Non -Ban kin g Fin an cial In st it u t ion s

Ch a p t er V
5. 1 C or e f i nanci al ser vi ces pr ovi ded by
fi nanci al i nter medi ar i es i ncl ude payments and
li qui di ty, matur i ty tr ansfor mati on, stor e of value,
i nfor mati on pr ocessi ng and pool i ng of r i sk s.
Bank s have tr adi ti onally pr ovi ded most of these
ser vi ces and ar e i ncr easi ngl y di ver si fyi ng i nto
other ar eas. H owever, bank s typi cally have an edge
i n pr ovi di ng payment and li qui di ty r elated ser vi ces
and they usually select a por tfoli o mi x wi th an
over r i di ng obj ecti ve of pr ovi di ng a cer tai n r etur n.
Non-bank i ng fi nanci al i nsti tuti ons ( NBFI s) , on the
other hand, tend to offer enhanced equi ty and r i sk -
based pr oducts. N B FI s pl ay a cr uci al r ol e i n
br oadeni ng access to fi nanci al ser vi ces, enhanci ng
competi ti on and di ver si fi cati on of the fi nanci al
sector. T hey ar e i ncr easi ngly bei ng r ecogni sed as
complementar y to the bank i ng system capable of
absor bi ng shock s and spr eadi ng r i sk s at ti mes of
fi nanci al di str ess.
5. 2 M obi li sati on of fi nanci al r esour ces outsi de
the tr adi ti onal bank i ng system has wi tnessed
tr emendous gr owth all over the wor ld i n r ecent
year s. T he boundar i es separ ati ng commer ci al
bank s and NB FI s ar e al so getti ng i ncr easi ngl y
blur r ed. R api d fi nanci al di ver si fi cati on has thus
posed new challenges for r egulator s, especi ally i n
t he ar ea of devi si ng appr opr i at e r egul at or y
safeguar ds for the hi ghly complex NBFI sector.
O wi ng to thei r di ver si fi ed natur e, N B FI s may
r equi r e speci f i c r egul at or y pr escr i pt i ons
par ti cular to thei r natur e of busi ness, i n addi ti on
t o t he gener al gui del i nes appl i cabl e for t he
fi nanci al sector.
5. 3 T he NBFI sector i n I ndi a compr i ses var i ous
types of fi nanci al i nsti tuti ons wi th each one of
them havi ng i ts r oots at a par ti cul ar stage of
devel opment of the fi nanci al sector. A l l -I ndi a
fi nanci al i nsti tuti ons ( AI FI s) , lar gely an offshoot
of development planni ng i n I ndi a, wer e cr eated
for long-ter m fi nanci ng wi th some of them havi ng
sector al /r egi onal focus. N on-bank i ng fi nanci al
compani es ( NBFCs) , on the other hand, ar e mostly
pr i vate sector i nsti tuti ons, whi ch have car ved thei r
ni che i n the I ndi an fi nanci al system. Pr i mar y
deal er s ( PD s) , whi ch have come i nto exi stence
r ecentl y, pl ay an i mpor tant r ol e i n both the
pr i mar y and secondar y G over nment secur i ti es
mar k et. Although commonly gr ouped as NBFI s,
the natur e of oper ati ons of FI s, NBFC s and PD s
i s qui te di ffer ent fr om one another. T he r egulator y
focus i n r espect of these thr ee types of NBFI s i s
also di ffer ent. Busi ness oper ati ons and fi nanci al
per for mance of di ffer ent types of NBFI s ar e dr i ven
mai nly by sector-speci fi c factor s.
5. 4 T he focus of r egul at or y i ni t i at i ves i n
r espect of fi nanci al i nsti tuti ons ( FI s) dur i ng
2004-05 was t o st r engt hen t he pr udent i al
gui del i nes r el at i ng t o asset cl assi f i cat i on,
pr ovi si oni ng, ex posur e t o a si ngl e/gr oup
bor r ower and gover nance nor ms. B usi ness
oper ati ons of FI s expanded dur i ng 2004-05.
T hei r fi nanci al per for mance al so i mpr oved,
r esulti ng fr om an i ncr ease i n net i nter est i ncome.
Si gni fi cant i mpr ovement was also obser ved i n the
asset qual i ty of FI s, i n gener al . T he capi tal
adequacy r ati o of FI s conti nued to r emai n at a
hi gh l evel , notwi thstandi ng some decl i ne dur i ng
the year.
5. 5 R egulator y i ni ti ati ves i n r espect of NBFC s
dur i ng the year r elated to i ssuance of gui deli nes
on cr edi t/debi t car ds, r epor ti ng ar r angements for
lar ge si zed NBFC s not accepti ng/holdi ng publi c
deposi ts, nor ms for pr ematur e wi thdr awal of
deposi ts, cover for publi c deposi ts and k now your
customer ( K YC) gui deli nes. Busi ness operati ons of
NBFCs, whi ch contracted sharply duri ng 2003-04
1
,
reflecti ng mai nly the i mpact of decli ne i n resource
mobi li sati on, expanded margi nally duri ng 2004-05.
