nbfc swati.ppt

8/17/2019 Nbfc Swati.ppt

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Financial institution

• A financial institution is an institution which

collects funds from the public, and places

them in financial assets, such as deposits,

loans and bonds rather than tangible

property. FINANCIAL

INSI!I"N

#an$ing

institution

Non

ban$ing

institution


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meaning

• he financial institution which pro%ide

%arious ban$ing facilities but are not

termed as ban$s because they do not hold

ban$ing license are $nown as non ban$ing

financial institution.


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A Nonan$ing Financial Company 'N#FC( is acompany registered under the Companies Act, )*+and is engaged in the business of -

• loans and ad%ances,• acuisition of shares / stoc$ / bonds / debentures /

securities issued by 0o%ernment / local authority /other securities of li$e mar$etable nature,

• leasing,• hire&purchase,• insurance business,

• chit business• stoc$ bro$ing companies• merchant ban$ing companies• 1N#Cs


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N#FC does not include any institution whose principal

business is that of -

• agriculture acti%ity,

• industrial acti%ity,

• sale / purchase / construction of immo%able property.


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Features of N#FC2s

• 1egistration with 1#I is mandatory• All the N#FC are not entitled to accept public

deposits•

N#FC can accept public deposit for a minimumperiod of )3 months and ma4imum of 5 months• hey cannot accept deposits repayable on

demand• N#FCs cannot offer interest rates higher than the

ceiling rate prescribed by 1#I from time to time• N#FCs cannot offer gifts/incenti%es or any other

additional benefit to the depositors


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C"N6.

• N#FCs 'e4cept certain AFCs( should ha%e minimumin%estment grade credit rating.

• he deposits with N#FCs are not insured

• he repayment of deposits by N#FCs is not guaranteed by

1#I• here are certain mandatory disclosures about the company

in the Application Form issued by the company solicitingdeposits

• If a N#FC defaults in repayment of deposit, the depositor can

approach A. Company Law #oard or

#. Consumer Forum or

C. file a ci%il suit to reco%er the deposits.


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N#FI2s 781S!S #AN92sBANKS NBFIS

Definition #an$ing is acceptance of depositswithdraw able by cheue ordemand:

N#FI cannot acceptdemand depositsN#FI are companiescarrying financial business

Scope of business Scope of business of the ban$ islimited.

here is a %arious types ofbusiness regardingfinancial acti%ities.

function hey generate multiple e4pansionof credit

"nly mobilise sa%ings forin%estment.

Need for a license License norms are tightlycontrolled and generally it ispercei%ed to be uite difficult to geta license for a ban$

It is comparati%ely mucheasier to get a registrationas an N#FI.

Types of group #an$s form homogeneous group

doing ban$ing business

N#FC form a

heterogeneous group


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Difference between Banks & NBFCs

N#FCs are doing functions a$in to that of ban$s,howe%er there are a few differences-

i. N#FC cannot accept demand deposits:ii. it is not a part of the payment and settlement system

and as such cannot issue cheues to its customers :and

iii. deposit insurance facility is not a%ailable for N#FCdepositors unli$e in case of ban$s.


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1egistration of N#FCs

In terms of Section ;+&IA of the 1#I Act, )*


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=owe%er, to obiate dual regulation, certain category ofN#FCs which are regulated by other regulators are

exempted from the requirement of registration with RBI -'a( 7enture Capital Fund / >erchant #an$ing companies / Stoc$

bro$ing companies registered with S!BI,

'b( Insurance Company holding a %alid Certificate of 1egistration

issued by I"DA'c( Nidhi companies as notified under Section 35 A of the

Co#panies Act$ %'(

'd( Chit companies as defined in clause 'b( of Section 3 of theC)it Funds Act$ %*+

'e( =ousing Finance Companies regulated by National ,ousingBank


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?or$ing of N#FC

• Filing of application in prescribed form

• Submit it in regional office of 1#I

• @rocessing by 1#I• 1#I issue certificate


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"e-uire#ents for "egistration wit) "BI

A company incorporated under the Companies Act, )*+ anddesirous of commencing business of non&ban$ing financial

institution as defined under Section ;+ I 'a( of the 1#I Act, )*


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NBFCs and /ublic Deposits

• All N#FCs are not entitled to accept public deposits.

• "nly those N#FCs holding a %alid Certificate of

1egistration with authoriation to accept @ublic6eposits can accept / hold public deposits.

• he N#FCs accepting public deposits should ha%eminimum stipulated Net "wned Fund and comply with

the 6irections issued by the #an$.


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Ceiling on Acceptance of /ublic Deposits

A N#FC maintaining reuired N"F and complying with the prudential

norms can accept public deposits as follows-

Category of NBFC Ceiling on /ublic deposits

!0 1 ,/ Co#panies#aintaining C"A" of %'2

wit)out credit rating

!0 1 ,/ Co#panies wit)C"A" of %+2 and )aing#ini#u# inest#ent grade

credit rating

%3' ti#es of N4F or "s %.crores w)ic)eer is less

5 ti#es of N4F

0C 1 IC wit) C"A" of %'2and )aing #ini#u#inest#ent grade creditrating

%3' ti#es of N4F


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• @resently, the #a6i#u# rate of interest a NBFC can offer is%%23 he interest may be paid or compounded.

