Download - Role of NBFCs in Promoting Inclusive Growth

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FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRY

Role of NBFC’s in promoting inclusive growth

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Contents1. PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

2. INDUSTRY INSIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Promoting Inclusive Growth – Role of Non-Banking Finance Companies 10

Role of NBFC’s in promoting inclusive growth 13

Role of NBFC-MFIs in promoting inclusive growth 17

Role of NBFCs in promoting inclusive growth 21




NBFC-MFI: The Beacon of Financial Inclusion 41

Role of NBFC in inclusive growth 45

Criticality of NBFCs in India’s infrastructure creation 48


3. THE POLICY PULSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57Banking Sector 58Capital Markets Sector 62Insurance Sector 65

4. FICCI’S DATA CENTRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69Indian Economy-An Update 70Investment Banking Updates 73Markets Watch 78

5. FINANCIAL SECTOR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79

Synopsis of Past Events 79

6. FINTAINMENT SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82

Preface

Dr. A. Didar SinghSecretary GeneralFICCI

Industry Insights

In association with

10 Role of NBFC’s in promoting inclusive growth

Industry Insights

Promoting Inclusive Growth – Role of Non-Banking Finance Companies

NBFCs are playing a vital role in furthering the cause

Mr. Shachindra Nath,

11Role of NBFC’s in promoting inclusive growth

Industry Insights

Focus on SME

Affordable Housing

Innovative Business Models

NBFCs have emerged

intermediary in

services accessible to a wider set of customer segments including SMEs. NBFCs have extended

having a range of products that suit their needs in their portfolio


Industry Insights

Shachindra Nath Group CEO

Religare Enterprises Ltd.

Conclusion


Industry Insights


NNBFCs complement banks

industry

Mr. Pinaki Ranjan Mitra,

NBFCs have traditionallycomplemented the commercial banks and have prevented the concentration of credit risk in banks


Industry Insights

NBFCs’ role in promoting inclusive growth:

3

________________________________________________________________________________________________________

3


Industry Insights

Need to recognize NBFCs’

inclusion agendaWhile the Income Tax Act allows deductions to banks and HFCs for non-recognition of income on NPAs-

available to NBFCs


Industry Insights

The way ahead:

Pinaki Ranjan MitraHead-Creadit Operations

Ananya Finance


Industry Insights

Role of NBFC-MFIs in promoting inclusive growth

Mr. Chandra Shekhar Ghosh

NBFCs have so far played a very

development of the country by taking

to under banked and unbanked, rural mass and people having small enterprises


Industry Insights

(source: RBI data base)

Chart 2: Credit disbursed in billion Rs. across segments (Source: RBI database)


Industry Insights

Table 1: A brief of the development programme run by Bandhan (data as on February, 2013)

Development Program (in Numbers)

3


Industry Insights

I think this is time that the government commissions an exclusive funding body for MFIs, instead of making Small Industries & Development Bank of India solely responsible for it

Chandra Shekhar GhoshChairman & Managing Director

Bandhan

References:

3.


Industry Insights

Role of NBFCS in Promoting Inclusive Growth

Ms. Archana S Bhargava,

NBFCs play a crucial role in broadening

services, enhancing competition and

They are undoubtedly complementary to the banking system, capable of absorbing shocks and spreading risks at times of


Industry Insights

Financial exclusion of the Marginalized-critical role of Micro Finance


Industry Insights

Recognition of NBFC-in Micro Finance


Industry Insights

Enhancing Tier I capital & Wider disclosure norms

NBFC for inclusive growth

Archana S Bhargava Executive Director

Canara Bank

Micro Finance Institutions are uniquely positioned

inclusion and provide

relatively poorer and vulnerable sections


Industry Insights

Introduction

Banks’ efforts towards

be supported by NBFCs

Role of NBFCs in promoting inclusive growthMr. Suman Chowdhury,

The penetration of

services is still far lower than the desired

proportion of the households, especially in rural areas, remain outside the coverage of the formal banking system


Industry Insights

NBFCs continue to sustain healthy growth in retail

1846

2466

3257

3904

4680

0

1000

2000

3000

4000

5000

Mar-10 Mar-11 Mar-12 Mar-13 (E) Mar-14 (P)

Rs.