Pr ofi tabi li ty of NBFC s i mpr oved i n 2003-04 and
2004-05 mai nl y on account of contai nment of
expendi tur e. Whi l e gr oss NPA s of NB FC s, as a
gr oup, decli ned dur i ng 2003-04 and 2004-05, net
NPAs after decli ni ng mar gi nally dur i ng 2003-04,
i ncr eased si gni fi cantly dur i ng 2004-05. Although
capi t al adequacy of N B FC s cont i nued t o be
comfor table, on the whole, ther e was i ncr ease i n
1
D ata on NBFCs i n the previ ous R eport related to the peri od 2002-03. I n thi s R eport apart from data for 2003-04, provi si onal data
i n respect of 570 reporti ng compani es for 2004-05 have also been collected and analysed.
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Repor t on Tr end and Pr ogr ess of Banking in India, 2004-05
the number of NBFC s wi th C R AR less than 12
per cent and decli ne i n NBFC s wi th C R AR above
30 per cent. T he busi ness of l ar ge NB FC s not
accepti ng publi c deposi ts, but wi th asset si ze of
R s. 500 cr or e and above, conti nued to expand.
T hese N B FC s ear ned substanti al pr ofi ts and
i mpr oved thei r asset quali ty dur i ng the year.
5. 6 A number of measur es wer e i ni t i at ed
dur i ng 2004-05 to fur ther str engthen the r ole of
PD s i n the G over nment secur i ti es mar k et. M aj or
i ni ti ati ves under tak en dur i ng the year i ncluded
str engtheni ng of di vi dend di str i buti on poli cy wi th
focus on pay-out r ati o and capi tal adequacy r ati o,
i ssuance of gui deli nes for r ai si ng subor di nated
debt for T i er-I I and T i er-I I I capi tal, adopti on of
standar di sed settlement on a T + 1 basi s for all
outr i ght secondar y mar k et tr ansacti ons i n the
G over nment secur i ti es mar k et and per mi tti ng sale
of G over nment secur i ti es al l otted to successful
bi dder s i n pr i mar y i ssues on the day of allotment.
Sour ces of funds of PD s decli ned dur i ng the year.
T he har deni ng of i nter est r ates pr ompted PD s to
substanti ally r educe thei r G over nment secur i ti es
hol di ng. PD s, as a gr oup, i ncur r ed net l osses
dur i ng the year, mai nly due to lar ge tr adi ng losses
as agai nst tr adi ng pr ofi ts i n the pr evi ous year.
N otwi thstandi ng the l osses, P D s conti nued to
mai ntai n hi gh capi tal adequacy r ati os.
5. 7 Agai nst the above back drop, thi s Chapter
det ai l s t he pol i cy devel opment s, busi ness
operati ons and fi nanci al performance of fi nanci al
i nsti tuti ons, non-bank i ng fi nanci al compani es and
pri mary dealers i n Secti ons 2, 3 and 4, respecti vely.
2 . FINANCIAL INSTITUTIONS
5. 8 Fi nanci al i nsti tuti ons have tr adi ti onal l y
been the maj or source of long-term funds for the
economy i n li ne wi th the development obj ecti ve of
the state. A wi de var i ety of fi nanci al i nsti tuti ons
( FI s) emer ged over the year s. Whi le most of them
extend di r ect fi nance, some also extend i ndi r ect
fi nance and sti l l some other s extend l ar gel y
r efi nance. FI s can be br oadly categor i sed as all-
I ndi a or state level i nsti tuti ons dependi ng on the
geographi cal coverage of thei r operati on. Based on
thei r maj or acti vi ty, all-I ndi a fi nanci al i nsti tuti ons
( A I FI s) can be cl assi fi ed as ( i ) ter m-l endi ng
i nsti tuti ons [ I FCI L td. , I ndustr i al I nvestment Bank
of I ndi a ( I I BI ) L td. , I nfr astr uctur e D evelopment
Fi nance Company ( I D FC) L td. , Export-I mport Bank
of I ndi a ( E X I M B ank ) and T our i sm Fi nance
C or por ati on of I ndi a ( T FC I ) L td. ] whi ch extend
long-ter m fi nance to di ffer ent i ndustr i al sector s;
( i i ) r efi nance i nsti tuti ons [ N ati onal B ank for
Agr i cul tur e and R ur al D evel opment ( NABAR D ) ,
Smal l I ndustr i es D evel opment B ank of I ndi a
( SI D BI ) and Nati onal H ousi ng Bank ( NH B) ] whi ch
extend r efi nance to bank i ng as wel l as non-
bank i ng fi nanci al i nter medi ar i es for on-lendi ng
to agr i cultur e, small scale i ndustr i es ( SSI s) and
housi ng sector s, r especti vely; and ( i i i ) i nvestment
i nsti tuti ons [ L i fe I nsur ance C or por ati on of I ndi a
( L I C ) and G ener al I nsur ance C or por ati on of I ndi a
( G I C) and i ts er stwhi le subsi di ar i es) , whi ch deploy
thei r assets largely i n mark etable securi ti es. State/
regi onal level i nsti tuti ons are a di sti nct group and
compr i se var i ous State Fi nanci al C or por ati ons
( S FC s) , S tate I ndustr i al and D evel opment
C or por ati ons ( S I D C s) and N or th E aster n
D evelopment Fi nance C or por ati on ( NE D Fi ) L td.