• he N#FCs are allowed to accept 1 renew public deposits fora #ini#u# period of %+ #ont)s and #a6i#u# period of (.#ont)s3

• hey cannot accept deposits repayable on de#and.


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I#portant "egulations relating to Acceptance of Deposits byNBFCs

i. he N#FCs are allowed to accept / renew public deposits for a minimum period of )3 months and ma4imum period of5 months. hey cannot accept deposits repayable ondemand.

ii. NBFCs cannot offer interest rates higher than the ceilingrate prescribed by RBI from time to time. he presentceiling is )) per cent per annum. he interest may be paid orcompounded at rests not shorter than monthly rests.

iii. N#FCs cannot offer gifts / incentives or any otheradditional benefit to the depositors


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i%. N#FCs 'e4cept certain euipment leasing / hire&purchasefinance companies( should ha%e minimum investment grade

credit rating

%. he deposits with NBFCs are not insured .

%i. he repayment of deposits by NBFCs is not guaranteed byRBI

%ii. here are certain mandatory disclosures about the company

in the Application Form issued by the company solicitingdeposits


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Sub#ission of "eturns to "BI

he N#FCs accepting public deposits should furnish to 1#I

i !udited balance sheet of each financial year and anaudited profit and loss account in respect of that year aspassed in the general meeting together with a copy of the

report of the #oard of 6irectors and a copy of the report andthe notes on accounts furnished by its Auditors:

ii. "tatutory !nnual Return on #eposits

iii. Certificate from the Auditors that the company is in a position to repay the deposits as and when the claimsarise$


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i%. 7uarterly "eturn on li-uid assets:

%. ,alf8yearly "eturn on prudential nor#s:

%i. ,alf8yearly A09 "eturns by companies ha%ing public depositsof 1s. 35 crores and abo%e or with assets of 1s. )55 crores andabo%e irrespecti%e of the sie of deposits :

%ii. 9ont)ly return on e6posure to capital #arket by companiesha%ing public deposits of 1s. +5 crores and abo%e: and

%iii. A copy of t)e Credit "ating obtained once a year along withone of the =alf&yearly 1eturns on prudential norms as at '%(abo%e.


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Types of NBFC


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6ifferent types of N#FCs registered with 1#I

i. euipment leasing company:

ii. hire&purchase company:

iii. loan company:

i%. in%estment company:%. >utual benefit finance company

%i. 1esiduary non ban$ing company


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IN:!ST9!NT C49/AN;

• In%estment Company is any financialintermediary whose principal business is that

of buying and selling of securities.• It is a company whose main business isholding securities of other companies purelyfor in%estment purposes.

• he in%estment company in%ests money onbehalf of its shareholders who in turn share inthe profits and losses.

• 84ample - >utual Fund Companies


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9utual #enefit Finance Companies are

one of the oldest forms of non&financial

companies. It is a company structure in which

the companyBs owners are also its clients.• hat is, the mutual companyBs profits are

distributed to its participating customers each

year in proportion to their indi%idual e4posures to

the company.

• >any insurance companies are structured as

mutual companies.


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• Some of the important obecti%es of Nidhis are toenable the members to sa%e money, to in%esttheir sa%ings and to secure loans at fa%orable

rates of interest.• hey wor$ on the principles of complete mutualityof interest and are generally well&managed.

• he 0o%ernment has granted certainconcessions under Section 35A of theCompanies Act, )*+.

• @rimarily regulated by 6epartment of Company Affairs '6CA( under the directions / guidelinesissued by them under Section arch 3555 'Chairman- [email protected](


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04AN C49/AN;

• Loan company means any financial institution

whose principal business is that of pro%idingfinance, whether by ma$ing loans orad%ances or otherwise for any acti%ity otherthan its own 'e4cluding any euipment

leasing or hire&purchase finance acti%ity(.• A loan is a type of debt. Li$e all debtinstruments, a loan entails the redistributionof financial assets o%er time, between the

lender and the borrower.

"!SID


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"!SID

• Company which recei%es deposits under any schemeor arrangement, by whate%er name called, in onelump&sum or in instalments by way of contributions orsubscriptions or by sale of units or certificates or otherinstruments, or in any manner are called 1N#Cs.

• 1N#Cs are a class of N#FCs which cannot beclassified as euipment leasing, hire purchase, loan,in%estment, nidhi or chit fund companies, but whichtap public sa%ings by operating %arious depositschemes.

• he deposit acceptance acti%ities of these companiesare go%erned by the pro%isions of 1esiduary Non#an$ing Companies '1eser%e #an$( 6irections, )*ED


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,I"!8/


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!7


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I>@"1ANC8

• Non ban$ing financial institutions ha%e the

following importance in Indian economy.

0reater reach.

Fle4ibility in tapping resources.

1etail ser%ices to small and medium

business.Important component of financial mar$et.


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strategies

• 6e%elopment of assets and competencies for

sustainable competiti%e ad%antage.

• Selection of appropiate strategies

• 6e%elopment of initiati%es• 6rafting of action plan

• 6e%elop a model

• 6e%elop internal business plan• 6e%elop trac$ing model

• Create internal reporting pa$age


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T)ank you

nbfc swati.ppt

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