ANALYSIS OF NBFC SECTOR

SATHISH KUMAR R

ABIRAMI A

SARAVANA PRABHU B

Complimentary to banking system

12.7% of the total assets of financial system Operate largely in vehicle financing, hire purchase, lease, personal loans, working capital loans,

microfinance, consumer loans, housing loans, loans against shares, investments, distribution of financial products, etc

NBFC – Can accept only Demand deposits

Cost of funds

Business Model Flexibility – Limited reporting/documentation

Relaxed regulatory norms – Int. rate/ PSL/ Capital Market Exposure

DICGC not available, cannot issue cheques, NPA classification

Recovery Mechanisms – SARFAESI, DRT not present

Easy to obtain License, no restriction on

number of branches

KYC (know-your-customer) norms not Stringent

NPA Classification - 180 days vs 90 days

Well-informed rural

population

driving strong

credit growth

Advanced technologies to

accelerate operational efficiency by 30-40 per cent

Supporting Government

initiatives, such as the

National Rural Financial

Inclusion Plan

Innovative, diversified and customized product

portfolio

Growing per capita income

Flourishing consumer

credit market (Indian

consumer market to grow

by 67 per cent from 2013 to

2020)**

Favourable

regulatory

changes

* F

igur

es a

re in

mill

ions

* F

igur

es a

re in

mill

ions

F06 FY10 FY11

No of NBFCs 13014 12630 12409

Bank Credit of all scheduled Banks

1,572,780

3,337,659

4,060,843

NBFC advances as % of Bank Credit 10.77% 12.57% 13.20%

Assets of all scheduled banks

2,531,462

5,258,495

6,146,590

NBFC assets as a % of Bank assets 13.06% 13.33% 13.78%

Deposits of all scheduled banks

2,185,809

4,635,224

5,355,160

NBFC Public deposits as % of bank deposits 1.05% 0.37% 0.22%

* Fig

ure

s are

in cro

res

Usha Thorat Committee

Tier I Capital of 10%, as against 7.5% recently

NPA recognition norm to be lowered to 90 days from 180/360 days

Standard asset provisioning -0.40% from March 31, 2014.

Acceptance of Deposits

Liquidity Management

Raising money through private placement of debenture

NBFCs finance for Purchase of Gold – LTV 60%

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