Bill

ion

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Per

cen

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Vehicle Finance Gold loans Corporate/SME LAPLAS Personal Loans Others

CRISIL believes that the major retail NBFCs have strengthened their underwriting and collection systems after the delinquency pressures they witnessed over the two years ended 2008-09


Industry Insights

Banks NBFCs

Semi-Urban & Rural, 30%

Urban & Metro, 70%

Semi-Urban & Rural, 60%

Urban & Metro, 40%

Trend in Overall Gross NPA

3.5

2.0

1.61.9

2.0 - 2.2

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


Per c

ent

NBFCs have strengthened their processes and systems to manage


Industry Insights

Origination and Underwriting:

Collection and portfolio monitoring

Regulatory framework to ensure stability and continuing origination of priority sector loans by NBFCs

Diversity of resource

for sustainable growth in NBFCs


Industry Insights

Suman ChowdhuryDirector - Financial Sector Ratings

CRISIL Limited

Conclusion


Industry Insights

A


NBFCs have been playing a complementary role

institutions including banks in meeting the funding needs of the economy


Industry Insights

Role of NBFC in Financial Inclusion


Industry Insights

Thampy KurianAdditional General Manager & All India Head

Agricultural & Financial Inclusion DeptFederal Bank

Summing up


Industry Insights

Role of NBFCs in promoting inclusive growth

Mr. Bindu Ananth,

Policy thrust has been strongly dis-incentivising banks from partnering with NBFCs, and instead, has been continuing to nudge banks to open their own branches and originate assets through their own staff and agents

________________________________________________________________________________________________________


Industry Insights

1.

-2.tion model:

Containing systemic risk in 3.NBFCs:


Industry Insights

Transaction cost for a loan ofRs. 10,000Model Minimum CRAR Transaction Cost2

3

________________________________________________________________________________________________________

3

Bindu AnanthPresident, IFMR


Industry Insights

Mr. V.P. Nandakumar,

Missing Links in India’s

Financial inclusion at zero cost

Today, large sections of the people, particularly in rural areas, are excluded from the organised

and continue to be dependent on local moneylenders


Industry Insights

The multiplier effect

normal

Interest rates not “too high”


Industry Insights


Industry Insights

Suicides in perspective

Unnecessary duplication

The struggle ahead

The reason why

model works better in the recovery of loans to the poor is that incentives and disincentives inherent in the model serve to instil a sense of responsibility in the


Industry Insights

V P NandakumarManaging Director and CEO Manappuram Finance Ltd.


Industry Insights

NBFC-MFI: The Beacon of Financial Inclusion

Mr. Alok Prasad,

India’s multi-tier

includes over ~12,000 NBFCs, an extensive institutionalframework,contributing to more than 10% of the assets

system


Industry Insights

MFIs do not focus only on extending loans but also provide livelihood support services.

literacy is woven into the client relationship which allows them to get more empowered


Industry Insights


Industry Insights

Alok Prasad

Micro Finance Institutions Network (MFIN)


Industry Insights

Role of NBFC in Inclusive Growth

NBFCs have thrived on account of somewhat lax and multiple regulators thereby providing them more

commercials to charge to their customers


Industry Insights


Industry Insights

The all-inclusive growth horizon has enough space to accommodate all healthy players in

of the country

Chief General Manager(Rural Business)

State Bank of India


Industry Insights

A

Criticality of NBFCs in India’s infrastructure creation

NBFCs, especially

Companies

Infrastructure Finance Companies (NBFC-

role in supplementing and complementing banks’ efforts


Industry Insights

(I) Nil TDS

(II) Coverage under SARFAESI Act

(III) Tax provisions pertaining to NPA deduction

NBFCs have to operate within very stringent regulations and are at a clear disadvantage vis-à-vis banks while carrying out their functions


Industry Insights


Industry Insights

Chairman & Managing Director Srei Infrastructure Finance Ltd.


