ent i n S ection 5.

2. Financia l Ins t i tu t ions

6.3 A s at end-M arch 2012, there were fi ve

financial institutions (FIs) under the full-fledged

regulati on and supervision of the R eserve Bank ,

v i z. , E xport Import Bank of India (E X IM Bank ) ,

N a t io na l B ank f or A gr i cu l ture and Rur a l

D evelopment (N AB AR D ), N ational H ousing B ank

(N H B ), Sm all Industri es D evelopm ent Bank of

I ndia (SI D B I ) and Industrial I nvestment Bank of

India ( I IBI) (Table VI.1). However, I IBI is in the

process of voluntary winding-up.

The non-banking financial sector is witnessing a consolidation process, with smaller NBFCs (deposit-

taking) opting for either merger or closure and some larger ones getting converted into non-deposit-

taking NBFCs. NBFCs are comfortably placed with higher capital. The financial performance of

deposit-taking Non-Banking Financial Companies (NBFCs-D) showed an improvement as reflected

in the increase in their operating profits mainly emanating from growth in fund-based income.

Systemically Important-Non-deposit taking NBFCs (NBFCs-ND-SI) segment continued to rely on

bank finances for their resource requirement. There is sign of deterioration in the quality of assets in

respect of NBFCs-ND-SI. The set of regulations prescribed for NBFCs sector is expected to make the

NBFCs more resilient in the medium term. The combined balance sheets of financial institutions(FIs) expanded and operating profit as well as net profit have increased significantly. The impaired

assets of the FIs showed increase and are a matter of concern. The increase in expenses of PDs more

than compensated for the increase in income which led to reduced profit. PDs are comfortably placed

with higher CRAR.

Table VI.1: Owner sh ip Patt ern of

Financia l Ins t i tu t ions

(A s on M arch 31, 2012)

I nsti tution O wnership Per cent

1 2 3

E X I M B ank G overnm ent of I ndia 100

NAB AR D G overnm ent of I ndia

R eserve Bank of India

99.3

0.7

NH B R eserve B ank of I ndia 100

SI D B I * Public Sector B ank s

Insurance Compani es

Financial Institutions

O thers

62.5

21.9

5.3

10.3

*ID BI Bank Ltd. ( 19.2 per cent), S tate Bank of India (15.5 per cent) andL ife Insurance Corporation of I ndia ( 14.4 per cent) are the three maj or

shareholders in SI D BI .

8/13/2019 NBFCs.pdf

2/22

121

Non-Banking Financial Ins t i tut ion s

Operations of Finan cia l Inst i tut ions

Combin ed ba la nce sheets of f inanc ia l

inst i t u t i ons (FIs) expan ded

6.4 T he financial assistance sanctioned and

di sbursed by FI s increased dur ing 2011-12 due

to increase in sanctions and di sbursem ents made

by i nvestment i nstitutions (L I C and G I C ) and

specifi ed financial i nstitutions (I V C F and T FC I ).

H owever, sanctions and di sbursements m ade by

I FC I have declined i n 2011-12 (T able V I .2 and

Appendix T able VI .1).

Asset s an d Liabilities of FIs

6.5 T he com bi ned balance sheets of FI s

expanded dur ing 2011-12. O n the liabi li ties side,

deposits and bonds and debentures remain the

m ajor sources of borr owings dur ing 2011-12. O n

the assets side, loans and advances conti nued to

be the si ngle largest component, contr i buti ng

m ore than four-fi fth of the total assets of the FI s

(T able VI .3).

Table VI.2: Financial Assis tance Sanctioned and

Disbursed by Financia l Ins t i tu t ions(Am ount in `billion)

C ategory A mount Percentage

Variation

2010-11 2011-12 2011-12

S D S D S D

1 2 3 4 5 6 7

(i) All-India

Term-lendi ng

Instituti ons *

545 472 478 478 -12.2 1.2

(ii) Specialised

Financial

Instituti ons #

9 5 11 8 21.3 66.8

(iii) Investment

Instituti ons @

450 401 544 520 20.8 29.5

Total Assistance by

FIs (i+ ii+ ii i)

1 ,0 0 4 8 7 8 1 ,0 3 3 1 ,0 0 6 2 .9 1 4 .5

S: Sanctions. D : D isbursements.

* : R elating to IFC I, SID BI and II BI.

# : R elating to IV CF, IC IC I Venture and T FC I.

@ : R elating to LI C and GI C & erstwhile subsidiaries (NIA , U IIC and

O I C ) .

Notes: 1. Com ponents m ay not add up to the whole due to round in goff.

2. D ata pertain in g to 2011-12 are provi sional.

Source: R especti ve Fi nancial Institu ti ons.

Table VI.3: Liabilities and Assets of

Financia l Ins t i tu t ions

( As at end-M arch)(Am ount in `m ill ion)

I tem 2011 2012 P Percentage

Variation

Liabilities

1. C api tal 49,000

(1.7)

62,000

(1.8)

26.5

2. R eserves 4,26,071

(14.7)

4,65,001

(13.8)

9.1

3. Bonds & D ebentures 9,00,968

(31.0)

10,72,973

(31.9)

19.1

4. D eposi ts 9,27,817

(31.9)

10,90,780

(32.4)

17.6

5. Borrowings 4,26,807

(14.7)

4,95,207

(14.7)

16.0

6. O ther L i abi li ties 1,75,493

(6.0)

1,77,294

(5.3)

1.0

Tota l Liab ilit ies /Assets 2 9 ,0 6 ,1 5 6 3 3 ,6 3 ,2 5 5 1 5 .7

Assets

1. C ash & B ank Balances 65,219

(2.2)

67,398

(1.9)

3.3

2. Investm ents 1,18,023

(4.1)

1,25,559

(3.7)

6.4

3. L oans & A dvances 25,61,759

(88.2)

29,82,001

(88.7)

16.4

4. Bi lls D iscounted/

R ediscounted

35,422

(1.2)

29,636

(0.9)

-16.3

5. Fixed Assets 5,374

(0.2)

5,364

(0.2)

-0.2

6. O ther Assets 1,86,822

(6.4)

1,53,297

(4.6)

-17.9

P: Provisional.

Notes: 1. Data pertain to 4 F Is, vi z. , EX I M B ank , NA B A R D , NHB &S I D B I .

2. Fi gures in parentheses are percentages to total L i abil iti es/

Assets.

Source: Audited OSM O S Returns of EX IM Bank, NAB ARD and SIDBIended M arch 31, and for N H B J une 30.

Resou rces Mobilised by FIs

Comm ercia l Paper (CP) is the m ajor source of

funds

6.6 T he resources m obi li sed by FI s dur ing

2011-12 were considerably higher than in the

previous year. T he NH B has m obi li sed the largest

amount of resources, followed by NABAR D , SI D B I

and EX IM Bank (T able VI .4) .

6.7 D ur ing 2011-12, there was a signi ficant

increase in the resources raised by FI s thr ough

comm ercial paper (C P) , which accounted for m ore

than 70 per cent of the total resources m obi li sed

from the m oney m ark et (T able V I .5).

8/13/2019 NBFCs.pdf

3/22

122

Repor t on Trend and P rogres s of Banking in India 20 11-12

Sources an d Uses of Fund s

6.8 T he m ajori ty of the funds raised were used

for fr esh deploym ents, fol lowed by repaym ent of

past borr owings (T able V I .6) .

Matur i ty and Cost of Borrowings an d Len ding

6.9 T he wei ghted average cost of R up ee

resources raised went up across the board. Whi le

the weighted average m atur i ty of R upee resources

raised by SI D B I and NA BAR D has gone up, i n the

case of E X I M B ank and NH B they came down

duri ng 2011-12 (T able VI .7). While both E X I M

B ank and SID B I r aised their pri m e lending rate

dur i ng the year, the NH B k ept i t unchanged

(T able VI .8).

Table VI.4: Resources Mobilised by Finan cial Insti tu tions(Am ount in `billion)

I nsti tutions Total R esources R aised Total O utstanding(A s at end-M arch)

L ong T erm Short T erm Forei gn C urrency Total

2010-11 2011-12 2010-11 2011-12 2010-11 2011-12 2010-11 2011-12 2011 2012

1 2 3 4 5 6 7 8 9 10 11

EX I M B an k 111 88 15 55 111 84 237 227 472 547

NA BA R D 97 179 185 90 - - 283 269 339 423

NH B 75 555 295 827 - - 370 1,382 109 607

SI D B I 100 139 23 80 12 20 135 239 341 440

Total 3 8 4 9 6 1 5 1 8 1 ,0 5 2 1 2 3 1 0 4 1 ,0 2 5 2 ,1 1 7 1 ,2 6 1 2 ,0 1 6

- : Nil/Negligible.

Note:L ong-term R upee resources com pri se borr owings by way of bonds/debentures; short-term resources compr ise CP, term deposits, I C D s, C D s and

borr owing from th e term m oney m ark et. Foreign currency resources largely com pri se bonds and borrowi ngs in th e internati onal m ark et.

Source :R espective F I s.

Table VI.5: Resourc es Raised b y Fina ncialIns t i tu t ions from Money Market

( As at end-M arch 2012)(Am ount in `mi ll ion)

Instrument E X I M NA BA R D NH B SID B I Total

1 2 3 4 5 6

A. Total 4 9 ,3 5 5 9 0 ,3 4 7 2 8 ,9 5 3 5 0 ,9 1 5 2 ,1 9 ,5 7 0

i ) Term D eposi ts 8,193 70 2,184 8,419 18,866

i i ) Term M oney - 4,381 - - 4,381

i i i ) Inter-

corporate

D eposi ts - - - - -

iv) Certi ficate of

D eposi ts 536 12,810 - - 13,346

v) Comm ercial

Paper 40,626 73,086 4,889 42,496 1,61,097

vi) Short-term

loans from

bank s - - 21,880 - 21,880

Memo:

B. Umbrella Limit 7 5,4 58 2 ,0 7,9 41 4 1,5 50 8 9,6 73 4 ,1 4,6 22

C. Utilisation of

Umbrella l imit

( A as percentage

of B)

65.4 43.5 69.7 56.8 53.0

- : Nil/Negligible.

