NBFC's are an types of finance company,which do not hold banking licence but do all the activities which banks are doing.These finance companies cover under banking regulations.They accept deposits from public by some deposits schemes and lend to the borrowers.
Charactristics of NBFC's:
1.NBFC's are registered under Companies act 1956 as the other pvt ltd Company registered.
2.NBFC's engaged in business of loans and advances,aqcuisition of stocks/bonds/debentures issued by Govt and local authority.Also ,these companies are enggaged in Leasing,Hirepurchases,Insurences business and Chit fund busines ect.
3.Non banking finance companies do accept demand deposits,so that no one send money to another city through DD.
4.NBFC's not have payment and settlement systems, so therefore can not provide cheques facilities to it's customers.
5.Deposits made by the investors into the NBFC's are not covered under deposits insurance scheme.
6.NBFC's not allowed to accept deposits directly from the public,rather they have to arrange funds by issuing debt instruments,borrowing fron the banks and financial institutions.
Roles of NBFC's:
1.NBFC's helps in development of sectors like Transportation and Infrastructure by providing easy credit to these sectors.
2.Main role of NBFC's are to generate employment to the young graduates,so as to minimize the one of the biggest problem of unemployment in india.
3.NBFC's also play a role of wealth creation to it's investors who invest there hard earn money in there diffirent investment schemes.
4.These finance companies also helps in economic development of the countries by providing easy credit to the different corporations and publics related to the development of the country.
5.As the banks reaches are not available to the rular areas,NBFC's replace the banking needs in rular areas by proving the easy credit and hepls accumulates rular savings in the form of issuing debt instruments.
6.NBFC's have trust in semi urban and rular ares,aslo the they have trust on first time user of NBFC's facilities beacuse of easy recovery of debts.
7.NBFC's basically finance to the economically weaker section of the society who not get debt from other sources.They provide loans at high intrest rate as compare to Banks.
Classifications of NBFC's:
1.Assets Financing Companies: These are the companies,providing loans against the assets only and not doing business of lending to other than assets financing.
2.Loan Companies:These types of NBFC's only providing loans to the corporates or publics.
3.Investment Companies:These types of companies engage in a business of helping investors of doing investments.
Categorization of NBFC's:
1.Equipment leasing companies: These are the companies which helps in finance the equipments like machineries, vehicals ect.Thses companies actually give equipments on lease by keeping ownership of financed equipments.
2.Hire Purchase Companies: These are the types of companies which hepls in purchasing an equipments by financing them and make payment of installments by purchasers.
3.Mutual Benifit finance company: These are the companies which work on the mutual benifit of a particular group of people.
4.Miscellaneous Non Banking Companies: These are a types of NBFC which are doing all types of businesses of collecting,managing,conducting as promoters of any corporation.
5.Housing Finance Companies:These are a types of NBFC's which are helps in purchasing houses by the home buyers by allowing them the easy financing.These companies giving loans for longer period of time usally 20 to 30 years.
Credit Management of NBFC's:
1.NBFC should use the appropriate operating procedure.It should follow proper guidelines related to the running of NBFC's.
2.There is a strict regulation to the NBFC's that it would nott provide credit to it's directors or promoters.
3.Also,NBFC's not provide credit to the directors,where its directors have any interest.
4.If in loan agreement did not specify the period of loans, then tha loan should be recovered within one year from the date of issuing guidelines by RBI.
Management Information System:
(A) Internal Reporting Systems:
1.NBFC's should maintain periodical statements,which shown the accurate position of the company.
2.NBFC's should maintain the statements of different branches related to the advances,non performing assets,assets classifications and ALM.
(B) External reporting systems:NBFC's are required to submitt the following returns to Department of non banking supervision at the regional offices of RBI:
1.NBFC's should present the Audited financial statements including the director report presented in annual general meeting.
2.NBFC's should present the annual returns on deposits.
3.They should submitt the detail changes in address,telephone numbers,name of directors,principal officers,specimen signature of official authorized to sign on behalf of company.
4.NBFC's having assits size of 100 crores and public deposit of 20 crore should submitt the following ALM harlf yearly:
4.1 Statement of strucutre liquidity
4.2 Statement of dynamic liquidity
4.3 Statement of interest rate sensititvity
5.NBFC's should maintain the harlf yearly statement of capital fund,risk assets or exposures and risk assets ratio ect.
6.They should maintain the monthly return on exposure to capital market.
7.They should maintain the statement showing the names,designation and professional qualifications of principal officers.Also nae,resident adress,qualification of directors and specimen signature of authorized to sign on behalf of the company.
