...Systemically Important Non-Deposit Taking Core investment Company Capital Market Exposures Certificate of Registration Commercial Paper Capital to Risk Weighted Assets Ratio Commercial Real Estate Financial Companies Regulation Bill Foreign Direct Investment Investment Company Inter Corporate Deposits Infrastructure Finance Company Initial Public Offering Insurance Regulatory and Development Authority Joint Parliamentary Committee Know Your Customer Loan Company Liquidity Coverage Ratio Lender Of Last Resort Micro Finance Institution CME CoR CP CRAR CRE FCRB FDI IC ICD IFC IPO IRDA JPC KYC LC LCR LOLR MFI 3 M&A NBFC NBFC-ND-SI Mergers and Acquisitions Non Banking Financial Company Systemically important Non Deposit taking Non Banking Financial Company Deposit taking Non Banking Financial Company Non Deposit taking Non Banking Financial Company Non Banking Financial Institutions Non-convertible debentures Net Owned Funds Non-Performing Asset Over-the-counter Public Financial Institution Priority Sector Lending Reserve Bank of India Residuary Non Banking Company Return on Assets Return on Equity Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Scheduled Commercial Bank Securitisation and Reconstruction Companies Securities and Exchange Board of India Statutory Liquidity Ratio Small and Medium Enterprise NBFC-D NBFC-ND NBFI NCD NOF NPA OTC PFI PSL RBI RNBC RoA RoE SARFAESI SCB SC&RC SEBI SLR SME 4 CONTENTS Section Numbers...
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...Manual on Financial and Banking Statistics 6. NON-BANKING FINANCIAL COMPANIES The activities of non-banking financial companies (NBFCs) in India have undergone qualitative changes over the years through functional specialisation. The role of NBFCs as effective financial intermediaries has been well recognised as they have inherent ability to take quicker decisions, assume greater risks, and customise their services and charges more according to the needs of the clients. While these features, as compared to the banks, have contributed to the proliferation of NBFCs, their flexible structures allow them to unbundle services provided by banks and market the components on a competitive basis. The distinction between banks and non-banks has been gradually getting blurred since both the segments of the financial system engage themselves in many similar types of activities. At present, NBFCs in India have become prominent in a wide range of activities like hire-purchase finance, equipment lease finance, loans, investments, etc. By employing innovative marketing strategies and devising tailor-made products, NBFCs have also been able to build up a clientele base among the depositors, mop up public savings and command large resources as reflected in the growth of their deposits from public, shareholders, directors and other companies, and borrowings by issue of non-convertible debentures, etc. Consequently, the share of non-bank deposits in household sector savings in financial assets...
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...the private sector business houses, public sector enterprises, and multinational corporations and leading small and mid-sized enterprises (“SME”). As a result, a large part of our wholesale lending is generally concentrated among highly rated customers. In addition to market targeting, the principal means of managing credit risk is the credit approval process. We have policies and procedures to evaluate the potential credit risk of a particular counterparty or transaction and to approve the transaction. For our wholesale clients, we have a risk assessment and grading system that is applied to each corporate counterparty on an annual basis. We also have limits for funded exposure to individual industries. In addition, we have limits for exposure to borrowers and groups of borrowers for funded and non-funded exposures. Our credit risk policies for loans also apply to credit substitutes. We also have a review process that ensures the proper level of review and approval depending on the size of the...
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...Preamble: | The Micro, Small and Medium Enterprises (MSME) Sector, particularly the tiny segment of the small enterprises, faces huge challenges as under: * Competition from both domestic & multi-national companies. * Inadequate access to finance due to lack of financial information and non-formal business practices * Lack of access to private equity and venture capital * Lack of access to inter-state and international markets; * Limited access to secondary market instruments * Fragmented markets in respect of their inputs as well as products * Vulnerability to market fluctuations * Limited access to technology and product innovations * Lack of awareness of global best practices * Considerable delays in the settlement of dues/payment of bills by the large scale buyersThe MSME sector therefore looks to the Banks for * Single window dispensation. * Quick decision with least Turnaround Time, and above all, * Better service.It is therefore the Bank’s priority:- * to provide timely and adequate credit to the MSMEs, * to encourage their Technology Upgradation, for better quality and competitiveness of their product(s), and * even pro-actively detect sick and viable units in time, so as to nurse them back to health through appropriate restructuring.With the deregulation of the financial sector, the ability of the bank to service the credit requirements of the MSME sector depends on the underlying transaction costs, efficient recovery processes and...