Source :Fortni ghtly return of resources m obili sed by financial i nstituti ons,

Table VI.6: Pa t te r n of Sources and Deploymen t

of Fun ds of Financia l Ins t i tu t ions

(Am ount in `billion)

I tem As at

end-

M arch

2011

As at

end-

M arch

2012

Percentage

Variation

1 2 3 4

A. Sources of Fund s (i+ ii+ii i) 2,978(100.0)

4,252

(100.0)

42.8

i . I nternal 1,632

(54.8)

2,623

(61.7)

60.7

i i . E xternal 1,191

(40.0)

1,495

(35.2)

25.6

i i i . O thers@ 155

(5.2)

134

(3.2)

-13.7

B. De plo ym e n t of Fu n d s (i + ii+ i ii) 2 ,9 7 8(100.0)

4 , 2 5 2(100.0)

4 2 . 8

i . Fresh D eploym ent 1,747

(58.7)

2,739

(64.4)

56.8

i i . R ep aym en t of p ast bor r owi ngs 840

(28.2)

1,290

(30.4)

53.7

i i i . O ther D eploym ent 391

(13.1)

222

(5.2)

-43.2

of which: I nterest Paym ents 142

(4.8)

145

(3.4)

1.9

@ I ncludes cash and balances with b ank s, balances with the R eserve

Bank and other bank s.

Notes: 1. EX IM Bank , NABAR D , NHB and S IDB I .

2. Figures in parentheses are percentages to totals.


8/13/2019 NBFCs.pdf

4/22

123


Table VI.7: Weighted Average Cost and

Maturity of Rupee Resources Raised by

Selec t Financia l Ins t i tu t ions

Institutions Weighted Average Cost

(Per cent)

Weighted Average M aturi ty

(years)

2010-11 2011-12 P 2010-11 2011-12 P

1 2 3 4 5

E X IM B ank 8.4 9.0 2.9 2.8

SI D B I 7.0 7.2 2.5 3.7

NA BA R D 7.1 9.5 1.1 1.9

NH B 7.2 8.8 2.5 0.9

P: provisional.


Table VI.8: Long-term PLR Stru ctu re of Select

Financia l Ins t i tu t ions(Per cent)

E ffective E X IM B ank SID B I NH B

1 2 3 4

M arch 2011 14.0 11.0 10.5

M arch 2012 15.0 12.75 10.5

Source: R especti ve FI s.

Table VI.9: Finan cial Perform an ce of Select

All-India Financial Insti tutions

(Am ount in `m ill ion)

2010-11 2011-12 Var iation

Amount Percentage

A) In com e (a+ b ) 1 ,8 5 ,0 1 8 2 ,2 6 ,6 4 7 4 1 ,6 2 9 2 2 .5

a) I nter est I n com e 1, 80, 167

(97.4)

2,16,887

(95.7)

36,720 20.4

b) Non-I nterest

Income

4,851

(2.6)

9,760

(4.3)

4,909 101.2

B) Exp en d itu re (a+ b) 1 ,3 7 ,4 2 2 1 ,6 2 ,9 0 8 2 5 ,4 8 6 1 8 .5

a) I nterest

Expenditure

1,22,589

(89.2)

1,48,852

(91.4)

26,263 21.4

b) O perating

E xpenses

14,833

(10.8)

14,057

(8.6)

-776 -5.2

of which

Wage B i ll 10,981 10,175 -806 -7.3

C) Provisions for

Taxation

1 2 ,8 1 9 1 6 ,4 5 1 3 ,6 3 2 2 8 .3

D) Profit

O perating Profi t (PB T ) 39,374 48,849 9,475 24.1

Net Profi t (PAT ) 26,556 32,399 5,843 22.0

E) Financial Ratios @

O perating Profi t 1.46 2.81

Net Profi t 0.98 1.03

Incom e 6.85 7.23

Interest I ncome 6.67 6.92

O ther I ncom e 0.18 0.31

E xpendi ture 5.09 5.20

Interest E xpendi ture 4.54 4.75

O ther O perating

E xpenses

0.55 0.45

Wage B i ll 0.41 0.32

Provisions 0.47 0.52

Spread

(Net Interest Income)

2.13 2.17

@ : as percentage of T otal A verage Assets.

Notes: 1. Fi gures in par entheses are percentages to total I ncome/

Expenditure.

2. Percentage var iati on could be slightly di fferent because

absolute numbers have been r ounded off to `mi ll ion.

Source :Audited OSM O S Returns of EX IM Bank, N ABAR D and SIDB I

ended M arch 31, and for NH B J une 30.

Financial Performance of FIs

The pro f i tab i l i t y o f FIs substan t ia l ly increased

w i th reduct ion in w age b i ll

6.10 Both the operating profit and net profit of

FI s increased signi ficantly dur ing 2011-12 ( T able

V I .9) . T he return on assets (R oA) i s highest for

SI D BI fol lowed by the NH B, E X IM Bank and

NAB AR D (Table V I .10) .

Table VI.10: Select Financial Parameters of Financial Insti tutions(A s at end-M arch)

(Per cent)

I nsti tution I nterest I ncom e/

Average Work in g Funds

Non-I nterest I ncome/


O perating Pr ofit/


R eturn on A verage Assets

(Per cent)

Net Profi t per Em ployee

(`mi ll ion)

2011 2012 2011 2012 2011 2012 2011 2012 2011 2012

1 2 3 4 5 6 7 8 9 10 11

E X I M B ank 6.5 7.1 0.5 0.6 2.2 2.5 1.2 1.1 24 27

NAB A R D 6.2 6.5 0.1 0.2 1.3 1.4 0.9 0.9 3 4

NH B * 7.7 8.6 0.04 0.05 1.7 2.1 1.1 1.3 32 38

SI D B I 8.0 8.5 0.3 0.2 2.9 3.4 1.8 2.0 5 5

*: Position as at the end of June.

Source :Statements furni shed by the FI s.

8/13/2019 NBFCs.pdf

5/22

124


Soun dn ess Indicators: Asset Quali ty

NPAs of FIs ha ve gone up substan t ia l ly d ur ing

the year

6.11 A t the aggregate level, the net NPA s of FI s

have increased substantially. T he increase in net

NPAs, however, was attributable m ainly to SID B I

and EX IM Bank . While NA BA R D has maintained

the same level, the NH B has reported no NPAs

duri ng 2011-12 (T able V I .11).

6.12 T here was a substantial increase in the

sub-standard and doubtful assets of EX I M B ank

(T able V I .12). T he higher N PAs in respect of E X I M

B ank m ay be a reflecti on of the conti nued

unfavourable external envir onm ent, especially in

the context of Indias increased integration with

the world econom y.

Capita l Adequ acy

FIs are comfor tab ly p laced wi th cap i ta l

6.13 D ur ing the year 2011-12, all four FI s have

m aintained a higher C R A R than the m ini m um

stipulated norm of 9 per cent (T able V I .13) .

3. Non-Banking Finan cia l Comp anies

Th r ee new ca tego r i e s o f NBFCs have been

created Infr astr uctu re Debt Fun ds (NBFC-IDF ),

Micro Finan ce Inst i tu t ion (NBFC-MFI) and NBFC-

Factors

6.14 NB FC s are classi fied into two categori es,

based on the liability structure, v iz . , C ategory A

compani es (N BFC s accepting publi c deposi ts or

N B FC s-D ), and Category B com panies (N B FC s

not ra is ing publ ic deposi ts or N B FC s-N D ) .

N B FC s-D are subj ect to requi rem ents of capi tal

adequacy, li qui d assets m aintenance, exposure

norms (including restrictions on exposure to

investments in land, building and unquoted

sh a r e s) , A L M d i sci p l i n e a n d r ep o r t i n g

requir em ents; in contrast, until 2006 NB FC s-ND

were subject to mi nim al regulation. S ince Apri l 1,

2007, non-deposi t tak ing N BFC s wi th assets of `1

bi l l ion and above are being classi f ied as

System i cally I m portant N on-D eposi t tak i ng

NBFC s (N BFC s-ND -SI ), and prudential regulations,

such as capi tal adequacy r equi r ements and

exposure norms along with reporting requirements,

have been m ade applicable to them . T he asset

l i ab i l i ty m anagem ent (A L M ) r eport ing and

di sclosure norm s have also been made appl icable

to them at di fferent points of tim e.

Table VI.11: Net Non-Performing Assets

( As at end-M arch)


I nsti tuti ons Net NPAs Net NPAs/Net L oans (Per cent)

2011 2012 2011 2012

1 2 3 4 5

E X I M B ank 930 1,558 0.2 0.3

NAB AR D 298 371 0.02 0.02

NH B .. . . . . . .

S I D B I 1,321 1,847 0.3 0.4

All FI s 2,549 3,776 0.1 0.13

.. : Not Available.

Source: Audited OSM O S Returns of EX IM Bank, NABA RD and SIDBI

ended M arch 31, and for NH B J une 30.

Table VI.12 : Asset Classification of Fina ncial In sti tu tions

(A s at end-M arch)

(Am ount in `mi ll ion)

I nsti tution Standard Sub-Standard D oubtful L oss

2011 2012 2011 2012 2011 2012 2011 2012

1 2 3 4 5 6 7 8 9

E X IM B ank 4,55,628 5,37,340 1,966 4,044 2,456 3,871 358 44

NA BA R D 13,94,594 16,49,324 - 221 681 681 10 10

NH B * 2,25,814 2,85,185 .. . . . . . . . . . .

S I D B I 4,59,215 5,36,034 1,427 2,123 1,364 385 - 1,227

A ll FIs 25,35,251 30,07,883 3,393 6,388 4,501 4,937 368 1,281

- : N il/Negligible. .. : Not A vailable. * : Position as at the end of June 2011 as per O SM O S r eturns.

Source :Audited OS M O S R eturns of EX IM Bank, N ABA RD and SID BI ended M arch 31, and for NH B June 30.

8/13/2019 NBFCs.pdf

6/22

125


6.15 N B FC s are also classi fied i n term s of

activities into Asset Finance Companies (AFC),

Investment Companies ( IC) , Loan Companies

(LC), Infrastructure Finance Companies (IFC),

C ore Investment C ompanies (C IC ), I nfrastructure

D ebt Fund - N on-B ank ing Financial C ompanies

(I D F-N B FC ), N on-B ank ing Fi nancial Com pany

M icro F inance I nst i tut ions (N B FC -M FI ) and

N B FC -Factors . D ur i ng 2011-12, two new

categori es of N B FC s, v iz . , I nfrastructure D ebt

Funds NB FC (N BF C -ID F) and M icro Finance

I nst i tut ion ( N B FC -M FI ) were created andbrought under separate regulatory fram ework . I n

addi ti on, a new category of NB FC -Factors was

introduced in September 2012. Earlier in April

2010, a r egulatory fram ework for S ystem ically

I m portant C ore I nvestment Companies (C I C N D -

SI ) was created for compani es with an asset size

of `1 bill ion and above, whose business is

investment for the sole purpose of holdi ng stak es

in group concerns, are not trading in these

securities and are accepting public funds.Prudential requirements in the form of Adjusted

N et Worth and leverage were also pr escr ibed for

C I C -N D -SI s as they were gi ven exem ption from

N O F, capi tal adequacy and exposure norm s.