Some of these FI s have been noti fi ed as Publi c
Fi nanci al I nsti tuti ons ( PFI s) by the G overnment of
I ndi a under Secti on 4A of the Compani es Act, 1956.
5. 9 Wi th the conver si on of two ter m-l endi ng
i nsti tuti ons, viz. , I C I C I and I D BI i nto bank s, only
four FI s, viz. , NABAR D, SI D BI , NH B and E X I M
Bank ar e subj ected to full-fledged r egulati on and
super vi si on by the R eser ve Bank . NABAR D, SI D BI
and N H B al so shoul der r esponsi bi l i t i es of
r egul at i ng and/or super vi si ng f i nanci al
i nter medi ar i es, i n var yi ng degr ee, falli ng under
t hei r r espect i ve domai ns - housi ng fi nance
compani es i n the case of NH B, SFC s and SI D C s
i n the case of SI D BI , and r ur al co-oper ati ve bank s
and r egi onal r ur al bank s i n the case of NABAR D.
T ak i ng i nt o account t he devel opment al and
super vi sor y functi ons exer ci sed by N A B A R D ,
S I D B I and N H B , a m odi f i ed appr oach f or
super vi sor y assessm ent of F I s has been
i ntr oduced based on the r ecommendati ons of the
Wor k i ng G r oup ( Chai r man: Shr i Y. H . M alegham) .
FI s not accepti ng publi c deposi ts, but havi ng asset
si ze of R s. 500 cr or e and above, ar e subj ected to
only li mi ted off-si te super vi si on by the R eser ve
Bank . T he focus of the analysi s i n thi s Secti on i s,
t her ef or e, l i mi t ed t o t he ei ght i nst i t ut i ons
cur r ently bei ng r egulated by the R eser ve Bank .
T hese i nsti tuti ons i nclude I FC I , I I BI , I D FC , E X I M
Bank , T FCI , SI D BI , NABAR D and NH B.
Regu la t or y In i t i a t i ves for Fi n a n ci a l In s t i t u t i on s
5. 10 Sever al pr udenti al and other r egul ator y
measures were i ni ti ated duri ng 2004-05 to bri ng
the regulatory framework for FI s i n li ne wi th that
of bank s.
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Non-Banking Financial Inst it ut ions
Asset Classification, Provisioning and Capital
Adequacy Norms
5. 11 Wi t h a vi ew t o m ovi ng cl oser t o
i nt er nat i onal best pr act i ces and ensur i ng
conver gence of the nor ms appl i cabl e to FI s wi th
those of bank s, wi th effect fr om M ar ch 31, 2005,
an asset i s r equi r ed to be cl assi fi ed as doubtful ,
i f i t r emai ns i n the sub-standar d categor y for 12
months. FI s, however, ar e per mi tted to phase out
the consequent addi ti onal pr ovi si oni ng over a
four -year per i od, commenci ng fr om the year
ended M ar ch 31, 2005, wi th a mi ni mum of 20
per cent each year.
5. 12 A t pr esent , FI s ar e r equi r ed t o mak e
pr ovi si ons for non-per for mi ng assets ( NPAs) on a
gr aded scal e based on t he age of t he N PA .
H owever, i n r espect of NPAs i ncluded i n doubtful
f or m or e t han t hr ee year s cat egor y, t he
pr ovi si oni ng r equi r ement on the secur ed por ti on
i s sti pulated at 50 per cent, i r r especti ve of i ts age,
unti l i t i s i denti fi ed as a loss asset. As the chances
of r ecover y of an asset di mi ni sh over a per i od of
ti me, i t i s i mper ati ve that FI s expedi te r ecover y
of N PA s. A ccor di ngl y, a gr aded hi gher
pr ovi si oni ng, accor di ng to the age of N PA s i n
doubtful for mor e than thr ee year s categor y, was
i ntr oduced for FI s wi th effect fr om M ar ch 31, 2005
( wi th effect fr om June 30, 2005 i n the case of
NH B) . C onsequently, the i ncr ease i n pr ovi si oni ng
r equi r ement on the secur ed por ti on i s r equi r ed
to be appli ed i n a phased manner over a thr ee-
year per i od i n r espect of the exi sti ng stock of NPAs
classi fi ed as doubtful for mor e than thr ee year s
as on M ar ch 31, 2004 ( wi th effect fr om June 30,
2004 i n the case of N H B ) . O n the unsecur ed
porti on, whi ch i s not covered by the reali sable value
of tangi ble secur i ty to whi ch the FI has a vali d
r ecour se and the r eali sable value i s esti mated on
a r eali sti c basi s, pr ovi si on wi ll conti nue to be to
the extent of 100 per cent. H owever, i n r espect of
all advances classi fi ed as doubtful for mor e than
thr ee year s on or after Apr i l 1, 2004 ( July 1,
2004 i n t he case of N H B ) , t he pr ovi si oni ng
r equi r ement would be 100 per cent.
5. 13 E xposur es on all PFI s for capi tal adequacy
pur poses attr act a r i sk wei ght of 100 per cent wi th
effect fr om Apr i l 1, 2005 as agai nst the ear li er
sti pulati on of 20 per cent.