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...Finserve | Reliance Capital | AB Nuvo | Shriram Transport | Sundaram Fin | Srei infra | Power Finance | REC | | | Eligibility Criteria | Private Entities “owned & Controlled” by residents | Public Sector entities – 50% public holdings (min 51%) | Existing NBFC | | Fit & proper criteria | Past track record of sound credential, integrity | Successful track record of 10 years | RBI may seek feedback from regulators, ED, CBI and IT Dept | | Corporate Structure | Non operative Financial holding Company to be Set Up | 51% of the Holding Company should be held by listed entity | Public Should own 51% of the entity holding 51% of in the NOFHC | NOHFC to hold bank and other financial services entities | NOHFC to ring fence fin entities from group activities | RBI will have to be satisfied with ring fencing (no lending not just promoters individuals linked to promoters , suppliers , customers (CHALLENGE) , even for regulators to monitor (SUPERVISORY DEPT) | | EXPOSURE NORMS | NOHFC won’t have exposure to promoter group entities, promoter assc. individual with major suppliers and customers | | | Capital & Shareholding | Min paid up voting equity capital of Rs 500 Cr | NOHFC to hold 40% for 5 years | Shareholding in excess of 40% will have to be brought down to 40% in 3 years, then eventually to be brought down to 20% in 10 years, 15% in 12 years | Listing in 3 years | More than 50% of directors | ...
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...How this country was affected by the current global crisis? How is it dealing with the situation? Be sure to address the monetary and fiscal policy of the government and the rescue package (if any) implemented by the government. This paper describes how government of India and RBI (Reserve bank of India, equivalent to Fed Reserve in US) tackled aftermath of global financial crisis in India. Effects of Global crisis Aftermath of Financial crisis was more prominent during 2008. As the global financial crisis began unfolding in the first nine months of 2008, foreign institutional investors pulled out close to $10 billion from India, dragging the capital market down with it. The liquidity crisis, coupled with the credit squeeze and a weak currency, hurt various sectors. Banks have reined in retail financing, affecting home and auto loans. Car loans account for 70% of consumer auto purchases now, down from 85% a year ago. Meanwhile, consumers are deferring other purchases while financiers have been logging a drop in loan disbursal rates At that time the Bombay Stock Exchange Index, or Sensex, tumbled 6% to a two-year low. For the first time in five years, the central bank cut the cash reserve ratio, the amount of funds that banks have to keep with the Reserve Bank of India by 50 basis points, to 8.5%, on Oct. 6, 2008. The same evening, the Securities & Exchange Commission of India eased some restrictions on foreign portfolio investors—such as registering in India before...
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...NON-PERFORMING ASSETSCHALLENGE TO THE PUBLIC SECTOR BANKS INTRODUCTION After liberalization the Indian banking sector developed very appreciate. The RBI also nationalized good amount of commercial banks for proving socio economic services to the people of the nation. The Public Sector Banks have shown very good performance as far as the financial operations are concerned. If we look to the glance of the financial operations, we may find that deposits of public to the Public Sector Banks have increased from 859,461.95crore to 1,079,393.81crore in 2003, the investments of the Public Sector Banks have increased from 349,107.81crore to 545,509.00crore, and however the advances have also been increased to 549,351.16crore from 414,989.36crore in 2003. The total income of the public sector banks have also shown good performance since the last few years and currently it is 128,464.40crore. The Public Sector Banks have also shown comparatively good result. The gross profits of the Public Sector Banks currently 29,715.26crore which has been doubled to the last to last year, and the net profit of the Public Sector Banks is 12,295,47crore. However, the only problem of the Public Sector Banks these days are the increasing level of the non performing assets. The non performing assets of the Public Sector Banks have been increasing regularly year by year. If we glance on the numbers of non performing assets we may come to know that in the year 1997 the NPAs were 47,300crore and reached to 80...