6.16 An NB FC -M FI is defined as a non-deposi t-

tak i ng N B FC ( other than a com pany li censed

under Section 25 of the Indian Companies Act,

1956) that fulfils the following conditions: (i)

M ini m um N et O wned Funds of `5 crore (`2 crore

for the N orth-eastern R egion), ( i i ) N ot less than

85 per cent of its net assets are in the nature of

quali fying assets, ( i i i ) the income i t derives from

the rem aini ng 15 per cent assets in accordance

with the regulations specified in that behalf. An

N B FC which does not qualify as an NB FC -M FI

shall not extend loans to the m icro finance sector,

i n excess of 10 per cent of i ts total assets. G i ven

the functional har dship faced by the M FI sector

followi ng the A ndhr a Pr adesh M i cro Fi nance

I nsti tutions (R egulations of M oney L endi ng)

O r di nance, 2010 and to give repr i eve to the

sector, the R eserve B ank m odi fied the regulatory

f ram ework for M F I s to al low for t i m e for

com pli ance to regulati ons and al low them to

regi ster wi th the B ank as N B FC -M FI early.

C onsidering the im portance of this sector for the

developm ent and regulati on of m i cro-finance

institutions to promote financial inclusion, the

M i cro-Fi nance I nstituti ons (D evelopm ent and

R egulation) B i ll, 2012 was introduced in the L ok

Sabha on M ay 22, 2012 (B ox V I .1).

6.17 T he ownership pattern of NBFC s-ND -SI as

well as deposi t-tak ing NB FC s as at end-M arch

2012, suggested that governm ent owned compani es

have a share of below 3 per cent ( T able VI .14) .

Pro file of NBFCs (in clud in g RNBCs)

Non-Ban k in g f inan c ia l com pan ies segment is

w i tnessing consol ida t ion

6.18 T he total num ber of NBFC s registered with

the Reserve Bank declined m arginally to 12,385

as at end-June 2012 (C hart VI .1). A sim ilar trend

was observed in the case of deposit-tak ing NB FC s

( N B FC s-D ) duri ng 2011-12, m ainly due to the

cancellation of Certi ficates of Registration (C O R )

and their exi t from deposi t-tak ing activi ties.

6.19 D espi te the decli ne i n the num ber of

N B FC s, thei r total assets as well as net owned

funds registered an increase during 2011-12,

whi le publi c deposi ts recorded a decli ne. T he

share of R esi duary Non-B ank i ng Com panies

(R N B C s) in the total assets of NB FC s showed a

decli ne. T he net owned funds of R N B C s have

Table VI.13 Capital to Risk (Weighted) Assets

Ratio of Select Financial Insti tutions

(A s at end-M arch)

(Per cent)

I nsti tution 2011 2012 P

1 2 3

E X IM B ank 17.0 16.4

NA BA R D 21.8 20.6

NH B * 20.7 19.7

SI D B I 31.6 29.2

*: Positi on as at the end of June 2012 as per O SM O S r eturns.

P: Provisional.

Source :Audited OSM OS Returns of EX IM Bank, N ABAR D and SID BIended M arch 31, and for NH B J une 30.

8/13/2019 NBFCs.pdf

7/22

126


T he M icro Fi nance Institutions (D evelopment andR egulation) B ill, 2012 aim s at providi ng a framework for the

development and regulation of micro-finance institutions.

T he Bill defines a mi cro-finance institution ( M FI ) as an

organisation, other than a bank , pr ovidi ng m icro-finance

servi ces as m icro credit faci li ti es not exceeding `5 lak h in

aggregate, or wi th the R eserve B ank s speci fication of `10

lak h per i ndi vidual. Subsid iar y servi ces li k e collection of

thr i ft, pension or i nsurance servi ces and remi ttance of

funds to individuals within India also come under these

servi ces. T he Bi ll allows the Central G overnm ent to create

a M icro-Finance D evelopment C ouncil ( M FD C ) that will

advi se on poli cies and m easures for the developm ent of

M FI s. B esides, the Bi ll allows the C entral G overnm ent toform S tate M icro-Fi nance Councils (SM FC ), which will

be responsible for co-ord inati ng the activi ti es of D istrict

M icro-Fi nance C ommi ttees in the respecti ve states.

D istrict M icro-Fi nance C omm ittees (D M FC ) can be

appointed by the R eserve Bank . T he B ill requir es all M FI s

to obtain a certi ficate of registration from the R eserve

B ank . T he applicant needs to have a net owned fund (the

aggregate of pai d-up equi ty capi tal and fr ee reserves on the

balance sheet) of at least `5 lak h. T he Reserve Bank should

also be satisfied wi th the general character or management

of the instituti on.

E very M FI wi ll have to create a reserve fund and theR eserve Bank may speci fy a percentage of net profi t to be

added annually to this fund. T here can be no appropr iati on

from thi s fund unless specified by the Reserve B ank . A t the

end of every financial year, M FI s are requi red to pr ovide

an annual balance sheet and profit and loss account for

audi t to the Reserve B ank . T hey will also have to provide

a return, detailing their activities within 90 days of the

B i ll being passed. Any change in the corporate structure

of a M FI , such as shut-down, am algamati on, tak eover or

restructuri ng can only tak e place with appr oval from the

R eserve B ank .

T he Bi ll has entrusted the R eserve Bank with the power to

issue di rections to all M FI s. T his could include dir ections

on the extent of assets deployed in pr ovid ing mi cro-finance

servi ces, ceil ings on loans or r aising capital. T he R B I

has the authori ty to set the ceili ng on the rate of i nterestcharged and the margin by M FI s. M argin i s defined as the

di fference between the lendi ng rate and the cost of funds ( in

percentage per annum ) .

T he Reserve B ank shall create the M icro-Finance

D evelopment Fund ( M FD F) . T he sums are raised from

donors, institutions and the public along with the

outstanding balance from the existing M icro-Fi nance

D evelopm ent and E qui ty Fund. T he central governm ent,

after due appropriation from Parliament, may grant money

to this fund. T he fund can provide loans, grants and other

m icro-credit faci li ties to any M FI s.

T he Reserve Bank is responsible for redr essal of gri evancesfor beneficiar ies of micro-finance servi ces. T he Reserve

B ank is empowered to i m pose a monetary penalty of up

to `5 lak h for any contravention of the B i lls provisions.

No civil court will have jur isdiction against any M FI over

any penalty imposed by the Reserve Bank . T he B i ll gives

the C entral G overnment the author i ty to delegate certain

powers to the National B ank for Agri culture and Rur al

D evelopment (N AB AR D ) or any other C entral G overnm ent

agency. H owever, the Central G overnm ent has the power to

exempt certai n M FI s from the provi sions of the B i ll.

The Bi l l and i ts l ikely Im pact on the Microf inan ce Sector

T he Bi ll envisages that the Reserve Bank would be the

overal l r egulator of the M FI sector, regard less of legal

structure. T he Reserve Bank has provided the views on the

B ill to the G overnm ent of Indi a. T he aim s of the B ill ar e to

regulate the sector in the custom ers in terest and to avoid

a m ultitude of mi crofinance legislation in di fferent states.

T he proper balancing of the resources at the Reserve B ank

to supervise these addi tional sets of instituti ons besides the

existing regulated insti tuti ons could be an im portant issue.

R equir ing all M FI s to register i s a cri ti cal and necessary step

towards effective regulation. T he proposal for appointm ent

of an O mbudsman wil l boost the bank ing industrys own

efforts to handle gri evances better. C ompulsory registration

of the M FI s would br ing the erstwhi le money-lenders into

the fold of organised financial services in the hinterland

who had been acting as M FI s hi ther to.

Box VI.1: Micro Finan ce Inst i tu t ions (Developmen t an d Regulat ion) Bil l, 20 12 and

its Impact on th e Microfinan ce Sector

however rem ained at m ore or less sam e level

duri ng 2011-12 (T able V I .15).

6.20 T he ratio of public deposi ts of NB FC s to

aggregate deposits of S cheduled C om m erci al

B ank s (SC B s) i n 2011-12 indi cates a decline. T he

ratio of deposits of NBFCs to the broad liquidity

aggregate of L 31 also declined during the year

(C hart VI .2) .

1 Includes NM 3 + Postal D eposits + Term M oney + C erti ficates of D eposit + T erm D eposit + public deposits with NB FC s.

8/13/2019 NBFCs.pdf

8/22

127


Operations of NBFCs-D (excluding RNBCs)

Fina nc ia l per fo rm ance of depos i t -tak ing Non-

Ban k Fin anc ia l Com pani es (NBFCs-D) show ed

improvemen t

6.21 T he balan ce sheet size of N B F C s-D

expanded at the rate of 10.8 per cent in 2011-12

(T able V I .16) . T he borrowings constituted around

two-thi rd of the total li abili ties of NB FC s-D . T he

publi c deposi ts of NB FC s-D , whi ch are subj ect to

credit ratings, continued to show an increasing

trend dur ing 2011-12. O n the assets side, loans

and advances r em ai ned the m ost i m por tant

category for NB FC s-D , consti tuting about three-

four th of thei r total assets. T he investm ent

constituted the second m ost im por tant category,

which witnessed subdued growth dur ing 2011-12

m ainly due to a decli ne in non-SL R investm ents.

6.22 Asset Fi nance C ompani es (A FC s) held the

lar gest share in the total assets of NBFC s-D at

end-M arch 2012 (T able V I .17).