Prudential Credit Exposure Limits for FIs
5. 14 I n the l i ght of the l i ber al i sed access of
bor r ower s to exter nal commer ci al bor r owi ngs
( E CBs) and thei r abi li ty to r ai se r esour ces thr ough
the capi tal mar k et, the pr acti ce of gi vi ng case-by-
case appr oval t o F I s, t hat had di ffi cul t y i n
compl yi ng wi th the pr udenti al cr edi t exposur e
li mi ts, was di sconti nued. Accor di ngly, the si ngle/
gr oup bor r ower pr udenti al exposur e cei li ngs, i.e.,
15 per cent ( addi t i onal 5 per cent f or
i nf r ast r uct ur e pr oj ect s) and 40 per cent
( addi t i onal 10 per cent f or i nf r ast r uct ur e
pr oj ects) , r especti vely, have to be str i ctly adher ed
to by FI s. I n excepti onal ci r cumstances, FI s wi th
the appr oval of thei r r especti ve B oar ds, can
enhance thei r exposur e to a bor r ower up to a
fur ther 5 per cent of capi tal funds ( i.e., 20 per
cent of capi tal funds for a si ngle bor r ower and 45
per cent of capi tal funds for a gr oup of bor r ower s) ,
subj ect to the bor r ower consenti ng that FI s may
mak e appr opr i ate di scl osur es i n thei r A nnual
R epor ts. I n r espect of exposur e to i nfr astr uctur e,
FI s could consi der addi ti onal sancti ons up to 5
per cent and 10 per cent over and above the li mi ts
of 20 per cent and 45 per cent, r especti vel y.
E xposur es, wher e pr i nci pal and i nter est ar e fully
guar anteed by the G over nment of I ndi a, may be
ex cl uded. F I s shoul d m ak e appr opr i at e
di scl osur es i n the N otes on A ccounts to the
annual fi nanci al statements, wher e the exposur e
exceeded the pr udenti al li mi ts. FI s wer e advi sed
to phase out exposur es i n excess of si ngle/gr oup
bor r ower li mi ts not i n confor mi ty wi th above by
M ar ch 31, 2005, ei ther by i ncr easi ng capi tal funds
or r educi ng exposur es.
Holding of Instruments in Dematerialised Form
5. 15 Wi th a vi ew to extendi ng the demater i ali sed
for m of holdi ng to equi ty i nstr uments, FI s wer e
advi sed to hold thei r fr esh i nvestments i n equi ty
i nst r um ent s ef f ect i ve A ugust 30, 2004 i n
demater i ali sed for m. All the outstandi ng equi ty
i nvestments i n physi cal for m wer e r equi r ed to be
conver t ed i nt o demat er i al i sed for m by end-
D ecember 2004.
Certificates of Authentication from Statutory
Central Auditors of FIs
5. 16 FI s wer e advi sed i n Febr uar y 2005 to
obtai n fr om thei r Statutor y C entr al A udi tor s
( i ) the certi fi cate relati ng to thei r treasury operati ons;
( i i ) r econci li ati on of i nvestment; ( i i i ) custody of
unused B R ( bank er s r ecei pt) for ms and thei r
uti li sati on as r ecommended by the Janak i r aman
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Repor t on Tr end and Pr ogr ess of Banking in India, 2004-05
C ommi ttee; ( i v) compli ance i n the k ey ar eas such
as i nvestment por tfol i o, i ncome r ecogni ti on,
asset cl assi fi cati on and pr ovi si oni ng; and
( v) authenti cati on of cal cul ati on of C R A R and
assessment of capi tal adequacy r ati o i n the Notes
on Accounts attached to the balance sheet.
Disclosures on Risk Exposures in Derivatives
5. 17 Wi th a vi ew to mak i ng meani ngful and
appr opr i ate di sclosur es of FI s exposur es to r i sk
and thei r str ategy to manage the r i sk , a mi ni mum
fr amewor k for di sclosur es on thei r r i sk exposur es
i n der i vati ves was put i n place i n Apr i l 2005. T he
fr amewor k , apar t fr om the quanti tati ve aspects,
al so i ncl udes qual i tati ve aspects r el ati ng to
der i vati ves wi th a par ti cular r efer ence to the extent
to whi ch der i vati ves ar e used, the associ ated r i sk s
and busi ness pur poses ser ved.