Industry Insights

Role of NBFCs in promoting inclusive growth

,

Inclusive growth does not only imply the

being distributed equally & evenly; it is participation of all sections & regions of society in the growth story & their reaping

growth


Industry Insights

Advantages of NBFCs:

Brief Background

Functioning of NBFCs:

How the NBFCs can contribute in inclusive growth?

________________________________________________________________________________________________________


Industry Insights

Role of NBFCs in Inclusive Growth

a. Serving unbanked segments:

b. Specialization:

c. Exclusive Service:

d. Strong understanding of customer segments and ability to deliver

customized products:

e. Employment Creation:

Drawbacks

Conclusion


Industry Insights

NBFCs may be looked at playing a larger

services sector

Former, Executive Director Union Bank of India

The Policy Pulse


The Policy Pulse

Important announcements by RBI

license

Monetary Policy

Other newsLoans to PPP infra projects to be treated as secure

loans: RBI

Banking Sector


The Policy Pulse

Basel III norms for Indian banks from April 1: RBI

Govt wants PSBs to consider separate credit limit

Public sector banks to clean books before raising funds to tackle higher NPA issue

RBI extends deadline for issuance of new format cheques

RBI launches study on banks active in selling gold coins

Partner Exchange


Core banking must for co-op banks by Dec 31: RBI

Impose limit on global transactions of cards, RBI tells banks

Crop loans: Private Banks get interest subvention booster

Regulator wants local branches of foreign banks registered as Indian subsidiaries

RBI sets up panel to address exporters credit issues

The Policy Pulse


The Policy Pulse


Shares gifted to immediate relatives not to trigger open offer

SEBI asks companies to use electronic mode to make payments

SEBI allows FIIs to use government, corporate bonds as collateral

SEBI issues product labelling for Mutual Funds

Capital Markets Sector

SEBI tweaks stock exchange arbitration mechanism

SEBI allows debenture trustees to seek credit rating details

Rajya Sabha passes SEBI Bill for appointing SAT head

The Policy Pulse


SEBI forms panel on insider trading

distributors

SEBI alters consent mechanism norms

SEBI tweaks Infra-debt rules

SEBI to regulate all investment advisors

SEBI may mandate scrutiny of small companies’ IPO fund use through monitoring agency

The Policy Pulse

Partner Exchange


SEBI asks market intermediaries to comply with ASBA norms

FII limit for government, corporate bonds raised

auction route

SEBI issues guidelines for separate debt segment on bourses

ownership

Mergers, demergers need Sebi clearance

The Policy Pulse


The Policy Pulse

IRDA asks insurers to have anti-fraud policy

IRDA comes out with framework for monitoring insurance frauds

IRDA revises norms for life insurance products

areas

IRDA introduces File and Use procedure for life products

Insurance Sector

Rajiv Gandhi Scheme: SEBI extends new fund offer to 30 days

SEBI’s discussion paper on buyback through open market purchase

SEBI’s circular on Amendments to ESOP Guidelines and Equity Listing Agreement


IRDA standardises health insurance

IRDA brings back auto clearance process for life products

IRDA bans life cover with highest NAVguarantee

IRDA hikes equity exposure limit of insurers to 15 percent

IRDA allows standalone health insurers to use life insurance agents for sales

Insurers allowed to buy up to 15% stake in companies

IRDA proposes to lower solvency margin to 145 pc for insurers

IRDA raises third-party motor cover premium

The Policy Pulse

Partner Exchange


IRDA looking at two-year policies to improve cover

Life insurers to have standard form for policyholders: IRDA

IRDA to review broker norms

Insurers, IRDA to launch awareness campaign

IRDA halves compulsory ceding by domestic general insurers to GlC Re

IRDA tweaks investment norms for insurance companies

General insurers can bring out an IPO, post 10 years of operation

Non-linked variable products, Ulips to be treated on a par

The Policy Pulse

FICCI’s Data Centre


Indian Economy-An Update

Economic Scenario

Industry

Rate of GDP at Market Prices (%) (at 2004-05 prices)