Table VI.14 : Ownersh ip Pa tter n of NBFCs

(A s on M arch 31, 2012)

(Number of Companies)

O wnership NB FC s-ND -SI D eposi t-tak ingNB FC s

1 2 3

A . G overnm ent C om pani es 9

(2.4)

7

(2.6)

B . Non-G overnm ent C om panies 366

(97.6)

266

(97.4)

1. Public L td C om panies 198

(52.8)

263

(96.3)

2. Pr ivate L td C om panies 168

(44.8)

3

(1.1)

T otal No. of C om panies (A )+ (B ) 375

(100.0)

273

(100.0)

Note: Fi gures in parentheses are percentages to total num ber of N B FC s.

Table VI.1 5: Pro file o f NBFCs(Am ount in ` billion)

I tem As at end-M arch

2011 2012P

NB FC s of which:

RNBCs

NB FC s of which:

RNBCs

1 2 3 4 5

T otal A ssets 1,169 115 1,244 76

(9.8) (6.1)

Publi c D eposi ts 120 79 101 43

(66.0) (42.2)

Net O wned Funds 180 30 225 31

(16.6) (13.7)

P: Provisional

Note : 1. N BFC s comprise NB FC s-D and RN BC s.

2. Fi gures in par entheses are percentage shares in respecti ve

total.

3. O f the 273 deposit-tak ing NB FC s, 196 NB FC s filed Annual

R eturns for the year ended M arch 2012 by the cut-off date,

September 8, 2012.

Source : A nnual/Q uarterly R eturns.

8/13/2019 NBFCs.pdf

9/22

128


Table VI.16 .Consolida ted Balance Sh eet of NBFCs-D

(A mount in `billion)

I tem As at end-M arch Variati on

2010-11 2011-12 P

2011 2012P Absolute Per C ent Absolute Per C ent

1 2 3 4 5 6 7

Paid-U p C api tal 36

(3.5)

32

(2.8)

-3 -6.4 -4 -11.5

R eserves Surplus 135

(12.8)

162

(13.9)

13 10.9 27 20.2

Publi c D eposi ts 41

(3.9)

58

(5.0)

12 43.5 18 43.8

B orrowings 698

(66.2)

809

(69.2)

57 9.0 111 15.9

O ther L iabi li ties 144

(13.7)

107

(9.1)

32 28.3 -37 -25.9

Total Liab ilit ies/ Assets 1 ,0 5 4

(100.0)

1 , 1 6 9

(100.0)

1 1 2 1 1 .9 1 1 4 1 0 .8

I nvestments 211 159 26 14.1 -52 -24.8

( i ) SL R Investm ents@ 135

(12.8)

134

(11.5)

39 40.0 -1.0 -0.7

( i i ) Non-SL R I nvestm ents 76

(7.2)

25

(2.1)

-12 -14.1 -51 -67.6

L oans and A dvances 780

(74.0)

874

(74.8)

68 9.6 94 12.1

O ther Assets 63

(6.0)

103

(8.8)

18 39.3 40 62.3

P: Provisional

@ SL R investments compr ise 'approved S ecuri ties' and 'unencumbered term deposits' in Scheduled Com mercial B ank s; L oans & advances include Hi re

Pur chase and L ease Assets.

Notes : 1. Figures in parentheses are percentages to respective total.

Source : A nnual/Q uarterly R eturns.

Table VI.17: Major Components of Liabilities of NBFCs-D by Classification of NBFCs(A s at end-M arch)

(Am ount in ` billion)

C lassi fi cation of NB FC s No. of C om pani es D eposi ts Borrowings L iabi li ties

2011 2012P 2011 2012P 2011 2012P 2011 2012P

1 2 3 4 5 6 7 8 9

A sset Fi nance C ompanies 174 160 36

(89.4)

45

(76.9)

490

(70.2)

581

(71.8)

740

(70.2)

856

(73.2)

L oan C ompanies 43 36 4

(10.6)

13

(23.1)

208

(29.8)

228

(28.2)

314

(29.8)

313

(26.8)

Total 2 1 7 1 9 6 4 0 5 8 6 9 8 8 0 9 1 ,0 5 4 1 ,1 6 9

P: Provisional.

Note: Figures in parentheses are percentage share to total.

Size -wise Classification of Depos its of NBFCs-D

Lar ger NBFCs are m ore success fu l in ra is ing

pub l ic deposi ts

6.23 A sharp increase was di scerni ble in the

share of NB FC s-D with a deposi t si ze of ` 500

m i lli on and above, accounting for about 93.2 per

cent of total deposi ts at end-M ar ch 2012.

H owever, onl y 7 N B FC s-D belonged to thi s

category, constituting about 3.6 per cent of the

total num ber of NB FC s-D . I t i ndi cates that only

relatively lar ger N B FC s-D were able to rai se

resources thr ough deposi ts ( T able V I .18 and

Chart VI .3) .

8/13/2019 NBFCs.pdf

10/22

129


Region-wise Composition of Deposits held by

NBFCs

6.24 A m ong m etropoli tan ci ti es, N ew D elhi

accounted for the largest num ber of N B FC s-D ,

whi le Chennai held the largest share of 69.7 percent i n total public deposi ts of NB FC s-D ( T able

VI .19 and Chart VI.4).

Table VI.18 : Pu blic Deposits he ld b y NBFCs-D

by Deposit Range

(Am ount in `mill ion)

D eposi t R ange A s at end-M arch

No. of

NB FC s

Am ount of

deposit

2011 2012 P 2011 2012 P

1 2 3 4 5

1. L ess than `5 mi llion 134 117 194 138

2. M ore than `5 million and up

to `20 million

38 34 442 377

3. M ore than `20 mi llion and up

to ` 100 million

28 27 1,287 1,131

4. M ore than ` 100 million and

up to ` 200 million

7 7 1,084 1,092

5. M ore than ` 200 million and

up to ` 500 million

2 4 807 1,201

6. ` 500 m i llion and above 8 7 36,809 54,467

Total 2 1 7 1 9 6 4 0 ,6 2 3 5 8 ,4 0 6

P: Provisional

Source: Annual/Q uarterly Returns.

Table VI.19: Pu blic Deposits h eld by

NBFCs-D - Region -wise(Am ount in `m ill ion)

R egion As at end-M arch

2011 2012 P

Number of

NBFCs-D

Public

D eposits

Number of

NBFCs-D

Public

D eposits

1 2 3 4 5

North 144 1,882 125 3,285

E ast 8 39 5 39

West 20 9,286 17 14,880

South 45 29,416 49 40,206

Tota l 2 1 7 4 0 ,6 2 3 1 9 6 5 8 ,4 1 0

Met r opo l i t an c i t i e s :

K olk ata 5 39 3 39

C hennai 26 28,638 30 39,338

M um bai 6 9,074 5 14,682

New D elhi 50 976 43 2,390

Tota l 8 7 3 8 ,7 2 8 8 1 5 6 ,4 5 0

P: Provisional

Source :Annual R eturns.

Interest Rate on Pub lic Deposits with NBFCs

NBFCs-ND-SI segm ent cont i nu es to rely heavi ly

on bank f inan ce

6.25 T here was an increase i n the shar e of

publ ic deposi ts in the interest rate range of 10 percent to 12 per cent dur ing 2011-12 (T able V I .20

and Chart VI.5).

8/13/2019 NBFCs.pdf

11/22

130


Matu rity Profile of Pu blic Deposit s

6.26 T he largest proporti on of publi c deposi ts

rai sed by NB FC s-D belonged to the shor t to

medium end of the maturity spectrum. In 2011-

12, there was an increase in the shares of deposits

for m ore than 2 years (T able V I .21 and Chart V I .6) .

6.27 B ank s and financial i nstituti ons were the

major providers of funds for NBFC s-D , constitutingabout 50 per cent dur ing 2011-12. T his share has

come down mar ginally. O thers (which include,

in ter al ia, m oney borrowed from other compani es,

comm ercial paper, bor rowings from m utual funds

and any other types of funds that were not treated

as public deposits) also registered a declining

trend (T able VI .22).

Assets of NBFCs

Expa nsion in assets of AFCs w as not iceable

6.28 T he total assets of N B FC s-D sector

registered a m oderate growth dur i ng 2011-12

m ainly due to an i ncrease in the assets of asset

Table VI.20: Pu blic Dep osits h eld b y NBFCs-D

Interest Rate Range-wise(Am ount in `mi ll ion)

I nterest R ate R ange As at end-M arch

2011 2012 P

1 2 3

U p to 10 per cent 29,963

(73.8)

32,460

(55.6)

M or e than 10 per cent an d u p to 12 per cen t 9 ,454

(23.3)

24,870

(42.6)

12 per cent and above 1,206

(3.0)

1,080

(1.8)

Total 4 0 ,6 2 3

(100.0)

5 8 , 4 1 0

(100.0)

P: Provisional

Note: 1. T he rate of interest on publi c deposits cannot exceed 12.5

per cent.

2. Fi gures in par entheses are percentages to total.Source : Annual R eturns.

Table VI.21 : Matu rity Patter n of Pub lic

Deposits held by NBFCs-D(Am ount in `m ill ion)

M aturi ty Period As at end-M arch

2011 2012P

1 2 3

1. L ess than 1 year 9,816 11,720

(24.2) (20.1)

2. M ore than 1 and up to 2 years 7,942 15,530

(19.6) (26.6)


(48.9) (42.8)


(5.5) (10.6)

5. 5 years and above@ 769 10

(1.9) (0.0)

Tota l 4 0 ,6 2 4 5 8 ,4 1 0(100.0) (100.0)

P: Provisional

@ includes unclaim ed publi c deposits.

Note: Fi gures in par entheses are percentages to respective total .

Source: Annual R eturns.

8/13/2019 NBFCs.pdf

12/22

131


finance compani es (T able V I .23) . A s at end-M arch2012, more than two-third of the total assets of

the NB FC s-D sector was held by asset finance

com pani es. C om ponent-wise, advances accounted

for the predominant share of total assets, followed

by investm ent.

Distribution of NBFCs-D According to Asset

Size

6.29 A t end-M arch 2012, only 6 per cent of

NB FC s-D had an asset size of mor e than ` 5,000

million, which had a share of 97 per cent in the

total assets of all NB FC s-D (T able V I .24) .

Dist r ibut ion of Asse ts of NBFCs Type of

Activity

6.30 D ur ing 2011-12, assets held in the form

of loans and advances of NB FC s-D witnessed

signi ficant growth, whereas investm ent decli ned.T hese two categories of acti vi ti es constituted over

90 per cent share in total assets of the NB FC s-D

sector (T able V I .25) .

