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ANALYSIS OF NBFC SECTOR
SATHISH KUMAR R
ABIRAMI A
SARAVANA PRABHU B
Industry Structure
 Complimentary to banking system
 12.7% of the total assets of financial system
 Operate largely in ...
Banks Vs NBFC
NBFC – Can accept only Demand deposits
 Cost of funds
 Business Model Flexibility – Limited reporting/docu...
NBFC
Asset
Finance
Company
# NOF – 2crores
#CRAR – 15%
Investment
Company
# NOF – 2crores
#CRAR – 15%
Loan
Company
# NOF –...
Growing per capita
income
Growth Drivers
Market Size
13572
2448 2753
5841
2.27%
0.12% 0.06% 0.09%
0
5000
10000
15000
1997-98 2005-06 2009-10 2011-12
0.00%
0.50%
1....
Source of Funds161
28
641
112
171
41
698
144
194
58
809
107
P AI D UP CAP I TAL &
RE S E RV E S AND
S URP LUS
P UBLI C DE ...
Use of Funds96.34
88.64
711.19
45.50
135.00
76.00
780.00
63.00
134.00
25.00
874.00
103.00
S LR NON- S LR
I NV E S TM E NTS...
Performance – ROA, ROE
2.7
1.57
2.71
2.75
2.82
2.2
1.9
2.1
1.5
2.1
0
0.5
1
1.5
2
2.5
3
2009 2010 2011 2012 2013
ROA
NBFC-D...
Performance - NPA
2.1
2
1.3
0.7
2.1
0
0.5
1
1.5
2
2.5
2008 2009 2010 2011 2012
Gross NPAs to Total Advances
22.2
21
20.4
2...
Banks and NBFCs
F06 FY10 FY11
No of NBFCs 13014 12630 12409
Bank Credit of all scheduled Banks 1,572,780 3,337,659 4,060,8...
STRENGTH
Easy and fast appraisal &
disbursements
Product Innovation and Superior
Delivery
Strong Market Penetration and
in...
Recent Regulatory Changes
 Usha Thorat Committee
 Tier I Capital of 10%, as against 7.5% recently
 NPA recognition norm...
Retail NBFC
0.92
1.44
1.56
1.85
2.37
3.5
3.25
2007 2008 2009 2010 2011 2012 2013
AUM OF RETAIL NBFC (IN TRILLIONS)
THANK YOU!!!
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Nbfc industry analysis

