This document contains summaries of several sources that discuss various topics related to non-banking financial companies (NBFCs) in India: 1) J.P. Morgan's risk model changes usually require multiple layers of management approval. Muthoot Finance found that NBFCs need strategies to target the 65% of the rural market. 2) A Crisil report concluded that new RBI regulations will strengthen NBFCs but increased provisions may decrease profits up to 30 basis points. 3) RBI papers concluded minimum net worth for NBFCs should stay at 2 crore rupees and new NBFCs should have over 50 crore in assets. Monetary policy in India responds more

1. By,
Deepa shree
Under the guidance
Prof. Shivaraj B.V MBA , Ph.D
B.N.Bahadur Institute of Management Sciences,
Manasagangotri, University of Mysore,
Mysore

2. An empirical analysis with J.P Morgan to be haunted
by change in risk model 2012 concluded Traditional value-at-
risk models are not perfect. The possible losses for most days,
losses could be even bigger on a few occasions . But even so,
they are widely uses as metric by risk managers, traders and
investors. Changes in such risk models usually require several
layers of approval going up the management.
Muthoot finance 2011 concluded 65% of the market in
rural areas, firms need to develop strategies to target this
segment effectively and provide better accessibility to
borrowers. When expanding , firms need to ensure consonance
of services and operations through network

3. NBFCs profits to be hit marginally by new RBI norms:
crisil 2011 concluded reserve banks recent recommendations
on the NBFCs will structurally strengthen the players but the
increased provisioning norms may affect the profitability as
average return on assets will come down by up to 30 basis
points

4. RESERVE BANK OF INDIA (2011) concluded the
minimum net owned fund requirement for all new NBFCs
wanting to register with the reserve bank could be retained at
the present Rs.2 crore till the RBI act is amended. The RBI
should however, insist on a minimum asset size of more than
Rs.50 crore for registering any new NBFC .Existing NBFCS
below this limit may deregister or be asked to seek a fresh
certificate of registration at the end two years.

5. RESERVE BANK OF INDIA (2010) concluded
monetary policy stance in India in a structural VAR model
with output gap. Inflation gap and policy interest rate. The
structural VAR model has been used to calibrate findings
emerging from the static models.
A range of estimated models for Taylor rule in India in
a historical perspective suggests that while the monetary
policy appeared more responsive to the output gap than to the
inflation gap during the period 1950-51 to 1987-88 there is a
shift in policy response during the period 1988-89-2008-09
with relatively strong reaction to inflation gap than to the
output gap.
The estimates from a structural VAR frame work also
firmly establish that variations in the short- term interest rates
are driven more by inflation gap than output gap.

6. Sunando Roy (2005) in Indian debt market concluded
that liquidity risk is an aspect of market risk that has seen
largely neglected by standard value at risk models. This
negligence is partly due to the fact that no single measure can
effectively capture the various aspects of liquidity financial
markets

7. RBI Department of banking supervision financial institutions
division in NBFCs May 2004 Banks enjoy the natural advantage of low
cost fund are, therefore, capable of providing long-term finance at lower
rates despite higher intermediation cost and can derive at the same time
the benefit of risk diversification across a wide spectrum of asset of
varying maturities, subject of course, to the limitation imposed by their
ALM considerations with the change in the operating environment, the
supply of low cost of funds has dried up for the DFIs forcing them to
raise resources at market related rates. The DFIs are unable to withstand
the competition from banks due to their higher cost of funds. DFIs are
also burdened with large NPAs due to exposure to certain sectors which
have not performed well due to down turn in the business cycle further
adding to their cost of doing business. Further their portfolio is almost
entirely composed of long-term high risk project finance & consequently
the viability of their business model has come under strain. The rest of
the DFIs must convert to either a bank or a regular NBFCs as
recommended by the Narasimhan Committee & should be subject to full
of RBI regulations as applicable to the respective category. Further, no
DFI should be established in future without the central government
support.

8. Risk Measurement in NBFCs Kevindowd (2002) concluded
VaR frame work provides an approach to risk measurement that goes
beyond earlier approaches in a number of important respects in particular,
we can apply a VaR approach using any Profit or Loss or return
distribution However, VaR also serious limitations and those who
continue to use VaR should take account of these. The VaR also faces a
superior rival.
Stress test have three main attraction First and foremost, they can
give us a lot of information about what we stand to lose in bad states- &,
indeed stress testing in explicity designed to give us information about
losses in bad states. The information provided by stress testing is a
natural complement to that provided by probabilistic measures, most
particularly VaR, Second stress test results can be very useful in risk
management decision making---in setting capital requirements and
position limits and so on. Finally, stress test can highlight weakness in
our risk management systems

9. Altma E I (1968) Financial Ratios, Discriminant Analysis & the
prediction of corporate Bankrupty Journal of Finance, Sept pp 589-609
Bank for International settlements (2000); Berkowitz (2000a); Blanco
(1999b); Breuer & Krenn (1999,2000)
Committee on the Global Financial System (2009) Report of the working
group on capital flows to emerging market economies
Derivatives valuation and risk management-----David A. Dubofsky
Federal Reserve bank of Set.louis (2009) Monetary trends, April
Ghate.P 1992 Informal finance, oxford; oxford university
pressheory, evidence and speculation”, Journal of Economic Literature
2000
Horne.VHC & Wachowicz, JM2000, fundamentals of Financial
Management.

10. Prentice hall of Indian 1998 Information available at the official website of the
National Bank for Rural, Agricultural & Development (NABARD)
Money, Banking, International Trade, & Public Finance---M.L.Jhingan Patel
U.R 2000, outlook for the Indian financial sector, economic and political
weekly, Vol XXXXV CNo.45, November4-10 pp 3933-3938
Sinha.S (2001) role of central banks in micro finance in Asia & the pacific
Manil; Asian Development Bank Wardhana A. (2001) Introduction in
M.Robinson (Ed.)