Finan cial Performa nc e of NBFCs-D

Fund -based in com e of the NBFCs-D segment

has in creased

6.31 T he financial perform ance of N B FC s-D

witn essed i m pr ovem ent as reflected in the

Table VI.22 : Sou rce s of Borrowin gs by NBFCs-D by Classification of NBFCs(Am ount in `billion)

C lassi fication As at end-M arch

G overnm ent B ank s and Fi nanci alInstitutions

D ebentures O thers T otal B orrowings

2011 2012P 2011 2012P 2011 2012P 2011 2012P 2011 2012P

1 2 3 4 5 6 7 8 9 10 11

A sset Finance 0.0 0.0 283 300 123 198 84 83 490 581

(0.0) (0.0) (80.2) (74.9) (85.7) (83.3) (59.0) (71.2) (70.2) (71.8)

L oan C om panies 59 54 70 101 20 40 59 33 208 228

(100.0) (100.0) (19.8) (25.1) (14.3) (16.7) (41.0) (28.8) (29.8) (28.2)

Total 5 9 5 4 3 5 3 .2 4 0 1 1 4 3 2 3 8 1 4 3 1 1 6 6 9 8 8 0 9

P: Provisional

Note: Fi gures in parentheses are percentage to respective total.


Table VI.23 : Major Comp onen ts of Assets of

NBFCs-D by Classification of NBFCs


C lassi fication As at end-M arch

A ssets Advances I nvestm ents

2011 2012P 2011 2012P 2011 2012P

1 2 3 4 5 6 7

Asset Finance

Companies

740 856 557 656 126 180

( 70.2) ( 73.2) ( 71.5) ( 75.0) (59.9) (94.1)

L oan C om panies 314 313 222 218 85 11

(29.8) (26.8) (28.5) (25.0) (40.1) (5.9)

Total 1,054 1,169 779 874 211 191

P: Provisional

Note: Fi gures in parentheses are percentage to r especti ve total.


Table VI.24 : Assets of NBFCs-D byAsset-Size Ran ges

( As at end-M arch)


Asset R ange No. of

Companies

A ssets

2011 2012P 2011 2012P

1 2 3 4 5

1. L ess than `2.5 mi llion 2 0 2 0.0

2. M ore than `2.5 million

and up to`5.0 m i llion 9 11 35 45

3. M ore than `5.0 million

and up to `20 m i llion 70 55 804 691

4. M ore than `20 million

and up to `100 m i llion 73 65 3,471 2,917


and up to `500 m i llion 34 34 8,224 7,147


and up to `1,000

m i llion 8 11 5,079 6,910

7. M ore than `1,000

mi llion and up to

`5,000 m i llion 6 8 8,309 19,052

8. Above `5,000 m i lli on 15 12 1,028,388 1,131,913

Tota l 2 1 7 1 9 6 1 ,0 5 4 ,3 1 2 1 ,1 6 8 ,6 7 6

P: Provisional


8/13/2019 NBFCs.pdf

13/22

132


increase in their operati ng profits duri ng 2011-12.

T hi s increase in profit was m ainly on account of

growth i n fund-based i ncome (T able V I .26) .

E xpendi ture as a percentage to average total assets

witnessed a m arginal increase duri ng 2011-12.

T he same trend i s seen i n term s of incom e as a

percentage to average total assets of NB FC s-D

(C hart VI .7) .

Soun dn ess In dicator s: Asset Quality of NBFCs-D

De t e r i or a t i o n i n a s se t q u a l i t y o f NBF Cs -D

segment

6.32 D ur ing 2011-12, there was a signi ficant

increase in the gross N PA s to total advances of

NB FC s-D , whi ch is a deviati on from r ecent trends.

Table VI.25: Break-up of Assets of

NBFCs-D by Activity(Am ount in `billion)

A ctivi ty As atend-M arch

Per centageG rowth

2011 2012P 2011-12P

1 2 3 4

L oans and A dvances 779

(73.9)

874

(74.8)

12.2

I nvestments 211

(20.0)

192

(16.4)

-9.2

O ther assets 64

(6.1)

103

(8.8)

60.0

Total 1 ,0 5 4 1 ,1 6 9 10.8

P: Provisional

Note:Fi gures in parentheses are percentages to respective total .

Source :Annual R eturns.

Table VI.26 : Finan cial Perform an ce of NBFCs-D(Am ount in `billion)

I tem As at end-M arch

2011 2012P

A. In com e (i+ ii) 1 5 2 1 8 1

( i ) Fund-B ased 151

(99.2)

180

(99.3)

( i i ) Fee-B ased 1

(0.8)

1

(0.7)

B. Exp en d itu re (i+ ii+ iii) 1 0 9 1 3 3

( i ) Financial 68

(62.3)

81

(60.9)

of whichI nterest Payment 9

(8.2)

8

(6.0)

( i i ) O perati ng 30

(27.1)

35

(26.4)

( i i i ) O thers 11

(10.5)

17

(12.8)

C. Tax Provision s 1 4 1 6

D. Op era t in g Profit (PBT) 4 3 4 8

E. Net Profit (PAT) 2 9 3 3

F. Tota l Assets 1 ,0 5 4 1 ,1 6 9

G. Financial Ratios (as % to Total Assets)

i ) I ncom e 14.4 15.5

i i ) Fund Incom e 14.3 15.4

i i i ) Fee I ncom e 0.0 0.1

iv) E xpendi ture 10.4 11.4

v) Financial E xpendi ture 0.1 6.9

vi ) O perati ng E xpendi ture 2.8 3.0

vi i ) T ax Provision 1.3 1.3

vi i i ) Net Profi t 2.7 2.8

H. Cost to In com e Rat io 7 2 .0 7 3 .3

P: Provisional

Note:1. Fi gures in par entheses are percentages to respecti ve total. 2. Percentage var iati on could be slightly di fferent because

absolute num bers have been rounded off to `billion.


Table VI.27: NPA Ratios of NBFCs-D( per cent)

A s at end-M arch G ross NPAs to

Total Advances

Net NPAs to

Net Advances

1 2 3

2002 10.6 3.9

2003 8.8 2.7

2004 8.2 2.4

2005 5.7 2.5

2006 3.6 0.5

2007 2.2 0.2

2008 2.1 #

2009 2.0 #

2010 1.3 #

2011 0.7 #

2012 P 2.1 0.5

P: Pr ovisional. # Provi sion exceeds NPA

Source :H alf-Yearly returns on NB FC s-D .

8/13/2019 NBFCs.pdf

14/22

133


Net NPAs which remained negative til l 2011 from

2008, with provisions exceeding NPAs registered

an increase of 0.5 per cent of total net advances

as on M arch 31, 2012 (T able V I .27).

6.33 T here was deteri oration in the asset quali ty

of asset finance and loan com pani es dur ing 2011-

12 as evident from an i ncrease in the gross N PAs

to gr oss advances r ati o for th ese comp ani es

(T able VI .28).

I n ord er to i m pr ove transparency and

understanding by borr owers, the R eserve B ank

has issued a r evised fair practices code (Box V I .2) .

T he Reserve Bank has revised the gui delines on Fair Pr acti ces Code(FPC) for all NBFCs issued on September 28, 2006 in the light of

the recent developments in the N B FC sector. T he sali ent features of

the revised ci rcular d ated M arch 26, 2012 are as follows:

General

(a) All comm unications to the borrower shall be in the vernacular

language or a language as understood by the borrower.

(b) L oan application forms should include necessary informati on

that affects the interests of the borrower.

(c) L oan agreement should contai n all details.

(d) N BF C s should refrai n from i nterference in the affair s of the

borr ower except for the pur poses provid ed in the terms and

condi tions of the loan agreement.

(e) I n the m atter of recovery of loans, the NB FC s should not resort

to und ue harassm ent and ensure that the staffs are adequately

trai ned to deal wi th customers.

(f) T he Boar d of D ir ectors of N BF C s should also lay down the

appropriate grievance redressal mechanism within the

organisation.

(g) T he Fair P ractices C ode should be put in place by all NB FC s

with the approval of their B oards. T he same should be put up

on their website.

(h) Boar ds of NB FC s should lay out appropri ate internal principles

and procedures to determ i ne in terest rates and pr ocessing

and other charges.

(i ) T he B oard of each N BF C shall adopt an interest rate m odeltak ing into account r elevant factors, such as cost of fund s,

margins and risk premium .

( j) N BFC s m ust have a built-in r e-possession clause in the

contract/loan agreem ent with the borrower wh ich m ust be

legally enforceable.

( k ) T o ensure transparency, the term s and condi tions of the

contract/loan agreem ent should also contain provi sions

regardi ng: (a) noti ce peri od before tak in g possession; ( b)

circum stances under whi ch the notice peri od can be waived;

(c) the procedur e for tak in g possessi on of the securi ty; ( d) a

provi sion regardi ng final chance to be given to the borr ower for

repaym ent of loan before the sale / auction of the property; ( e)

the procedur e for gi ving repossession to the borr ower and ( f)

the procedur e for sale/ auction of the prop erty.

NBFC-MFIs

In additi on to the general pr inciples above, N B FC -M FI s are required

to adopt the followi ng fair practices that are specific to their lending

business and regulatory fram ework .

(a) A statem ent shall be made in vernacular language and

displayed by N BF C -M FI s in their premi ses and i n loan cards

articulating their comm itm ent to tr ansparency and fair lending

practices;

(b) Fi eld staff should be trai ned to mak e necessary enquir i es with

regard to exi sting debt of the borr owers, and trai ni ng, if any,

offered to the borrowers shall be free of cost.

Box VI.2: Guide lines on Fair P ract ices Code for NBFCs

Table VI.28: NPAs of NBFCs-D by Classification of NBFCs(Am ount in `billion)

C lassi fication/E nd-M arch G ross

A dvances

G ross NPAs Net A dvances Net NPAs

Am ount % to G ross Advances Am ount % to Net Advances

1 2 3 4 5 6 7

Asset F i nan ce

2010-11 517 3 0.5 508 -7 -1.4

2011-12 P 663 16 2.3 651 3 0.5

Loan Compan i e s

2010-11 183 2 1.3 181 -0.1 0.0

2011-12 P 208 3 1.6 206 2 0.8

A l l Comp an i es

2010-11 700 5 0.7 689 -7 -1.0

2011-12 P 871 19 2.1 857 5 0.5

P: Provisional

Sour ce: H alf-Yearly returns on NB FC s-D .