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...* Healthy and sound financial system plays an important role in achieving sustainable development and economic and political stability in both developed and underdeveloped economies. * Financial institutions play an important role in economic and financial environment of any country. * An essential element in the health of any financial system is the soundness of its institution. * As the value of the bank’s assets decreases or the percentage of non-performing loans increases a deduction from capital is take in an equal amount to restore the balance. Thus, capital acts as a source of funds to bear risks and absorb losses, covering any imbalance caused by a fall in the value of assets. * The level of capital funds required to support the institutional structure and to provide protection against unanticipated and excessive losses is known as capital adequacy * Capital adequacy is the most crucial element within bank supervisory systems * Systemic risk or the contagion effect means failure of one bank leads to possible collapse of several other financial institutions. * A liquidator is the officer appointed when a company goes into winding-up or liquidation who has responsibility for collecting in all of the assets of the company and settling all claims against the company before putting the company into dissolution * G-10 countries include Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, Sweden, Switzerland, The United Kingdom...
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...non-banking company). QUES 2. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ? ANS 2. NBFCs are doing functions akin to that of banks, however there are a few differences: (i) a NBFC cannot accept demand deposits; (ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and (iii) deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks. QUES-3. Is it necessary that every NBFC should be registered with RBI? ANS 3. In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to commence or carry on any business of non-banking financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934. However, to obviate dual regulation, certain category of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking...
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...Introduction The Indian Financial Institutions Sector The Indian Financial sector is still dominated by Bank intermediation. Though the size of Capital market has started expanding significantly from the early 1990s, bank intermediation remains the dominant feature. The market capitalization as a percentage of GDP in India is $ 1.03 trillion, which is about 90% of the GDP, while countries like Hong Kong (525% of GDP), Singapore (221%) are way ahead. India s Bond market capitalization also remains low at 50 % (McKinsey report) with the corporate bond market way behind the government debt market. The bank deposits account for 52% of the GDP, and about three fourth of the total assets of the financial system. (Paper by Wharton publications on financial systems in India, 2007). The Non Banking sector, including the Mutual funds, Non Banking Financial Companies, Insurance companies and Other Financial institutions account for over 30% of the Financial Sector’s assets. This adds up to about 26 lakh crore in assets (2008-09-FSAP). According to The Financial Development index-2008, India scores better in Financial intermediation through Non-Banks ranking 16th, compared to a rank of 50th in terms of Banks. India ranks better in terms of capital access comparable to Japan, in spite of much lower assets/GDP comparatively. Classification of Financial institutions The Financial institutions in India can be broadly classified into the categories as listed in the representation...
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...NEW BANKING LICENSE TO CORPORATE WORLD After a span of 10 years RBI is set to issue fresh banking license. In 2003 -04 it had last issued license to Yes bank and Kotak Mahindra bank . The RBI issued the final guidelines for license of new private banks wherein entities both from private and public sector shall be eligible to set up a bank through a wholly owned non operative financial holding company (NOFHC). The NOFHC shall be wholly owned by promoter/promoter group . The NOFHC shall hold the bank as well as all other financial services entities of the group. Entities /groups should have past record of sound credentials and integrity be financially sound and successful track record of 10 years . Criteria for applying license A business group which keen for applying for license should have a minimum paid up capital of Rs 500 crore. At the start of the banking operation, NOFHC should hold a minimum of 40% of equity for lock in period of 5 years .later it has to be brought down to 15% within 12 year from that onwards. The NOFHC will be registered as Non - banking finance company with RBI while the bank will be governed by the prudential regulations by RBI. NOFHC and bank shall not have any exposure to the promoter group. The bank shall not invest in the equity /debt capital instrument of any financial entities held by the NOFHC. However RBI put a stricter condition of having 25% of its branches in unbanked rural area. with population upto 9999 . New banks...
