Non-banking financial company


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Non-banking financial company

  1. 1. N. B. F. C.Non Banking Financial Company
  2. 2. What is it?• A NBFC is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/ securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business.
  3. 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. Registration of NBFCs
  4. 4. It does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property.
  5. 5. (i) equipment leasing company; (ii) hire-purchase company; (iii) loan company; (iv) investment company. The NBFCs that are registered with RBI are (i) Asset Finance Company (AFC) (ii) Investment Company (IC) (iii) Loan Company (LC) With effect from December 6, 2006
  6. 6. Asset Financing Company AFCs are financial institutions whose principal business is of financing physical assets such as automobiles, tractors, construction equipment material handling equipment and other machines.
  7. 7. Investment Company ICs generally are involved in the business of shares, stocks, bonds, debentures issued by government or local authority that are marketable in nature
  8. 8. Loan Company LCs are loan giving companies which operate in the business of providing loans. These can be housing loans, gold loans etc.
  9. 9. Role Of NBFCs 70-80% of Commercial Vehicles are finance driven.  Indian economy is more dependent on roads  Heavy Govt. outlay for mega road projects  Heavy replacement demand anticipated – 30 lakh commercial vehicles by the year 2007  Another Rs.6000 Crores required for phasing out old commercial vehicles  CRISIL in its study has placed commercial vehicle financing under “low risk” category  Each commercial vehicle manufactured, sold and financed gives employment to minimum 20 persons (direct and indirect)
  10. 10. Significance of NBFCs in India According to the Economic Survey 2010-11, it has been reported that NBFCs as a whole account for 11.2 per cent of assets of the total financial system. NBFCs have turned out to be engines of growth and are integral part of the Indian financial system, enhancing competition and diversification in the financial sector, spreading risks specifically at times of financial distress and have been increasingly recognized as complementary of banking system at competitive prices.
  11. 11. Major Products Offered By NBFCs In India
  13. 13. The financial performance of NBFCs in 2009-10 witnessed moderate deterioration which also reflected in the decline in the operating profits.
  14. 14. Future prospects of NBFC sector: NBFCs have been playing a very important role both from the macroeconomic perspective and the structure of the Indian financial system. They offer quick and efficient services without making one to go through the complex rigmarole of conventional banking formalities. The coming years will be very crucial for NBFCs and only those who will be able to face the challenge and prove themselves by standing the test of time will survive in the long run.
  15. 15. Differences Between NBFCs and Banks.
  16. 16. NBFC cannot collect deposits in the manner of a bank NBFC cannot issue checks drawn on itself NBFC cannot issue Demand Drafts like banks NBFC cannot indulge primarily in agricultural or industrial activity NBFC cannot engage in construction of immovable property NBFC cannot accept demand deposits While banks are incorporated under banking companies act NBFC is incorporated under company act of 1956