(Contd...)

8/13/2019 NBFCs.pdf

15/22

134


(c) T he effective rate of interest charged and the gri evance redr essal

mechanism set up by the N BF C -M FI s should be promi nently

di splayed in all i ts offices;

(d ) A declaration that the M FI will be accountable for preventing

in appropri ate staff behaviour and ti m ely grievance redressal

shall be made i n the loan agreem ent;

(e) A ll sanctioni ng and di sbursem ent of loans should be done only

at a central location and more than one individual should be

involved i n thi s function;

(f) All NB FC -M FI s shall have a Board -approved standard form of

loan agreem ent, pr eferabl y in the vernacular language;

(g) T he loan card should reflect the details, in cluding the effective

rate of i nterest charged;

(h) N on-credi t products issued shall be with the full consent of

borr owers and the fee structure shall be comm uni cated i n the

loan card itself;

( i) R ecovery should norm ally be m ade only at a central designated

place;

(j ) N BF C -M FI s shall ensure that a B oard-approved policy is in

place with regard to C ode of Cond uct by field staff.

Lend ing against collater al of gold jewellery

( a) A dequate steps to ensure that the K YC gui delines stipulated

by the RB I are com pli ed with and to ensure that adequate due

di li gence is carr ied out on the customer before extending any

loan.

(b) Pr oper assaying procedure for the j ewellery received.

(c) I nternal systems to satisfy ownershi p of the gold jewellery.

(d) T he policy shall also cover putti ng in p lace adequate system s

for stor ing the jewellery in safe custody, revi ewing the system s

on an on-going basi s, train i ng the concerned staff and peri odi c

inspection by in ternal aud itor s to ensure that the procedur es

are stri ctly adhered to.

(e) L oans agai nst the collateral of gold should not be extended by

branches that do not have appropr i ate faci li ty for storage of the

jewellery.

( f) T he jewellery accepted as collateral should be appropri ately

insured.

(g) T he Board-approved poli cy with regard to auction of jewellery

in case of non-repayment shall be transparent and adequate

pri or notice to the borr ower should be gi ven before the auction

date.

(h) T he auction should be announced to the publi c by i ssue of

advertisements in at least 2 newspapers, one i n vernacular

language and another in national daily newspaper.

( i) A s a poli cy the N BFC s themselves shall not par ticip ate in the

auctions held.

( j) G old pledged wil l be auctioned only through auctioneers

approved by the B oard.

( k ) T he poli cy shall also cover system s and procedur es to be put

in place for dealing with fraud, including separation of duties

of mobi lisation, execution and approval.

(Concld...)

6.34 T here was an increase in the shares of all

three NPA categories of sub-standard, doubtful

and loss assets of all compani es in 2011-12,

Table VI.2 9: Classification of Asset s of NBFCs-D by Cate gory of NBFCs(Am ount in `billion)

S tan dar d A ssets S ub -stan dar d A ssets D o ubt fu l A ssets L oss A ssets G r o ss NPAs G r o ss A dvan ces

1 2 3 4 5 6 7

Asset Finance Companies

2010-11 515

(99.5)

2.1

(0.4)

0.3

(0.1)

0.1

(0.0)

2.5

(0.5)

517

(100.0)

2011-12P 648

(97.7)

10

(1.5)

4

(0.5)

2

(0.3)

15

(2.3)

663

(100.0)

Loan Companies

2010-11 180

(98.7)

1

(0.6)

2

(0.4)

0

(0.0)

2

(1.3)

183

(100.0)

2011-12P 205

(98.4)

2

(1.0)

1

(0.4)

0.4

(0.2)

3

(1.6)

208

(100.0)

All Compa nies

2010-11 695

(99.3)

3

(0.5)

2

(0.1)

0.1

(0.0)

5

(0.7)

700

(100.0)

2011-12P 852

(97.8)

12

(1.4)

4

(0.5)

2

(0.3)

19

(2.2)

871

(100.0)

P: Provisional

Note: Figures in parentheses are per cent to total credit exposures.

Source: H alf Yearly returns on NB FC s-D.

underlining the marginal deterioration in asset

quali ty of these institutions. T his mai nly em anated

from asset finance companies (T able V I .29) .

8/13/2019 NBFCs.pdf

16/22

135


Table VI.30 : Capital Adequ acy Ratio of

NBFCs-D(N umber of companies)

C R AR R ange 2010-11 2011-12P

AFC L C Total AFC L C Total

1 2 3 4 5 6 7

1) L ess than 12 per cent 1 1 2 1 1 2

a) L ess than 9 per cent 1 1 2 1 1 2

b) M ore than 9 per cent

and up to 12 per cent

0 0 0 0 0 0

2) M ore than 12 per cent


1 2 3 1 0 1



5 3 8 8 3 11



19 3 22 16 2 18

5) A bove 30 per cent 142 27 169 131 27 158

Total 1 6 8 3 6 2 0 4 1 5 7 3 3 1 9 0

P: Provisional

Note: AF C -Asset Fi nance Compani es; LC -Loan C ompanies

Source: H alf-yearly retur ns.

Table VI.31: Net Owned Fun d vis--vis

Public Deposits of NBFCs-D

by Classification(Am ount in `billion)

C lassi fication Net O wned Fund Public D eposi ts

2010-11 2011-12P 2010-11 2011-12P

1 2 3 4 5

Asset Finance C om panies 108 139 36

(0.3)

45

(0.3)

L oan C om panies 42 56 4

(0.1)

13

(0.2)

Tota l 1 5 0 1 9 5 4 1

(0.3)

5 8

(0 .3)

P: Provisional.

Note:Figures in parentheses are ratio of public deposits to net owned

funds.


6.35 A t end-M arch 2012, of 190 r eporti ng

NB FC s, 187 had CR AR of m ore than 15 per cent

(T able V I .30). T his could be an indi cation that the

N B FC sector i s undergoi ng a consoli dati on

pr ocess in the past few years, wherein weak er

NB FC s are gradually exi ting and paving the way

for stronger ones. T he ratio of publi c deposi ts to

Net O wned Funds (N O F) of NB FC s tak en together

has mor e or less remai ned sam e as at end-M arch

2012 (T able V I .31) . T here was a si gni f icant

increase in NO F and publi c deposi ts of N BFC s-D

dur ing 2011-12. T he increase in N O F was m ainly

concentrated in the category of `5,000 mi llion and

above (T able V I .32).

Residu ary Non-Ban kin g Com pan ies (RNBCs)

RNBCs are in the process of m igra t in g to other

busin ess m odels

6.36 T he assets of R N BC s decli ned by 34 per

cent dur i ng the year ended M arch 2012. T he

assets m ai nl y consi st of i nvestm ents i n

unencumbered approved securities, bonds/

debentures and fixed deposits/certificates of

deposit of SC B s. T he N O F of R N B C s has also

registered a decli ne of 52.2 per cent i n 2011-12

(Table VI.33). T he decli ne in the expendi ture of

R NBC s dur ing 2011-12 was m ore than the decline

Table VI.32: Range of Net Owned Funds vis--vis Public Deposits of NBFCs-D(Am ount in `m ill ion)

R ange of NoF 2010-11 2011-12P

No. of

Companies

Net O wned

Fund

Public

D eposits

No. of

Companies

Net O wned

Fund

Public

D eposits

1 2 3 4 5 6 7

Up to `2.5 m i llion 2 -2,003 324 1 -1 1.2

M ore than `2.5 million and up to `20 m i llion 113 838 320 89 750 242

M ore than `20 million and up to `100 m i llion 65 2,662 1,359 67 2,894 1,271


M ore than `500 million and up to `1000 mi llion 2 1,204 1,038 4 2,869 817


A bove `5000 m i llion 8 1,25,527 31,923 7 1,69,792 39,212

Total 2 1 7 1 ,4 9 ,8 7 4 4 0 ,6 2 3 1 9 6 1 ,9 4 ,6 4 8 5 8 ,4 0 6

P: Provisional

Note: Fi gures in parentheses are publi c deposits as r atio of r especti ve net owned fund.

Source :Annual returns

8/13/2019 NBFCs.pdf

17/22

136


i n i ncom e, as a result of whi ch the operating

profits of R N BC s increased dur ing the year. As a

result of decline in the provision for taxation, the

net profits of R NB C s increased sharp ly dur ing

2011-12.

Regional Patt ern of Deposits of RNBCs

6.37 At end-M arch 2012, there were two R NBCs,

registered wi th the R eserve B ank . O ne each i s

located i n central and eastern r egions. B oth the

R N B C s are in the process of m igrating to other

business models and have been directed to reduce

their deposit liabilities to nil by 2015. Public

deposi ts held by the two R N B C s regi stered a

Table VI.3 3: Pro file o f RNBCs(Am ount in `mi ll ion)

I tem 2010-11 2011-12P Percentage

Variation

2010-11 2011-12P

1 2 3 4 5

A. Assets (i to v) 1 ,1 4 ,6 7 0 7 5 ,4 3 0 -26.6 -34.2

(i ) Investment in

U nencum bered

Approved Secur i ti es 13,080 8,380 -47.0 -36.0

(i i) Investment in

Fi xed D eposits

/ Certificate

of D eposits

of S cheduled

Comm. B anks/

Public Financial

I nsti tutions 26,520 13,900 -45.4 -47.6

(i ii ) D ebentures/Bonds/Commercial

Papers of G ovt.

Companies/Public

Sector B ank s/

Public Financial

Institution/

C orporation 28,760 7,510 -45.6 -73.9

( i v) O ther I nvestments 490 4,330 -96.2 784.3

( v) O ther A ssets 45,820 41,310 166.6 -9.8

B. Net Owned Fun d 29,880 14,270 2.3 -52.2

C. Total Income (i+ ii) 11,590 3,320 -40.4 -71.3

( i ) Fund I ncome 11,280 2,940 -41.3 -73.9

( i i ) Fee I ncom e 310 380 19.2 24.1

D. Total Expen ses ( i+ i i+i i i ) 10,060 1,660 -28.1 -83.5

( i ) Financial C ost 6,310 460 -35.2 -92.7

( i i ) O perating C ost 3,680 520 7.3 -85.9

( i i i ) O ther C ost 70 680 -91.6 876.9

E. Taxation 620 570 -62.2 -8.1

F. Operat ing Prof i t (PBT) 1,530 1,670 -72.0 8.9

G. Net Profit (PAT) 910 1,100 -76.2 20.5

P: Provisional. PB T : Profit Before T ax. PAT : Profit After T ax.