Other Policy Developments
5. 18 As a follow up to the announcement made i n
the Annual Poli cy Statement for the year 2004-2005,
a T echni cal G r oup on R efi nanci ng I nsti tuti ons
( R FI s) ( C hai r man: Shr i G . P. M uni appan) was
consti tuted on September 3, 2004 to evaluate the
effi cacy of r egulator y and super vi sor y systems of
R FI s over thei r r egul ated enti ti es. T he G r oup,
whi ch submi tted i ts R epor t i n Febr uar y 2005,
made sever al r ecommendati ons to r ati onali se the
r egul at or y syst em i n r espect of R F I s. I t
r ecommended a di f f er ent i at ed appr oach t o
r egul ati on based on the acceptance of publ i c
deposi ts, si ze and the dependence on R FI s for
r efi nance. T he C ommi ttee hel d that enti ti es
r egulated/super vi sed by R FI s should be classi fi ed
i nto those accepti ng publi c deposi ts and those not
accepti ng publ i c deposi ts. E nti ti es accepti ng
publ i c deposi ts shoul d be subj ected to di r ect
r egulati on by the R eser ve Bank ti ll such ti me they
cease to accept publ i c deposi ts. E nti ti es not
accepti ng publi c deposi ts should be segr egated
i nto the followi ng categor i es: ( a) enti ti es wi th an
asset si ze of mor e than R s. 100 cr or e and whi ch
ei ther do not avai l of r efi nance fr om R FI s at all or
whose domi nant sour ce of funds i s not r efi nance
fr om R FI s; ( b) enti ti es wi th an asset si ze of mor e
than R s. 100 cr or e but whose sol e/domi nant
sour ce of funds i s r efi nance fr om R FI s; and
( c) enti ti es wi th an asset si ze equal to or less than
R s. 100 cr or e. T he G r oup r ecommended that the
R eser ve B ank shoul d pr ovi de to R FI s a br oad
framework for regulati on of enti ti es under category
( a) . T he r egul at i on of ent i t i es fal l i ng under
categor i es ( b) and ( c) , i ncludi ng pr escr i pti on of
prudenti al norms, may be left enti rely to the R FI s
themselves. Furthermore, SFCs may be di scouraged
fr om accepti ng publi c deposi ts and the R eser ve
Bank may wi thdraw permi ssi on granted to them
for accessi ng publi c deposi ts. Acceptance of publi c
deposi ts by non-bank fi nanci al i nter medi ar i es
should be phased out. E ventually, r egulati on of
enti ti es accepti ng publi c deposi ts should converge
wi t h t he pr udent i al nor m s pr escr i bed f or
commer ci al bank s.
5. 19 S uper vi si on of t he ent i t i es under t he
over si ght of R FI s may be car r i ed out on the basi s
of C api tal Adequacy, Asset Q uali ty, M anagement,
E ar ni ngs, L i qui di t y, S yst em s and C ont r ol
( C AM E L S) appr oach and the capabi li ti es should
pr efer abl y be devel oped i n-house. H owever, i n
r espect of R R Bs, i f necessar y, audi tor s may be
employed on a contr act basi s. Fur ther mor e, for
thi s pur pose, i f necessar y, the Bank i ng R egulati on
Act, 1949 may be amended. Also, SI D BI and NH B
may consi der setti ng up a Boar d of Super vi si on
( BoS) on the li nes of the Boar d alr eady consti tuted
by NABAR D. T he super vi sor y functi ons of SI D BI
need to be well defi ned wi th no i nter venti on by
the State G over nments. Adequate power s may be
vested i n SI D B I to i mpose penal ty. N H B may
consi der i ntr oduci ng the system of awar di ng
r ati ngs to housi ng fi nance compani es ( H FC s) i n a
phased manner.
5. 20 For co-or di nati on between the R eser ve
Bank and R FI s, the G r oup r ecommended setti ng
up of a S t andi ng C om m i t t ee com pr i si ng
r epr esentati ves of the R eser ve B ank , S I D B I ,
NA B A R D and NH B. Fur ther, the ar r angements
exi sti ng between the R eser ve Bank and NABAR D
may be r epli cated for two other R FI s, i.e., SI D BI
and NH B. As i n the case of NH B and NABAR D ,
the R eser ve Bank may have a top management
level nomi nee on the Boar d of SI D BI . Whi le the
exi st i ng ar r angement s of annual f i nanci al
i nspecti on and speci al scr uti ni es ar e necessar y
and usef ul , a f or m al syst em t o m easur e
super vi sor y effecti veness may be devel oped by
R FI s and i mplemented after appr oval fr om the
R eser ve Bank .
5. 21 T he G r oup r ecom m ended t hat t he
aggr egate r efi nance by an R FI to an apex lendi ng
i nsti tute may be vi ewed as i f i t wer e a bundle of
back to back faci li ti es gr anted to var i ous pr i mar y
l endi ng i nsti tuti ons or to var i ous categor i es of
143
Non-Banking Financial Inst it ut ions
bor r ower s. I t may be per mi ssi ble to classi fy the
contami nated por ti on and non-contami nated
por ti on of the faci li ty separ ately so that the enti r e
r efi nance assi stance to an apex lendi ng i nsti tuti on
does not get classi fi ed as NPA i n the book s of the
R FI mer el y as a r esul t of par t contami nati on.
Fur ther, the r evi sed pr udenti al nor ms r ecentl y
pr escr i bed by the R eser ve Bank for bank s r elati ng
to S tate G over nment guar anteed exposur es,
wher eby the r equi r ement of i nvocati on of State
G over nment guar antee was deli nk ed for deci di ng
t he asset cl assi f i cat i on and pr ovi si oni ng
r equi r ements, be appli ed to R FI s as well.
Op er a t i on s of Fi n a n ci a l In s t i t u t i on s
5. 22 FI s extend fi nanci al assi stance both by
way of pr oj ect fi nance and non-pr oj ect fi nance.
