This document provides an analysis of India's non-banking financial company (NBFC) sector. It discusses the industry structure, nature of business, and differences between NBFCs and banks. NBFCs complement the banking system and account for 12.7% of the financial system's total assets. The document also analyzes NBFCs' sources and uses of funds, financial performance metrics like return on assets and non-performing assets, and recent regulatory changes affecting the sector. Overall, it presents an overview of the NBFC industry in India.

1. ANALYSIS OF NBFC SECTOR
SATHISH KUMAR R
ABIRAMI A
SARAVANA PRABHU B

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. 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. 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. Growing per capita
income
Growth Drivers

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. 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. 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. 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. 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. 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. 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. 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. 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. THANK YOU!!!