Source: Annual returns

signi ficant decli ne in 2011-12, m ainly due to a

substantial decli ne in the deposi ts held by S IFC L

(T able VI .34).

Investmen t Pat tern of RNBCs

6.38 Following the decline in deposits, there was

a decli ne in the investments of RNB Cs in 2011-12.

T he decline was noti ceable in all segm ents of

investment (T able V I .35).

NBFCs-ND-SI

Though bo r r ow ing f r om ba nk s i s si zab l e , a

substan t ia l increase in bor row ings by w ay of

debentures wa s w i tnessed

6.39 T he assets of NB FC s-N D -SI for the year

ended M arch 2012 showed an increase of 21 per

Table VI.34: P ub lic Deposits Held b y

RNBCs Region -wise(Am ount in `billion)

I tem 2010-11 2011-12P

No. of

R N B C s

Public

D eposits

No. of

R N B C s

Public

D eposits

1 2 3 4 5

C entral 1 53

(66.9)

1 21

(50.0)

E astern 1 26

(33.1)

1 21

(50.0)

Total 2 79 2 42

Met r opo l i t an C i t i e s

K olk ata 1 26 1 21

Total 1 26 1 21

P: Provisional

Note: Fi gures in p arentheses are percentages to r especti ve totals.Source :A nnual returns.

Table VI.35. In vestm ent Patte rn of RNBCs(Am ount in `m ill ion)

I tem 2010-11 2011-12P

1 2 3

Aggr ega te Lia bilit ie s to t he De p os it or s (ALD) 7 9 ,0 2 0 4 2 ,6 5 0

( i) U nencum ber ed appr oved secur iti es 13, 080

(16.6)

8,380

(19.6)

( i i ) Fixed D eposi ts wi th bank s 26,520

(33.6)

13,900

(32.6)

(i ii ) B onds or debentures or comm ercial papers

of a G ovt. C ompan y / publi c sector bank /

public financial I nstituti on / corporations

28,760

(36.4)

7,510

(17.6)

( i v) O ther I nvestm ents 490

(0.6)

4,330

(10.2)

P: Provisional

Note: Fi gures in par entheses as percentages to AL D s.

Source :A nnual returns.

8/13/2019 NBFCs.pdf

18/22

137


cent. T otal borrowings (secured and unsecured)

by N BFC s-ND -SI showed a signi ficant increase of

23.6 per cent, consti tuting m ore than two-thi rd

of the total l i abili t ies ( T able V I .36) . S ecured

borrowings consti tuted the lar gest source of funds

for N B FC s-N D -S I , fo l lowed by unsecur ed

borr owings, reserves and surplus.

Table VI.36 : Consolida ted Balan ce Sh eet of

NBFCs-ND-SI(A mount in ` billion)

I tem 2010-11 2011-12 Var iation

(Per cent)

1 2 3 4

1 . Sh are Cap ita l 3 8 2 5 0 5 3 2 .1

2. R eserves & Surplus 1,599 1,901 18.9

3 . Total Borrowin gs 5 ,1 7 5 6 ,3 9 8 2 3 .6

A. Secu red Borrowin gs 2 ,9 1 5 3 ,7 7 0 2 9 .3

A .1. D ebentures 984 1,732 76.0

A .2. B orrowings from B ank s 1,006 1,441 43.2

A .3. B orrowings from FI s 103 90 -12.7

A .4. I nterest Accrued 52 63 22.9

A .5. O thers 770 444 -42.3

B. Un -Secu red Borrowin gs 2 ,2 6 0 2 ,6 2 8 1 6 .3

B .1. D ebentures 753 1,218 61.7

B .2. B orrowings from B ank s 461 436 -5.3

B .3. B orrowings from FI s 31 53 74.0

B .4. B orrowings from R elatives 13 12 -9.5 B .5. I nter-C orporate B orrowings 242 278 14.5

B .6. C om m ercial Paper 314 306 -2.8

B .7. I nterest Accrued 44 69 59.0

B .8. O thers 401 256 -36.3

4. C urrent L iabi li ties & P rovi sions 457 409 -10.6

Total Liab ilit ies/ Tota l Assets 7 ,6 1 3 9 ,2 1 3 2 1 .0

Assets

1. L oans & Advances 4,709 5,900 25.3

1.1. Secured 3,406 4,486 31.7

1.2. U n-Secured 1,304 1,414 8.5

2. H i re Purchase A ssets 502 635 26.5

3. Investm ents 1,507 1,595 5.9

3.1. L ong-T erm Investm ents 1,089 1,227 12.6

3.2. C urrent I nvestm ents 417 368 -11.7

4. C ash & Bank B alances 313 357 14.0

5. O ther C urrent A ssets 437 553 26.5

6. O ther Assets 144 173 19.9

Memo I tems

1. C api tal M ark et E xposure 822 799 -2.8

Of w hich: E qui ty Shares 347 253 -27.0

2. C M E as per cent to T otal Assets 10.8 8.7

3. L everage R atio 2.84 2.83 2.95

Notes: Percentage var iati on could be slightly di fferent because absolute

num bers have been r ounded off to `billion.

Source: M onthly returns on ND -SI (`1 billi on and above).

Table VI.37 : Borr owings of NBFCs-ND-SI

Sector by Region(Am ount in `billion)

R egion As at end

M ar ch 2011 M ar ch 2012P J une 2012P

1 2 3 4

North 2,707 3,431 3,502

E ast 231 329 368

West 1,383 1,512 1,594

South 854 1,127 1,193

Tota l Borrowin gs 5 ,1 7 5 6 ,3 9 8 6 ,6 5 7

P: Provisional

Source :M onthly returns on N BFC s-ND -SI .

6.40 T he N B FC s-N D -SI segm ents i s growing

rapidly. Borr owings compr ise thei r largest source

of funds, m ostly sourced from bank s and financial

insti tutions. T o the extent that they rely on bank

financing, there is an indirect exposure to

depositors. Whi le the concentration of fundi ng has

ri sk s, the caps on bank lendi ng to NB FC s m ay

constrain their growth. H owever, the leverage ratio

of the NB FC s-N D -SI sector rem ains the same as

in the previous year.

Borro wings of NBFCs-ND-SI b y Region

Northern Region cont i nu ed to be m ain sour ce of

funds

6.41 Analysis of region-wise borrowings of the

N B FC s-ND -SI reveals the dominance of northern

and western r egions; together they constitute m ore

than 70 per cent of the total borrowings during

the year ended M arch 2012. T he sam e trend

continued during the quarter ended June 2012.

All regions registered growth during both the year

ended M arch 2012 and quarter ended June 2012

(T able VI .37).

Financia l Performan ce

NBFCs-ND-SI show ed deter io ra t ion in f inan c ia l

perform an ce an d increase in NPAs

6.42 T he financial perform ance of the N BFC s-

N D -SI sector deter iorated m arginally as reflected

in the decline in net profi t dur ing 2011-12 ( T able

V I .38) . B oth G ross and N et NPAs to total asset of

the NB FC s-ND -SI sector i ncreased dur ing the year.

8/13/2019 NBFCs.pdf

19/22

138


Table VI.38: Fina ncial Perform an ce of

NBFCs-ND-SI Sector(Am ount in ` billion)

I tem As at end

M arch

2011

M arch

2012

June

2012

1 2 3 4

1. T otal I ncom e 752 948 263

2. T otal E xpendi ture 529 740 192

3. Net Profi t 160 139 51

4. T otal Assets 7,613 9,213 9,608

Financial R atios

( i ) I ncome to Total Assets (per cent) 9.9 10.3 2.7

( i i ) E xpendi ture to Total Assets (per cent) 6.9 8.0 1.9

( i i i ) N et Profi t to T otal I ncom e (per cent) 21.3 14.6 19.4

( iv) Net Profi t to Total Assets (per cent) 2.1 1.5 0.5

Source: M onthly returns on ND -SI (`1billi on and above).

than 15 per cent ( T able V I .40) . T hese compani es

were also largely dependent on nationali sed bank sfor thei r term loans, work ing capital loans and

debentures/C Ps. N ew pr ivate sector bank s have

emerged as a second m ajor bank group for these

companies to rai se term loans and work ing capital

loans (Table VI.41).

4. Pr im ary Dealers

6.44 T here were 21 Pr im ary D ealers (P D s)

operating in the financial m ark ets as on June 30,

2012. O f them , 13 were run by bank s as a

departm ent called B ank -PD s, and the remaining

8 were non-bank enti ties k nown as standalone

PD s registered as NB FC s under Section 45 I A of

the R BI Act, 1934.

Operations an d Performa nce of PDs

6.45 D uri ng 2011-12, the bid to cover ratio of

PD s in both dated G overnm ent of Indi a securi ties

(G -Sec) and T reasury B i lls (T-B i lls) was m arginally

T he sam e trend contin ued as on J une 2012

(Table VI.39).

6.43 As on M arch 31, 2012, the m ajor i ty of the

reporting companies maintained the stipulated

minimum norm of 15 per cent capital adequacy

as m easured by C R AR . O nly 10 per cent of the

total reporti ng compani es have a CR AR of less

Table VI.39 : NPA Ratios of NBFCs-ND-SI S ect or( per cent)

I tem A s at end

M arch

2011

M arch

2012

June

2012

1 2 3 4

( i ) G ross NPA s to G ross Advances 1.72 2.08 2.26

( i i ) Net NPAs to Net Advances 0.69 1.25 1.37

( i i i ) G ross NPA s to T otal Assets 1.28 1.48 1.61

( iv) Net NPAs to Total Assets 0.51 0.88 0.97

Source: M onthly returns on ND -SI (` 1 billi on and above).

Table VI.41: Bank Exposure of NBFCs-ND-SI Sector

(A s at end-M arch 2012)


Bank G roup T erm L oans Work ing C api tal L oans D ebentures C om mercial Paper O thers Total

1 2 3 4 5 6 7

A . Nationalised B ank s 959 282 81 18 73 1,412

B. State B ank G roup 102 97 21 0.3 27 247

C . O ld Private B ank s 38 27 10 2 2 79

D . New Private B ank s 140 53 53 11 11 268

E . Foreign B ank s 72 34 9 3 5 123

All Ban ks 1 ,3 1 0 4 9 2 1 7 5 3 5 1 1 7 2 ,1 3 0

Source: M onthly R eturns on ND -SI s (`1 billi on and above).