2012-13 (Q2) 2012-13 (Q3)

GDP at market prices 100.0 100.0



________________________________________________________________________________________________________



Partner Exchange



India slipped

India Outbound M&A

India Inbound M&A

Pos. Advisor Value $m #Deals % Share

1 Morgan Stanley 1,850 1 31.62 Jefferies & Company 1,850 1 31.63 BNP Paribas 148 1 2.54 Rothschild 108 2 1.85 Deutsche Bank 108 1 1.86 KotakMahindra Bank Ltd 106 2 1.87 Axis Bank 71 2 1.28 GCASavvian Advisors LLC 68 1 1.29 Avendus Capital Pvt Ltd 41 1 0.710 Systematix Corporate Services Ltd 37 2 0.6

IndiaAnnouncedM&A Advisory Ranking 1Q 2013

Pos. Advisor Value $m #Deals % Share

1 China 37,823 668 51.92 South Korea 10,118 182 13.93 Malaysia 7,539 166 10.34 India 5,861 222 8.05 Hong Kong 2,494 80 3.46 Singapore 2,266 81 3.17 Indonesia 1,730 64 2.48 Macao 1,194 4 1.69 Thailand 1,060 41 1.510 Taiwan 943 44 1.3

SEAsiaM&A Ranking by Target Nationality 1Q 2013

Investment Banking Updates Mergers & Acquisitions



0

5

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20

25

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2009 2010 2011 2012 2013

$bn India M&A Volume

Domestic Inbound Outbound

Indian ECM

IPO volume

Follow-on

NTPC’s

Mahindra, Morgan Stanley State Bank of India

Equity Capital Markets

Date Issuer Sector Deal Type Deal Value ($m) Bookrunners

7 Feb NTPC Ltd Utility & Energy FO 2,160MS, GS, CITI, DB, KOTAK,SBI

29 Jan Axis Bank Finance FO 1,027 AXIS, CITI, JPM1 Feb Oil India Ltd Oil & Gas FO 591 CITI, HSBC, KOTAK

20 FebShriram TransportFinance Co Ltd

Finance FO 305 GS

22 MarSteel Authority ofIndia Ltd SAIL

Metal & Steel FO 279AXIS, DB, HSBC, JPM,KOTAK, SBI

11 Mar WNS Holdings LtdProfessionalServices

FO 185 BoAML, WELLS FARGO

20 FebJaiprakash PowerVentures Ltd

Utility & Energy FO 175 CS

4 Mar Bajaj Finance Ltd Finance FO 135 JMFINANCIAL

8 FebIndiabulls FinancialServices Ltd

Finance FO 128 BoAML, UBS

15 MarNational AluminiumCo Ltd Nalco

Metal & Steel FO 116 AXIS, IDFC, SBI

Top 10 ECM Deals in 1Q 2013



India DCM

Corporate IG Agency

Bharti Enterprises Ltd.