Financial Leverage between Banks and NBFC's:
1.Banks and NBFC's are competing in some area's like leasing and Hire purchase,Corporate loans,Investment in non convertable debenture,IPO funding,Margin funding,Small ticket loans,Venture capital ect.
2.NBFC's do not offer facilities like saving and current deposits,cash credit ,overdraft ect.
3.Banks helps in financing the operation of NBFC'sby providing credit facilities or by sucscribing NBFC's debt instruments.
4.Investment made by NBFC's are current and long term in nature in the form of share/ debenture should not be permitted or restricted bt RBI.
5.Bills discounting ,rediscounting in a case of commercial vehical financing,two wheeler or three wheeler financing are not permitted by RBI.
6.RBI restricted to permit NBFC's to give unsecure loans and allow inter corporate deposit.
7.Also, RBI restricted to NBFC's to finance to individual for subscribing Initial Public Offer.
8.These is restriction of RBI to NBFC's to finance against capital/debt issue.
Regulatory Issues for NBFC's:These are vatious regulatory norms for the NBFC's in order to protect customer for misuse of facilities.
1.NBFC are classified into NBFC's accepting deposits(NBFC-D) and NBFC's not accepting deposits(NBFC-ND).
1.1 NBFC-ND should have assets size of Rs 100 crore as per last audited balance sheet and have to maintain CRAR of 10%.
1.2 CRAR for NBFC-D should be 10% or 15% .
2. NBFC's-ND are not permitted to undertake following types of business:
2.1 They do not lend any single borrower exceeding 15% of it's owned fund.
2.2 They also don not lend any single group of borrower exceeding 25% of it's owned fund.
2.3 They are not allowed to invest in share of another company exceeding 15% of it's owned fund and
the share of single group of companies exceeding 25% of it's owned fund.
2.4 Thses companies lend and invest together 25% of it's owned fund to single party and 40% of it's owned fund to the single group of parties.
3.Investments in debenture willbe treated as lending and not investments by the NBFC's.
4. NBFC's should provide additional exposures for infrastructure loans/investments at certain limits.
5.If any banks are providing exposure to any NBFC should be subjected to certain ceilings.
6.If any foreign banks want to establish any NBFC as a subsidiaries in india are required to submit consolidated financial statements to RBI.
7.NBFC's are allowed to offer Portfolio management services as aproduct irrespective of wheather they are subsidiary of banks or not.
8.Banks in india ,including foreign banks operating in india,shall not hold more than 10% of paid up capital of NBFC's-D.
Charactristics of NBFC's:
1.NBFC's are registered under Companies act 1956 as the other pvt ltd Company registered.
2.NBFC's engaged in business of loans and advances,aqcuisition of stocks/bonds/debentures issued by Govt and local authority.Also ,these companies are enggaged in Leasing,Hirepurchases,Insurences business and Chit fund busines ect.
3.Non banking finance companies do accept demand deposits,so that no one send money to another city through DD.
4.NBFC's not have payment and settlement systems, so therefore can not provide cheques facilities to it's customers.
5.Deposits made by the investors into the NBFC's are not covered under deposits insurance scheme.
6.NBFC's not allowed to accept deposits directly from the public,rather they have to arrange funds by issuing debt instruments,borrowing fron the banks and financial institutions.
Roles of NBFC's:
1.NBFC's helps in development of sectors like Transportation and Infrastructure by providing easy credit to these sectors.
2.Main role of NBFC's are to generate employment to the young graduates,so as to minimize the one of the biggest problem of unemployment in india.
3.NBFC's also play a role of wealth creation to it's investors who invest there hard earn money in there diffirent investment schemes.
4.These finance companies also helps in economic development of the countries by providing easy credit to the different corporations and publics related to the development of the country.
5.As the banks reaches are not available to the rular areas,NBFC's replace the banking needs in rular areas by proving the easy credit and hepls accumulates rular savings in the form of issuing debt instruments.
6.NBFC's have trust in semi urban and rular ares,aslo the they have trust on first time user of NBFC's facilities beacuse of easy recovery of debts.
7.NBFC's basically finance to the economically weaker section of the society who not get debt from other sources.They provide loans at high intrest rate as compare to Banks.
Classifications of NBFC's:
1.Assets Financing Companies: These are the companies,providing loans against the assets only and not doing business of lending to other than assets financing.
2.Loan Companies:These types of NBFC's only providing loans to the corporates or publics.
3.Investment Companies:These types of companies engage in a business of helping investors of doing investments.
Categorization of NBFC's:
1.Equipment leasing companies: These are the companies which helps in finance the equipments like machineries, vehicals ect.Thses companies actually give equipments on lease by keeping ownership of financed equipments.