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...always associated with the contemporary changes in the economy. The Indian banking industry has undergone a metamorphosis in the last two decades due to changes in the political, economic, financial, social, legal and technological environments. The mind boggling advances in technology and deregulation of financial markets across the countries created new opportunities, tempting banks to enter every business that had been thrown open. The banks are now moving towards universal banking concepts, while adding new channels and a series of innovative product offerings catering to various segments at an attractive price. This makes it imperative for the banks to adopt sophisticated risk management techniques and to establish a link between risk exposures and capital. Effective management of risk has always been the focus area for banks owing to the increasing sophistication in the product range and services and the complex channels that deliver them. The challenge for the banks is to put in place a risk control system that minimizes the volatility in profit and engenders risk consciousness across the rank and file of the organization. Sound risk management will ensure a healthy bottom line for the bank as risk taken by the bank will be commensurate with return and will be within an approved risk management policy. As all transactions of the banks revolve around raising and deploying the funds, Asset-Liability Management (ALM) gains more significance as an initiative towards the risk management...
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...Key Inputs for th XII Plan Financing of Power Sector Central Electricity Authority Government Of India Agenda Sector Profile Magnitude of Investment Funding Sources and Issues Power Sector Profile A LL INDIA DEFICITS IN POWER 20 15 Percent 10 5 Energy Def icit Peak Def icit 0 1998 -99 2000 -01 2002 -03 2004 -05 2006 -07 2008 -09 Energy availability has increased by 32.7% in the past 5 years but demand continues to outstrip supply Nearly 600 million Indians do not have access to electricity AT&C losses currently exceed 30% for the country as a whole. Need to Accelerate Power Sector Growth Growth in GDP and Gross Power Generation 15.00 Grow th in Gross Generation 10.00 Grow th in GDP Percent 5.00 0.00 199900 200001 200102 200203 200304 200405 200506 200607 200708* 200809* For India to grow @9% p.a. its power sector must also grow at 7.2% p.a (XIIth Plan projects electricity use elasticity wrt GDP at 0.8) But over the last 5 years, Gross Power generation has grown by only 5.89% pa NEP objective : Power for all by 2012 Targeted Growth of Generation XIth Plan target is 78,700MW XIIth Plan target is 1,00,000 MW Current investment focus is on Generation Investment in Sub-transmission and Distribution is lagging However, for smooth functioning of the sector Investment should be in the ratio 2:1:2 Magnitude of Investment (Rs crore) Plan Generation Transmi ssion 1,40,000 2,40,000 Distributi...
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...• The post 1995 overview is depicted with whatever information is available. NATURE • There are thousands of NBFCs and only a small proportion of them report to the RBI. • The RBI (Amendment) Act, 1997 defines NBFC as an “institution or company whose principal business is to accept deposits under any scheme or arrangement or in any other manner, and to lend in any manner.” • As a result, a number of loan and investment companies registered under the Companies act by business houses for the purpose of investment in group companies are now included as NBFCs. CATEGORIES 1. 2. 3. 4. 5. 6. 7. 8. Equipment Leasing Company (ELC) Hire-Purchase Finance Company (HPFC) Housing Finance Company (HFC) Investment Company (IC) Loan Company (LC) Mutual Benefit Financial Company (MBFC) Miscellaneous Non-Banking Company (MNBC) Residuary Non-Banking Company (RNBC) IMPORTANCE • NBFCs perform a diverse range of functions and helps bridge the credit gaps. • They have served the households, farm, and small enterprise sector on a sustained basis. • A thriving, healthy and growing non-banking financial sector is necessary for promoting the growth of an efficient and competitive economy. • The difference between the banks and the NBFCs have blurred over the years. Regulation of NBFC’s • • • • In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be...
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...risks are --------: Long gestation period Huge financial requirements necessitating loan syndication Contractually Driven, Regulatory & Legal Framework Revenues tied to economic variables Environmental Concerns Infrastructure has these inherent risks which lead to time overruns and increase project costs, but real challenge lies in mobilizing funds for projects. Government had allocated 8.33% of GDP to this sector in 11th Five Year plan, and is likely to increase it to 10% of GDP in 12th Plan. This displays Government’s commitment to augment infrastructure capabilities in India. An increase in project order inflows indicates “demand”, but a paucity of long term funds has come in the way of execution. Thus, RBI has taken the onus to channelize funds towards infrastructure, where it is a win- win situation for the project company and the financier. In 2004, it allowed banks to borrow from long term sources to fulfill long term project needs. However, at that time, the banks were hesitant to take such long term borrowing obligations and continued with short term borrowing (Bank deposits of tenor 1 month to 5...
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