Table VI.40 : Capital Adequ acy Ratio of

NBFCs-ND-SI - By Type of NBFC(N umber of companies)

C R AR R ange A FC I FC I C L C Total

1 2 3 4 5 6

L ess than 15 per cent 0 0 21 15 36

15 per cent to 20 per cent 5 1 8 20 34



Above 30 per cent 8 1 171 79 259

Tota l 1 8 4 2 1 1 1 3 2 3 6 5

Note: AF C - A sset Fi nance C omp anies; IFC - In frastructure Finan ce

Companies; IC - Investment Companies; LC - Loan Companies

Source: Q uarterly Returns on NB FC s-ND -SI .

8/13/2019 NBFCs.pdf

20/22

139


lower than in the previous year. PD s were requi red

to achieve a m inim um success ratio (bids accepted

to the bidding commitment) of 40 per cent for

T-B ills and Cash M anagem ent Bi lls (C M B s) put

together, usually reviewed on a half-yearly basis.

A ll the PD s achieved the stipulated m i nim um

success rati o in both the fir st and second half of

2011-12. T he success ratio in T-B i ll auctions,

however, was m arginally lower dur ing the year.

6.46 D ur ing 2011-12, all the dated G -Secs were

fully underwritten. In the auctions of dated

securi ti es, the share of the PD s (bi ds accepted to

the secur i ties issued) decreased mar ginally (T able

V I .42) . Par tial devolvem ent on the PD s took place

on 14 instances.

Performa nce of Standalone P Ds

6.47 I n the secondar y m ar k et, PD s have

individually achieved a minimum annual total

turnover ratio2 (outright and repo transactions)

of 5 tim es in dated G -Sec and 10 tim es in T -B i lls

dur i ng 2011-12. P D s had also achi eved the

minim um annual outri ght turnover ratio of 3 tim es

in dated G -Sec and 6 tim es in T-B il ls (T able V I .43).

Sources an d Applicat ion of Fund s of

S tanda lone PDs

Investm ent by PDs in corpora t e bond m ark et

ha s decreased

6.48 T he net owned fund (N O F) of the PD s hasincreased m arginally. R eserves and surplus of the

PD s had i ncreased signi ficantly. B oth the secured

and unsecured loans of the PD s also increased

significantly during 2011-12. Investments in

corporate bonds decreased m arginally dur ing the

year (Table VI.44).

Financia l Performa nce of Stand alone PDs

Shar p increase in expenses led to reduct ion in

pro f i t

6.49 T he net pr of i t of the P D s r educed

m arginally dur ing 2011-12. T he total i ncome of

the PD s increased signifi cantly. H owever, the PD s

reported a sharp increase in their interest

expenses m ai nly due to the increased cost of

borr owings ( T able V I .45) . A s a result, the cost-

income ratio ( i .e. , operating expenses to net total

2 Turn over r atio is com puted as the rati o of total purchase and sales dur i ng the year in the secondar y m ark et to average m onth-

end stock s.

Table VI.42: Perform an ce of th e PDs

in the Pr im ary Market

(A s at end-M arch)


I tem 2011 2012

1 2 3

Treasu ry Bills & CMBs

B idding C om mitm ent 3,808 7,296

Actual B ids Subm itted 7,260 13,505

B id to C over R atio 2.3 2.2

B ids Accepted 2,353 4,271

Success R atio ( in per cent) 61.8 58.6

Central Govt. Securit ies

Noti fied A m ount 4,370 5,100

Actual B ids submi tted 6,239 6,932

B id to C over R atio 1.4 1.3

B ids of PD s A ccepted 2,165 2,432

Share of PD s ( in per cent) 49.6 47.7

Note : Percentage variation could be slightly different because absolute

num bers have been r ounded off to `billion.

Table VI.43: Performance of Standalone

PDs in the Second ary Market

( As at end-M arch)


I tem 2011 2012

1 2 3

Outright

Turnover of standalone PD s 10,900 18,381

Turnover of mark et participants 57,419 69,764


Repo


Turnover of mark et participants 81,986 75,278


Total


Turnover of mark et participants 1,39,405 1,45,042


Notes : 1. Percentage vari ati on could be slightly di fferent because


2. C omp onents may not add up to the whole due to round in g

off.

Source: Clearing Corporation of India L im ited.

8/13/2019 NBFCs.pdf

21/22

140


income) increased duri ng the year. T he return on

net worth ( R O N W) and r eturn on average assets

(R O AA) for the year ended M arch 2012 were down

m arginally (T able V I 46). T he C R AR of the PD s

increased from 46.2 per cent to 53.8 per cent

dur ing the year as against a m inim um prescri bed

requir em ent of 15 per cent (T able V I 47) .

Table VI.44 : Sources a nd Appl ica t ions of Fun ds of Stan dalone Prim ary Dealers(Am ount in ` mill ion)

I tem As at end-M arch Percentage Var iation

2010 2011$ 2012 2011 2012

1 2 3 4 5 6

Sou rces of Fu n ds 1 ,0 3 ,0 8 0 1 3 0 ,3 2 0 2 ,0 3 ,8 1 0 2 6 .4 5 6 .4

1 C api tal 15,410 15,210 15,080 -1.3 -0.8

2 R eserves and Surplus 19,250 18,890 20,490 -1.9 8.4

3 L oans (a + b) 68,420 96,220 168,240 40.7 74.9

a) Secured 25,220 63,520 113,970 151.9 79.4

b) U nsecured 43,200 32,700 54,260 -24.3 66.0

Ap p licat ion of Fu n d s 1 ,0 3 ,0 8 0 1 ,3 0 ,3 2 0 2 ,0 3 ,8 1 0 2 6 .4 5 6 .4

1 Fixed Assets 140 380 370 171.4 -2.6

2 Investm ents (a + b + c) 72,800 98,520 1,45,080 35.3 47.3

a) G overnm ent Secur i ties 62,518 86,430 1,33,320 38.1 54.2

b) C om m ercial Papers 1,420 100 250 -92.9 149.4

c) C orporate B onds 8,800 11,990 11,510 36.2 -4.0

3 L oans and Advances 7,410 4,260 19,380 -42.5 354.9

4 Non-current A ssets 0 0 2,970 - -

5 Equity, M utual Funds, et c. 680 250 160 -63.2 -36.0

6 O thers* 22,050 26,910 35,850 22.0 33.2

* O thers include cash + certi ficate of deposits + bank balances + accrued in terest + deferr ed tax assets current liabi li ties and provisions.

$: E xcept M organ Stanley D eutsche Sec and I D BI G ilts.

Notes : 1. Percentage vari ati on could be slightly di fferent because of round in g off.

2. Com ponents may not add up to the whole due to round in g off.

Source : A nnual R eports of PD s.

Table VI.45: Fina ncial Perform an ce of

Stan dalone Primary Dealers(Am ount in ` mill ion)

I tem 2010-11 2011-12 Variation

Amount Percentage

1 2 3 4 5

A. In com e (i to iii) 1 0 ,7 9 0 1 5 ,4 7 0 4 ,6 8 0 4 3 .4

i) Interest and

discount

9,700 13,820 4,120 42.5

i i ) T radi ng Profi t 580 640 60 10.3

i i i ) O ther income 510 1,010 500 98.0

B. Exp en ses (i+ ii) 8 ,0 7 0 1 3 ,0 7 0 4 ,5 6 0 6 2 .0

i ) Interest 6,530 11,180 4,650 71.2

ii ) O ther expenses

including

E stablishment and

Administrative

Costs

1,540 1,890 350 22.7

Profit Before Tax 2,720 2,400 -320 -11.8

Profit After Tax 1,780 1,540 -240 -13.5

Notes : 1. Percentage vari ati on could be sli ghtly di fferent because


2. C omp onents m ay not add up to the whole due to round in g off.

Source : R eturns submi tted by PD s.

Table VI.46 : Finan cial Indicat ors of

S tanda lone PDs

(Am ount in ` mill ion)

I ndicator 2010-11 2011-12

1 2 3

i ) Net profi t 1,780 1,540

i i ) Average Assets 1,66,970 1,97,460

i i i ) R eturn on Average Assets ( in per cent) 1.1 0.8

iv) R eturn on Net Worth ( i n per cent) 5.1 4.4

Table VI.47: CRAR of the s ta nd alone P Ds

( As at end-M arch)

(Am ount in ` mill ion)

Particulars 2011 2012

1 2 3

1. T otal Net C api tal Funds 36,260 39,290

2. T otal R isk Weighted Assets 78,580 72,980

a) C redi t R isk 33,500 37,420

b) M ark et R i sk 45,080 35,560

3. CRAR ( in percent) 4 6 .2 5 3 .8

8/13/2019 NBFCs.pdf

22/22

141


5. Overa l l Assessm ent s

6.50 T here wer e signs of a consoli dati on

process in the NB FC sector i n term s of num berof NB FC s. T he balance sheets of NB FC s have,

however, showed substantial expansion and

sim i lar expansion was observed i n respect of FI s

and P D s. T he fi nanci al perform ance of the

N B FC s-D segm ent has witnessed im provem ent

as reflected i n the increase in their operating

pr of its m ain ly em anatin g from fund-based

income. H owever, the financial perform ance of

the N B FC s-N D -SI segm ent has deter i orated

m arginally, though the sector i s growing faster.

B orrowings consti tute the largest source of funds

m ostly sourced fr om bank s and f i nanci al

insti tutions for N B FC s. T hus, the heavy reli ance

on bank financing needs to be m oni tored closely.

I n th is context, the recent r egulator y measures

leading to tightening of norm s with respect to

raising of resources from bank s is expected to

br ing down the NB FC sectors reliance on the

bank ing sector and to look for alternate sources

of funds.

6.51 I n term s of NPA s, there was a signi ficant

increase in the gross N PA s to total advances of

N B FC s. S im i larly, FI s have registered an increase

in N PAs. T he N B FI s as a segm ent continue to be

better placed i n term s of capi tal adequacy with

h ig h C R A R than the m in i m um regu la tory

requir em ent. I n r espect of pr im ary dealers, while

their i nterest i ncome i ncreased, expenses

enhanced at a faster pace due to the increased

cost of borr owings, leading to reduced pr ofit and

lower R oA.

NBFCs.pdf

Documents

Transcript of NBFCs.pdf