2.Hire Purchase Companies: These are the types of companies which hepls in purchasing an equipments by financing them and make payment of installments by purchasers.
3.Mutual Benifit finance company: These are the companies which work on the mutual benifit of a particular group of people.
4.Miscellaneous Non Banking Companies: These are a types of NBFC which are doing all types of businesses of collecting,managing,conducting as promoters of any corporation.
5.Housing Finance Companies:These are a types of NBFC's which are helps in purchasing houses by the home buyers by allowing them the easy financing.These companies giving loans for longer period of time usally 20 to 30 years.
Credit Management of NBFC's:
1.NBFC should use the appropriate operating procedure.It should follow proper guidelines related to the running of NBFC's.
2.There is a strict regulation to the NBFC's that it would nott provide credit to it's directors or promoters.
3.Also,NBFC's not provide credit to the directors,where its directors have any interest.
4.If in loan agreement did not specify the period of loans, then tha loan should be recovered within one year from the date of issuing guidelines by RBI.
Management Information System:
(A) Internal Reporting Systems:
1.NBFC's should maintain periodical statements,which shown the accurate position of the company.
2.NBFC's should maintain the statements of different branches related to the advances,non performing assets,assets classifications and ALM.
(B) External reporting systems:NBFC's are required to submitt the following returns to Department of non banking supervision at the regional offices of RBI:
1.NBFC's should present the Audited financial statements including the director report presented in annual general meeting.
2.NBFC's should present the annual returns on deposits.
3.They should submitt the detail changes in address,telephone numbers,name of directors,principal officers,specimen signature of official authorized to sign on behalf of company.
4.NBFC's having assits size of 100 crores and public deposit of 20 crore should submitt the following ALM harlf yearly:
4.1 Statement of strucutre liquidity
4.2 Statement of dynamic liquidity
4.3 Statement of interest rate sensititvity
5.NBFC's should maintain the harlf yearly statement of capital fund,risk assets or exposures and risk assets ratio ect.
6.They should maintain the monthly return on exposure to capital market.
7.They should maintain the statement showing the names,designation and professional qualifications of principal officers.Also nae,resident adress,qualification of directors and specimen signature of authorized to sign on behalf of the company.
Financial Leverage between Banks and NBFC's:
1.Banks and NBFC's are competing in some area's like leasing and Hire purchase,Corporate loans,Investment in non convertable debenture,IPO funding,Margin funding,Small ticket loans,Venture capital ect.
2.NBFC's do not offer facilities like saving and current deposits,cash credit ,overdraft ect.
3.Banks helps in financing the operation of NBFC'sby providing credit facilities or by sucscribing NBFC's debt instruments.
4.Investment made by NBFC's are current and long term in nature in the form of share/ debenture should not be permitted or restricted bt RBI.
5.Bills discounting ,rediscounting in a case of commercial vehical financing,two wheeler or three wheeler financing are not permitted by RBI.
6.RBI restricted to permit NBFC's to give unsecure loans and allow inter corporate deposit.
7.Also, RBI restricted to NBFC's to finance to individual for subscribing Initial Public Offer.
8.These is restriction of RBI to NBFC's to finance against capital/debt issue.
Regulatory Issues for NBFC's:These are vatious regulatory norms for the NBFC's in order to protect customer for misuse of facilities.
1.NBFC are classified into NBFC's accepting deposits(NBFC-D) and NBFC's not accepting deposits(NBFC-ND).
1.1 NBFC-ND should have assets size of Rs 100 crore as per last audited balance sheet and have to maintain CRAR of 10%.
1.2 CRAR for NBFC-D should be 10% or 15% .
2. NBFC's-ND are not permitted to undertake following types of business:
2.1 They do not lend any single borrower exceeding 15% of it's owned fund.
2.2 They also don not lend any single group of borrower exceeding 25% of it's owned fund.
2.3 They are not allowed to invest in share of another company exceeding 15% of it's owned fund and
the share of single group of companies exceeding 25% of it's owned fund.
2.4 Thses companies lend and invest together 25% of it's owned fund to single party and 40% of it's owned fund to the single group of parties.
3.Investments in debenture willbe treated as lending and not investments by the NBFC's.
4. NBFC's should provide additional exposures for infrastructure loans/investments at certain limits.
5.If any banks are providing exposure to any NBFC should be subjected to certain ceilings.
6.If any foreign banks want to establish any NBFC as a subsidiaries in india are required to submit consolidated financial statements to RBI.
7.NBFC's are allowed to offer Portfolio management services as aproduct irrespective of wheather they are subsidiary of banks or not.
8.Banks in india ,including foreign banks operating in india,shall not hold more than 10% of paid up capital of NBFC's-D.
No comments:
Post a Comment