L oans, under wr i ti ng and di r ect subscr i pti on and
defer r ed payment guar antees consti tute maj or
for ms of pr oj ect fi nance, whi l e non-pr oj ect
fi nance compr i ses equi pment fi nance, equi pment
l easi ng, among other s ( A ppendi x T abl e 1) . FI s
have been br oad-basi ng thei r oper ati ons i n an
attempt to wi den thei r cl i entel e base ( B ox V. 1) .
T hey have al so been tak i ng sever al measur es to
augm ent t hei r non-f und based i ncom e by
pr ovi di ng cust om i sed advi sor y ser vi ces,
under tak i ng assi gnments r el ati ng to i nvestment
appr ai sal s and busi ness r est r uct ur i ng and
pl ayi ng the r ol e of l ead ar r anger s.
5. 23 Fi nanci al assi st ance sanct i oned and
di sbur sed by al l -I ndi a fi nanci al i nsti tuti ons
( excludi ng I D BI whi ch was conver ted i nto a bank
wi th effect fr om O ctober 1, 2004) decli ned dur i ng
2004-05 mai nl y due to a shar p decl i ne i n the
sancti ons and di sbur sements by L I C . Among FI
gr oups, whi le fi nanci al assi stance sancti oned by
al l -I ndi a t er m-l endi ng i nst i t ut i ons decl i ned,
di sbur sements i ncr eased, al bei t mar gi nal l y,
dur i ng the year, r ever si ng the tr end of the pr evi ous
year ( T able V. 1 and Appendi x T able V. 1) .
5. 24 Fi nanci al assi st ance sanct i oned and
di sbur sed by AI FI s has decli ned i n r ecent year s
( Char t V. 1) .
E X I M B ank has been focusi ng on smal l and medi um
enter pr i se ( SM E ) expor ter s as a si gni fi cant tar get gr oup of
cl i ents. A n SM E G r oup has been set up i n the E X I M B ank
to handl e pr oposal s fr om compani es/fi r ms wi th annual
tur nover of up to R s. 75 cr or e. T he pr i mar y obj ecti ve of the
G r oup i s to devel op a por tfol i o of exter nal l y or i ented SM E
cl i ents and ensur e smooth cr edi t del i ver y to these cl i ents.
T he E X I M B ank s suppor t to the SM E sector i ncl udes ter m
l oans for set t i ng up of new pr oj ect s, moder ni sat i on,
expansi on as al so equi pment fi nance and expor t cr edi t.
T otal cr edi t faci l i ti es amounti ng to R s. 134 cr or e wer e
sancti oned to expor t or i ented S M E s dur i ng 2004-05.
Si mi l ar l y, agr i cul tur e-expor ts have al so been i denti fi ed as
a focus ar ea. A n A gr i cul tur e B usi ness G r oup has al so been
set up i n the E X I M B ank to cater to the r equi r ements of
agr i cul tur e expor ts. T er m l oans wer e al so sancti oned to
food pr ocessi ng, fl or i cul tur e, fr ui ts and vegetabl es and
contr act far mi ng. T otal sancti ons to the agr i cul tur e-expor t
sector amounted to R s. 582 cr or e dur i ng 2004-05. Fur ther,
ser vi ce sect or fi nanci ng by E X I M B ank now i ncl udes
enter tai nment, heal thcar e, hospi tal i ty and shi ppi ng. L oans
wer e extended to 3 compani es i n the enter tai nment i ndustr y
engaged i n fi l m pr oducti on dur i ng 2004-05. T he appr oach
wi th r egar d to fi l m fi nanci ng has been to focus on for ex
ear ni ng pr oj ects and sel ect bor r ower s wi th pr oven r ecor d.
SI D B I has been tak i ng a ser i es of measur es i n the di r ecti on
of al i gni ng the concept of SSI s wi th the SM E s. SI D B I has
oper at i onal i sed t he S M E Fund of R s. 10, 000 cr or e
announced ear l i er by the G over nment of I ndi a. U nder the
Fund, di r ect assi stance i s bei ng pr ovi ded to SM E s at an
Box V. 1 : Bu s i n es s In i t i a t i ves a n d New Pr od u ct Develop men t Fi n a n ci a l In s t i t u t i on s
i nter est r ate of 2 per cent bel ow the PL R of SI D B I . D ur i ng
2004-05, an assi stance of R s. 2, 825 cr or e was sancti oned
whi ch benefi ted ar ound 3, 900 uni ts. Fur ther, i n associ ati on
wi th the sel ect publ i c sector bank s, SI D B I has set up the
SM E G r owth Fund wi th a vi ew to meeti ng the needs of the
r i sk capi tal for SM E s.
I D FC has expanded i ts busi ness fr om cor e i nfr astr uctur e
fi nanci ng to ur ban, agr i cul tur al and soci al i nfr astr uctur e
i n r ecent year s. I t has al so str i ved to expand i ts non-i nter est
sour ces of i ncome such as fi nanci al and advi sor y ser vi ces.