Power Finance Corp

India Domestic DCM

International

Debt Capital Markets

0.0 0.5 1.0 1.5 2.0 2.5 3.0

Chemicals

Professional Services

Metal & Steel

Technology

Telecommunications

Construction/Building

Mining

Utility & Energy

Oil & Gas

Finance

$bn

India ECM Volume by Top 10 sectors

1Q 2012 1Q 2013

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2009 2010 2011 2012 2013

#$bn India ECM Volume

IPO FO Equity Linked #Deals

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2009 2010 2011 2012 2013

#$bn India International DCM

Corp FIG SSA #Deals

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200

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500

600


2009 2010 2011 2012 2013

INR bn India Domestic Corporate vs FIG

Corp FIG

Pos. Bookrunner Parents Value ($m) No. %share

1 AXIS Bank 2,142 41 13.02 Standard Chartered Bank 1,831 23 11.13 ICICI Bank 1,214 24 7.44 HSBC 1,137 15 6.95 Trust Investment Advisors 1,011 50 6.16 Darashaw & Co Ltd 974 32 5.97 JPMorgan 969 4 5.98 Citi 908 6 5.59 Barclays 859 12 5.210 Deutsche Bank 718 13 4.4

IndiaDCM 1Q 2013



India loan

Investment grade

Oil & Gas

ONGC’s

Loan Markets

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2009 2010 2011 2012 2013

#$bn India Loan Volume

Investment Grade Leveraged #Deals

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2009 2010 2011 2012 2013

#$bn Refinancing as % of India Syndicated loan Volume

Volume % Refinancing

0 1 2 3 4 5 6

Technology

Real Estate/Property

Telecommunications

Chemicals

Consumer Products

Transportation

Utility & Energy

Metal & Steel

Oil & Gas

Construction/Building

$bn

India Corporate Loan Volume by Sectors

1Q 2012 1Q 2013



IB Revenue

India IB Revenue

Syndicated Loan revenue

DCM revenue

M&A fees

ECM fees

0

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150

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2009 2010 2011 2012 2013

#$m India Investment Banking Revenue

DCM ECM Loan M&A #Deals

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0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500


2009 2010 2011 2012 2013

#$m Asia (ex Japan) IB Revenue

Net Revenue ($mn) India as % of Asia(ex Japan) as % total IB



Markets Watch



Financial Sector Events

Synopsis of past events

Member, SEBI 18th February, 2013, Mumbai

Interactive Meeting with Mr. Anand Sinha, Deputy Governor, RBI- February 18, 2013- Mumbai



Banking and Financial Institutions Committee Meeting4th March, 2013, Mumbai

3.

Insurance and Pensions Committee Meeting5th March, 2013, Mumbai

Partner Exchange


Interactive Meetings with NASDAQ Dubai delegation8th , 2013, New Delhi and 9th, 2013, Mumbai



Across

Down

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Fintainment SectionCrossword

Notes:

Fintainment Section


Sequestration-

House Money Effect-

28/36 Rule-

(1) On February 28 2013, the Finance Minister cited in his budget speech a quote by an eminent Indian personality whose 150th birth anniversary falls this year. Name that personality

(2) What is the neologism which refers to the global elite of wealthy people whose members view them as completely international?

crisis. Which city is the capital of Cyprus?

Quiz

Financial Fundas

Partner Exchange

Fintainment Section


1. EconNation

2. Central Banks

3. Moneysage Lite

Question. 1 Question. 2 Question. 3

Jumble

Mangesh Ghogre

Fintainment Section Credits

Fintainment Section


I1

E2

P3

N C4

A S5

H A6

N D C A R R Y S7

C8

R R T D O O M9

U

O E R R N P U B

M10

I D C A P P11

R O S P E C T U S

E I D L M R U I

T D C12

R E D I T C A R D

O L T Y L Y

L13

A R G14

E C A P R15

B I16

F

E R I N U I17

D18

I19

V E R S I20

F I C A T I O N M

M E P S E D21

C F

P22

E N S I O N23

R

O S P L24

E25

U R26

O

R27

U P E E28

A I S E G29

T A T D30

E B T N D

N31

I F T Y N T32

A R P

Answers of Quiz

Answer: 1

Answer: 2

Answer: 3

Answers of Jumble

Answer 1: a - b - c - d - e - f -

Answer 2: a - b - c - d - e - f -

Answer 3: a - b - c - d - -

Solution of Fintainment Section

Fintainment Section

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