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Assets finance company
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- 2. NBFC MEANING • Non-Banking FinancialCompany (NBFC) is a company registered under the Companies Act, 1956 /2013 engaged in the business of loans and advances, Assets financing , investment share, debenture or other marketable securities of a like nature, leasing, hire-purchase and insurance business • NBFC provides working capital loan and credit facilities and investment in properties. It is useful for trading money market instruments • AFC provides financing against physical assets like car, bust, machine or Loan against property
- 3. What is the business activity of AFC • An Asset finance company which is a financial institution engaged in the principal business of financing of physical asset or movable assets and other economic activity such as Bus, Car , tractors , lathe machines, generator sets & manufacturing machine • An Assets finance company also provides short term working capital loan against against receivables, inventory i.e. •Assets finance company must generate 60% of its revenue from the aggregate of physical assets supporting the economic activity is not less than 60% of its total assets and total income respectively • Assets finance can be either deposit taking NBFC or non deposit taking NBFC • Assets finance can be registered with RBI with minimum net owned fund Rs. 200 Lakh •
- 4. • AFC • 60% of Total Assets in Financing Financing Real/Physical Real/Physical Assets •60% of Total Income arises from the aforesaid aforesaid Assets • Minimum Net owned fund Rs.200 Lakh • 60% of total income must be generated from assets financing business • Assets finance company can give secured or unsecured loan subject to total lending should be less than 40% of total assets size of the company Condition for Assets finance company License
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- 7. NOF ( NET OWNED FUND ) REQUIREMENT üIn terms of section 45 IA of the RBI Act, 1934, net owned funds (NOF) of an NBFC means- ü(a) the aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance-sheet of the company after deducting there from– ü (i) accumulated balance of loss; (ii) deferred revenue expenditure; and (iii) other intangible assets; and ü(b) further reduced by the amounts representing ü(1) investments of such company in shares of– ü (i) its subsidiaries; (ii) companies in the same group; (iii) all other non-banking financial companies; and ü(2) the book value of debentures, bonds, outstanding loans and advances (including hire- purchase and lease finance) made to, and deposits with,– ü(i) subsidiaries of such company; and (ii) companies in the same group, üto the extent such amount exceeds ten per cent of (a) above.
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- 9. NPA ( NON- PERFORMING ASSEST ) NORMS A. For lease Rental & Hire purchase Assets : ü Overdue for 9 months as on 31stMarch 2016 ü Lease rental & Hire purchase assets shall become NPA if they overdue for 9 months ( currently 12 months ) for the financial year ending March 2016; Overdue for 6 months as on 31st March 2017 üLease rental & Hire purchase assets shall become NPA if they overdue for 6 months for the financial year ending March 31, 2017 and ü Overdue for 6 months as on 31st March 2018 & onwards – üLease rental & Hire purchase assets shall become NPA if they overdue for 3 months for the financial year ending March 31, 2018 and thereafter
- 10. • CONT……. B. Sub – Standard Assets : For all loan & hire purchase & lease assets , sub-standard asset would mean : • NPA up to 16 months on 31/03/2016 – An asset that has been classified as NPA for a period not exceeding 16 months ( currently 18 months ) for the financial year ending March 31,2016 • NPA up to 14 months on 31/03/2017 – An asset that has been classified as NPA for a period not exceeding 14 months for the financial year ending March 31,2017 and • NPA up to 12 months on 31/03/2018 – An asset that has been classified as NPA for a period not exceeding 12 months for the financial year ending March 31,2018
- 11. Role of NBFC in Economic Development NBFCs aid in economic development in the following ways – 1. MOBILIZATION OF RESOURCES – it convert savings into investments 2.CAPITAL FORMATION- aids to increase capital stock of a company 3. Help in development of financial markets 4. It provides long term credit & specialized credit 5. Help in attracting foreign grants. 6. Aid in employment generation.
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- 13. • NBFCs whose asset size is of ₹ 500 cr or more as per last audited balance sheet are considered as systemically important NBFCs. •The rationale for such classification is that the activities of such NBFCs will have a bearing on the financial stability of the overall economy. Systematically important NBFC
- 14. Returns to be submitted by deposit taking NBFCs • NBS-1 Quarterly Returns on deposits in First Schedule. •NBS-2 Quarterly return on Prudential Norms is required to be submitted by NBFC accepting public deposits. • NBS-3 Quarterly return on Liquid Assets by deposit taking NBFC. • NBS-4 Annual return of critical parameters by a rejected company holding public deposits. (NBS-5 stands withdrawn as submission of NBS 1 has been made quarterly.) • NBS-6 Monthly return on exposure to capital market by deposit taking NBFC with total assets of ₹ 100 crore and above. • Half-yearly ALM return by NBFC holding public deposits of more than ₹ 20 crore or asset size of more than ₹ 100 crore • Audited Balance sheet and Auditor’s Report by NBFC accepting public deposits. • Branch Info Return.
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- 16. CONT…… • Constitution of Audit Committee according to section 177 of the Companies Act 2013, Company having assets of Rs. 50 crores and above shall constitute an audit committee. •All Applicable NBFCs shall form a Nomination Committee to ensure 'fit and proper' status of proposed/ existing directors. • Every NBFC shall create reserve fund at least 20% of its net profit before dividend every year. • Change in Management / directors of NBFC must be reported to RBI within 30 days.
- 17. Scope & Importance in future • The scopeof NBFCs is fast growing with multiplication of financial services. Some of NBFCs are also engaged in underwriting through subsidiary unit and by offering allied financial services including stock broking, investment banking, assets management and portfolio management. • In recent times non- baking financial companies (NBFCs) have emerged substantial contributors to the Indian economics growth by supplementing the effort of banks and other financial institutions. They pay key role in the direction of saving and investment .in wave of rapid industrial development &liberalization of the financial sector, key financial institution and professional have promoted financial institution to create have promoted financial institution to create a diversified and competitive financial system.
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