Sancti ons and di sbur sements of I D FC conti nued to r egi ster
hi gh gr owth on the back of i mpr oved i nfr astr uctur e outl ook
for the countr y. A l though sancti ons r ecor ded a moder ate
gr owth of 12. 1 per cent as compar ed wi th 149. 3 per cent
wi tnessed dur i ng the pr evi ous year, di sbur sements at
R s. 3, 739 cr or e consti tuted 58. 3 per cent of sancti ons as
compar ed wi th 47. 2 per cent i n the pr evi ous year. I D FC s
annual di sbur sements i n 2004-05 accounted for about a
thi r d of al l i nfr astr uctur e r el ated pr oj ect fi nanci ng i n the
countr y dur i ng the year. O n a cumul ati ve basi s, I D FC
appr oved assi stance of ar ound R s. 25, 000 cr or e to 198
pr oj ects as on M ar ch 31, 2005. D ur i ng 2004-05, ener gy,
tel ecom and tr anspor tati on consti tuted bul k ( 83. 7 per cent)
of t he di sbur sem ent s m ade. S i gni f i cant gr owt h i n
di sbur sement s was al so obser ved i n t he ener gy and
commer ci al and i ndustr i al sector s ( A ppendi x T abl e V. 2) .
I n vi ew of r estr i cti ons on the l endi ng acti vi ty and r esour ce
mobi l i sati on, I I B I focussed on r ecover y of dues thr ough
set t l em ent s, speedi ng up of l egal pr ocesses and
r estr uctur i ng.
144
Repor t on Tr end and Pr ogr ess of Banking in India, 2004-05
I tem As at end-M arch Percentage Vari ati on
2004 2005 2003-04 2004-05
S D S D S D S D
1 2 3 4 5 6 7 8 9
i ) All-I ndi a T erm-lendi ng I nsti tuti ons* 17, 770 9, 647 15, 605 10, 025 8. 5 -9. 1 -12. 2 3. 9
i i ) Speci ali sed Fi nanci al I nsti tuti ons * * 440 396 98 64 -7. 6 -19. 4 -77. 7 -83. 8
iii) I nvestment I nsti tuti ons # 23, 197 16, 989 10, 293 8, 972 288. 9 115. 0 -55. 6 -47. 2
Tot al Assist ance by FIs (i+ ii+ iii) 41,407 27,032 25,996 19,061 81.5 42.2 -37.2 -29.5
S: Sancti ons. D : D i sbursements.
* : R elati ng to I FCI , SI D BI , I I BI and I D FC.
* * : R elati ng to I VCF, I CI CI Venture and T FCI .
# : R elati ng to LI C and G I C.
Note : All data are provi si onal.
Source : R especti ve fi nanci al i nsti tuti ons.
Table V.1: Fin an cial Assist an ce San ct ion ed an d Disbur sed by Fin an cial In st it ut ion s
( Amount i n R s. crore)
As s et s a n d Li a b i li t i es of FIs
5. 25 L i abi l i ti es/assets of FI s ( excl udi ng I D B I )
expanded at a hi gh r at e dur i ng 2004-05 as
compared wi th the previ ous year. Bonds/debentures
conti nued to be the mai n source of funds for FI s,
followed by borrowi ngs from bank s i n rupees and
forei gn currency. Whi le resources mobi li sed by way
of bonds and debentures and borrowi ngs i ncreased
sharply, those by way of deposi ts decli ned sharply.
L oans and advances and i nvestments consti tute the
bulk of assets of FI s. L oans and advances by FI s
grew at a si gni fi cantly hi gher rate duri ng the year,
reflecti ng the i mpact of robust i nvestment cli mate
i n the countr y. I nvestments by FI s, however,
i ncreased margi nally as agai nst the sharp i ncrease
i n the previ ous year ( T able V. 2) .
Resources Mobilised by FIs
5. 26 T otal r esour ces mobi li sed ( outstandi ng) by
FI s ( long-ter m and shor t-ter m r upee and for ei gn
cur r ency bor r owi ngs, bonds and debentur es and
deposi ts) gr ew by 19. 4 per cent to R s. 83, 889 cr or e
at end-M ar ch 2005.
5. 27 Whi l e l ong-ter m and shor t-ter m r upee
r esour ces r ai sed by FI s i ncr eased, r esour ces
r ai sed by way of for ei gn cur r ency bor r owi ngs
decli ned. NABAR D mobi li sed the lar gest amount
of r esour ces, followed by E X I M Bank , NH B and
I D FC ( T able V. 3 and Appendi x T able V. 3) . I FCI and
I I BI conti nued to be bar r ed fr om mobi li si ng fr esh
r esour ces on account of thei r poor fi nanci al s.
5. 28 Aver age amount of r esour ces mobi li sed by
FI s thr ough money mar k et i nstr uments decli ned
si gni fi cantly dur i ng 2004-05 mai nly on account
of decl i ne i n r esour ces r ai sed by way of ter m
deposi ts. R esour ces r ai sed by way of commer ci al
paper i ncr eased shar ply ( T able V. 4) .
5. 29 T he pr acti ce of advanci ng l oans by the
R eser ve B ank to i ndustr i al and agr i cul tur al
f i nanci al i nst i t ut i ons f r om t he L ong T er m
O per ati ons ( LT O ) Funds, befor e tr ansfer r i ng the
sur plus pr ofi t to the G over nment of I ndi a, was
di sconti nued subsequent to an announcement to
thi s effect made i n the U ni on Budget for 1992-93.
