NBFC

NBFCs – Its concept and Role

Presented by- Nibedita Ray

Vikas Sethia

non-banking financial company(NBFC)

• Company registered under the Companies Act, 1956.

• Engaged in the business of loans and advances, acquisition of shares / stock / bonds / debentures / securities issued by government or local authority.

difference between bank & NBFC

• NBFC cannot accept demand deposits.• It is not a part of the payment and settlement system.• Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.• SLR for NBFC is 15% and is 25% for bank.

Different types

• Asset Financing Company

• Investment Company

• Loan Company

Rules and Regulations

• Minimum net owned fund of Rs. 100 cr .

• Company should have made net profit as per last two years audited balance sheet .

• Percentage of NPAs to net advances should not exceed 3%.

• The non-deposit-taking NBFCs should have CRAR of 10% and deposit-taking NBFCs should have CRAR of 12% or 15%.

Services•Act as supplier of loan and credit facilities.•Supporting investment in property.•Trade money market instruments.•Fund private education.•Underwrite stocks and shares.•Advise companies merger and acquisition.•Portfolio Management

roles• Development of sectors like Transport &

Infrastructure• Substantial employment generation• Help & increase wealth creation• Broad base economic development• Irreplaceable supplement to bank credit in

rural segments• Major thrust on semi-urban, rural areas &

first time buyers/users• To finance economically weaker sections• Huge contribution to the State exchequer

Salient Features• The NBFCs are allowed to accept/renew public

deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.

• NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 11 per cent per annum. The interest may be paid or compounded at rests not shorter than monthly rests.

• NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.

Demand.. Why?

• Prompt, tailor made service with least hassles.

• Direct and easy access to the top management.

• NBFCs cater to a class of borrowers who –Don’t have a necessarily high income

–But have adequate net worth–Are honest and sincere

Contd..• Deposit mobilization at the

door step of the depositors with personalized approach, interest warrants are delivered in advance.

• NBFCs provide financial assistance to their borrowers incase of emergency needs.

• NBFCs provide assistance and guidance to their customers in matter relating to insurance.

• NBFCs (except certain AFCs) should have minimum investment grade credit rating.

• The deposits with NBFCs are not insured.

• The repayment of deposits by NBFCs is not guaranteed by RBI.

• There are certain mandatory disclosures about the company in the Application Form issued by the company soliciting deposits.