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Nbfc industry analysis

  1. 1. ANALYSIS OF NBFC SECTOR SATHISH KUMAR R ABIRAMI A SARAVANA PRABHU B
  2. 2. Industry Structure  Complimentary to banking system  12.7% of the total assets of financial system  Operate largely in vehicle financing, hire purchase, lease, personal loans, working capital loans, microfinance, consumer loans, housing loans, loans against shares, investments, distribution of financial products, etc NBFC Nature of Business Acceptance of Deposits NBFC-D NBFC-ND
  3. 3. Banks Vs NBFC NBFC – Can accept only Demand deposits  Cost of funds  Business Model Flexibility – Limited reporting/documentation  Relaxed regulatory norms – Int. rate/ PSL/ Capital Market Exposure  DICGC not available, cannot issue cheques, NPA classification  Recovery Mechanisms – SARFAESI, DRT not present  Easy to obtain License, no restriction on number of branches  KYC (know-your-customer) norms not Stringent  NPA Classification - 180 days vs 90 days
  4. 4. NBFC Asset Finance Company # NOF – 2crores #CRAR – 15% Investment Company # NOF – 2crores #CRAR – 15% Loan Company # NOF – 2crores #CRAR – 15% Infrastructure Finance Company # NOF – 300crores #CRAR – 15% (Tier I-10%) Infra Debt Funds # NOF – 300crores #CRAR – 15% CIC- ND-SI # Assets Size >100 crores #CRAR – 15% Micro Finance Institutions # NOF – 5crores #CRAR – 15% Factors #NOF – 5crores CRAR – 15% Classfification – Nature of Business
  5. 5. Growing per capita income Growth Drivers
  6. 6. Market Size 13572 2448 2753 5841 2.27% 0.12% 0.06% 0.09% 0 5000 10000 15000 1997-98 2005-06 2009-10 2011-12 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% NBFCs-acceptance of Public Deposits Public Deposits % of Bank Deposits
  7. 7. Source of Funds161 28 641 112 171 41 698 144 194 58 809 107 P AI D UP CAP I TAL & RE S E RV E S AND S URP LUS P UBLI C DE P OS I TS BORROW I NGS OTHE R LI ABI LI TI E S SOURCE OF FUNDS - NBFC-D 2010 2011 2012 *Figuresareinmillions
  8. 8. Use of Funds96.34 88.64 711.19 45.50 135.00 76.00 780.00 63.00 134.00 25.00 874.00 103.00 S LR NON- S LR I NV E S TM E NTS LOANS AND ADV ANCE S OTHE R AS S E TS USE OF FUNDS - NBFC-D 2010 2011 2012 *Figuresareinmillions 3485 417 1198 788 4709 502 1507 895 5900 635 1595 1083 LOA NS & A DV A NCE S HI R E P U R CHA S E A S S E TS I NV E S TM E NTS OTHE R A S S E TS USE OF FUNDS - NBFC-ND-SI 2010 2011 2012
  9. 9. Performance – ROA, ROE 2.7 1.57 2.71 2.75 2.82 2.2 1.9 2.1 1.5 2.1 0 0.5 1 1.5 2 2.5 3 2009 2010 2011 2012 2013 ROA NBFC-D NBFC-ND-SI 15.7 19.2 17 17 15.4 8.26 7.49 8.08 7 8.6 0 5 10 15 20 25 2009 2010 2011 2012 2013 ROE NBFC-D NBFC-ND-SI 17.5 15.4 15 15.3 13 14 15 16 17 18 NBFC PSU banks Old Pvt banks New Pvt banks Average RoE (post tax) FY 11 - 12
  10. 10. Performance - NPA 2.1 2 1.3 0.7 2.1 0 0.5 1 1.5 2 2.5 2008 2009 2010 2011 2012 Gross NPAs to Total Advances 22.2 21 20.4 22.3 42.1 32.8 27.5 28 0 5 10 15 20 25 30 35 40 45 2010 2011 2012 2013 CRAR NBFC - D NBFC-ND-SI
  11. 11. Banks and NBFCs F06 FY10 FY11 No of NBFCs 13014 12630 12409 Bank Credit of all scheduled Banks 1,572,780 3,337,659 4,060,843 NBFC advances as % of Bank Credit 10.77% 12.57% 13.20% Assets of all scheduled banks 2,531,462 5,258,495 6,146,590 NBFC assets as a % of Bank assets 13.06% 13.33% 13.78% Deposits of all scheduled banks 2,185,809 4,635,224 5,355,160 NBFC Public deposits as % of bank deposits 1.05% 0.37% 0.22% *Figuresareincrores
  12. 12. STRENGTH Easy and fast appraisal & disbursements Product Innovation and Superior Delivery Strong Market Penetration and increased operating effeciency Collection Effeciency WEAKNESS Too much of diversification from core business Increased regulatory coverage No access to SARFAESI or DRT for recovery from bad loans and no access to refinance Volatile business environment OPPORTUNITIES Large untapped market, both rural & urban and also geographically Tie-up with global financial sector giants New opportunities in credit card, personal finance, home equity, etc THREATS High cost of funds Restrictions on Deposit taking NBFCs Growing retail thrust within banks and competition from unorganized money lenders Significant slowdown in the economy affecting the various segments of NBFC. Deterioration of asset quality and rising levels of NPA. SWOT Analysis
  13. 13. Recent Regulatory Changes  Usha Thorat Committee  Tier I Capital of 10%, as against 7.5% recently  NPA recognition norm to be lowered to 90 days from 180/360 days  Standard asset provisioning -0.40% from March 31, 2014.  Acceptance of Deposits  Liquidity Management  Raising money through private placement of debenture  NBFCs finance for Purchase of Gold – LTV 60%
  14. 14. Retail NBFC 0.92 1.44 1.56 1.85 2.37 3.5 3.25 2007 2008 2009 2010 2011 2012 2013 AUM OF RETAIL NBFC (IN TRILLIONS)
  15. 15. THANK YOU!!!

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