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To recognize the nbfc loan market

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NBFC LOAN MARKET

NBFC LOAN MARKET

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  • 1. BY ASHUTOSH MEENA TSB MANIPAL UNI. JAIPUR
  • 2. Indian Loan Market by NBFC’S & BANKS:  India loan market is estimated to generate Rs 9,324.3 billion in 2011 and is expected to reach Rs 21,980.6 billion by 2016 with a CAGR of 18.7% from 20-11-2016.  The loan area includes home loans, education loan, auto loan, personal loan, consumer durable loan and much hyped gold loans.  The major loan part covers by gold loan the Indian population holds world’s 11% of the total Gold that value’s around Rs. 32,100 Billion in 2010.  Loan market is growing with the highest growth rate and is expected to grow with a CAGR of 38.7% from 2011-2016.
  • 3. NBFC: A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and under supervision of RBI NBFC’S work field is business of loans and advances, acquisition of shares, stock, bonds, debentures, securities issued by government or local authority and agriculture activity, industrial activity, sale/purchase/construction of immovable property. These institutions typically are restricted from taking deposits from the public depending on the jurisdiction. Maintenance of 12.5%of their deposits in liquid assets  Registration of NBFCs: 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.
  • 4. INDIAN BANKS: A bank is a financial institution and a financial intermediary that accepts deposits Bank deals with receiving from the general public money on current, deposit, savings or other similar account repayable on demand, paying or collecting checks drawn by or paid in by customers Directed under the RBI guidelines. Around 26 nationalized bank in India. 13 old private sector banks. 19 new age private sector banks. 80 Regional Rural banks 32 Foreign banks
  • 5. Why consumer prefers NBFC even if BANKS are there for loans: Only 34% of Indian individuals have access to banks. Banks have a lot of constraints in lending. Conditions for getting a loan. Proximity of financial services. Single product and dedicated business. For collecting the dues they use human resources and pay them lower than what banks pay. Banks lack here. In truck financing majority of the truck drivers don’t have proper papers to get the loans. In home finance, housing finance companies (HFC) flourish with higher focus and better customer service.
  • 6. Market Share of NBFC’s in financing: In 1981there were 7063 NBFC’S which is went up 24009 in 1990 and there were as many as 55995 NBFC’S in 1995. The numbers of NBFC’s was increase so rapidly because of high interest rates provided by these companies that led investors to invest their funds in NBFC’S. In 1997-98 RBI introduce strict guidelines because NBFC’S failed in repayment to their depositors. After that private banks comes into competition and NBFC’S also shows growth during the year 2000-02. In recent years NBFCs once again in decline mode because of high cost of funds and intense competition with the banking sector there are 12,740 companies as at end of June 2013. The big players are surviving like Shriram Transport finance and Mahindra finance because of automobile financing they also providing second hand vehicle finance.
  • 7. Challenges for NBFC’S:  Increased competition from banks in across-the-board finance it diversify the NBFCs from core business activities.  NBFCs have also ventured into riskier segments such as unsecured loans, capital market lending etc. moreover, NBFCs customer profile is concentrated on the selfemployed segment.  NBFCs main focus on urban markets they are expected to look for rural and semi- urban markets also , Because credit requirements of rural population are primarily met by banks from organized sector or local money lenders.
  • 8. Future scenario or opportunities for NBFCs :  NBFCs have a very important role both from the economic perspective and the structure of the Indian financial system.  NBFCs have to focus on their core strengths while improving on weaknesses.  The core strengths would be very dynamic in nature and constantly endeavor to search for new products and services in order to survive in this ever.  Most of big players in NBFC segment going to get banking licences in April 2014 by RBI, So small scale NBFCs have to alert with new strategies and focused on rural and semi urban area because if big players got licences then this is not easy for them to reach rural market frequently.