This document discusses non-banking financial companies (NBFCs) in India. It provides an overview of NBFC regulations, categories, size, activities, and roles. Key points include: 1) NBFCs engage in a variety of financial activities like organizing financing, supplying equipment, cashflow financing, and more. 2) As of 2012, there were over 12,000 registered NBFCs in India with a total asset base of over $20 billion. 3) NBFCs play an important role in financial inclusion by providing services to underserved segments and innovating financial products. However, they also face challenges like lack of regulatory parity with banks.

1. ASSET FINANCE
iBANK
By Dr. Siva Naryana PhD, FCMA,
ACA

2. SERVICES
 1/ WE ORGANISE FINANCE, HP/LEASING etc.
 2/ WE SUPPLY NEW & USED PLANT AND
MACHINERY
 (SUPPLIED ONLY,OR SUPPLIED AND
FUNDED)
 3/ WE ORGANISE CASHFLOW FINANCE
 4/ WE ORGANISE INVOICE DISCOUNTING
 5/ WE ORGANISE FACTORING
 6/ WE ORGANISE SALE AND LEASEBACK
 7/ WE ORGANISE COMM. MORTGAGES AND
BRIDGING FINANCE
 8/ WE ORGANISE RESCUE PACKAGES

3. FACTS & FIGURES
Facts & Figures - As on March 31, 2012
No. of NBFCs Regd with RBI 12385
Asset Base Rs. 1244 billion
Public Deposits Rs. 58 billion
Gross NPAs to Credit Exposure 2%
Classification
Liabilities Based - Deposit taking NBFC - D (Category-A)
- Non- Deposit taking NBFC - ND (Category-B)
- Subsidiary Company NBFC - ND (Category-C)
Activity Based - Asset Financing NBFC - AFC
- Loans
NBFC – LC
- Investments NBFC - IC
- Infrastructure Financing NBFC - IFC
- Micro Financing NBFC - MFI
- Factoring NBFC – FACTORS
- Infrastructure Debt Fund IDF – NBFC
- Core Investment CIC
Size Based – Assets >=100 Crores NBFC - ND - SI(Systemically Imp.)

4. ROLE OF IBANK
 Prevent concentration of credit risk in banks only and
complementing the services of banks
 Financial Inclusion – providing finance to unorganized and under-banked
segment of the society
 Product innovation gives NBFCs a competitive edge
- used vehicles financing
- small ticket personal loans
- three wheeler financing
- IPO financing
- finance for tyres & fuel
 Robust asset quality is a major strength of NBFCs

5. COMMERCIAL ASSET FINANCING
 More Than 95% of commercial vehicle sold are finance driven
 NBFCs have been the Pioneers as some of them have been in this
business for more than 70 years
 This is the bread & butter product for the small and medium asset
financing NBFCs spread across the country
 Traditional mode was Hire Purchase but switched over to Loans
against hypothecation since April 2001
 Considered as “Low Risk” by rating agencies

6. OVERVIEW
 Lack of level playing field with Banks & FIs
 Regulator could also play a “developer’s” role
 Dependence on banks for resources
 Competition with banks on originating assets
 Limited options for capital infusion as compared to banks
 Some State Govts treating NBFCs as Money Lenders under
the Money Lenders’ Act
 RBI has withdrawn the priority sector status to bank lending to
NBFCs for on-lending to the priority sector which includes
SRTOs

7. ROAD AHEAD
 CRISIL predicts NBFCs may overtake banks in retail lending
within 2 years
 RBI intends to plug the Regulatory Arbitrage between Banks &
NBFCs
 Direct Tax Code (DTC) shall bring the much desired tax parity
with Banks
 GST should do away with multiple taxation of Leasing and Hire
Purchase
 Indian Financial Code (IFC) by Financial Sector Legislative
Reforms Commission (FSLRC) proposes to shift from “entity”
based regulation to “activity” based regulation

8. PROJECT POINT
 Road transport finance and infrastructure finance to be given a special
status similar to housing finance
 Leasing as a tool for lending to low capital SMEs needs to be promoted
 Clarity on definition and taxation on leasing
 Supportive laws governing accounting rules, property rights and contract
enforcement will be of prime importance
 Fast track recovery mechanism like Repossession of Assets using “private”
means within the legal framework
 A new regulatory approach
- NBFCs are a vital link in Financial Inclusion
- development of NBFCs to ensure co-existence with Banks & Fis
- removing inequitable restrictions vis-à-vis banks
- long term policy enabling the players to evolve long term strategies
- closer consultation with representative bodies
- play the dual role of growth enabler and the regulator