Accor di ngly, the R eser ve Bank has been mak i ng
onl y tok en contr i buti on to these funds fr om
1992-93. T her e was no outstandi ng bor r owi ng
Sancti ons Sancti ons ( Excludi ng I D BI )
D i sbursements D i sbursements ( Excludi ng I D BI )
Char t V.1: Financial Assist ance Sanct ioned
and Disbur sed by AIFIs
R
s
.

c
r
o
r
e
145
Non-Banking Financial Inst it ut ions
Table V.2: Composit ion of Liabilit ies and Asset s of Fin an cial In st it ut ions
( Amount i n R s. crore)
I tem As at end-M arch Percentage Vari ati on
2004 2005 2003-04 2004-05
1 2 3 4 5
Liabilit ies
1. Capi tal 6, 131 6, 331 3. 3
( 4. 7) ( 4. 4)
2. R eserves 13, 499 14, 963 13. 5 10. 8
( 10. 4) ( 10. 5)
3. Bonds and D ebentures 50, 545 60, 801 5. 6 20. 3
( 38. 8) ( 42. 6)
4. D eposi ts 17, 946 13, 643 13. 5 -24. 0
( 13. 8) ( 9. 5)
5. Borrowi ngs 18, 360 23, 028 11. 3 25. 4
( 14. 1) ( 16. 1)
6. O ther L i abi li ti es 23, 661 24, 104 5. 6 1. 9
( 18. 2) ( 16. 9)
Tot al Liabilit ies/Asset s 1,30,142 1,42,870 7 . 9 9 . 8
Asset s
1. Cash 12, 146 16, 989 77. 0 39. 9
( 9. 3) ( 11. 9)
2. I nvestments 14, 298 14, 386 23. 8 0. 6
( 11. 0) ( 10. 1)
3. L oans and Advances 91, 613 98, 924 0. 4 8. 0
( 70. 4) ( 69. 2)
4. Bi lls D i scounted/ R edi scounted 1, 218 1, 048 22. 8 -14. 0
( 0. 9) ( 0. 7)
5. Fi xed Assets 1, 217 1, 195 -28. 0 -1. 8
( 0. 9) ( 0. 8)
6. O ther Assets 9, 650 10, 328 16. 9 7. 0
( 7. 4) ( 7. 2)
: Ni l/Negli gi ble.
Note : 1. D ata relate to I FCI , T FCI , I D FC, I I BI , EX I M Bank , NABAR D, NHB and SI D BI .
2. Fi gures i n parentheses are percentages to total li abi li ti es/assets.
Source : Balance sheets of respecti ve FI s.
Table V.3: Resour ces Mobilised by Fin an cial In st it ut ion s
( As at end-M arch)
( Amount i n R s. crore)
I nsti tuti on Total R esources R ai sed T otal
L ong-term Short-term Forei gn Currency Total
O utstandi ng
2004 2005 2004 2005 2004 2005 2004 2005 2004 2005
1 2 3 4 5 6 7 8 9 10 11
I FCI 17, 564 13, 385
I I BI 176 176 2, 420 2, 229
T FCI 102 23 70 172 23 546 421
I D FC 1, 550 3, 378 2, 025 875 3, 575 4, 253 3, 975 6, 533
EX I M Bank 2, 025 955 1, 074 1, 632 3, 782 2, 843 6, 881 5, 430 12, 752 14, 704
NABAR D 5, 334 8, 843 5, 334 8, 843 11, 883 23, 805
NH B 2, 990 2, 419 300 2, 753 3, 290 5, 172 10, 569 14, 385
SI D BI 1, 429 1, 607 1, 536 736 7 21 2, 972 2, 364 10, 535 8, 427
Tot al 13,607 17,225 5,005 5,996 3,789 2,864 22,401 26,085 70,245 83,889
: Ni l/Negli gi ble.
Note: 1. L ong-term resources compri se borrowi ngs by way of bonds/debentures; short-term resources compri se borrowi ngs by way of
commerci al papers, term deposi ts, i nter-corporate deposi ts, certi fi cates of deposi t and term money. Forei gn currency resources
compri se largely bonds.
2. Fi gures i n columns 10 and 11 may not match wi th total borrowi ngs ( i ncludi ng bonds and debentures) and deposi ts i n T able V. 2 due
to di fferences i n the coverage as some loans rai sed by FI s are not i ncluded i n the T able.
by any i nsti tuti on under the Nati onal I ndustr i al
C r edi t ( NI C ) L ong-T er m O per ati ons ( LT O ) Fund
at end-June 2005. T he outstandi ng cr edi t to NH B
under the Nati onal H ousi ng C r edi t ( NH C ) L ong-
T er m O per ati ons ( LT O ) Fund stood at R s. 50 cr or e
at end-June 2005.
146
Repor t on Tr end and Pr ogr ess of Banking in India, 2004-05
All-India Financial Institutions versus Scheduled
Commercial Banks
5. 30 Fi nanci al assets of FI s grew by 7. 9 per cent
dur i ng 2004-05 as agai nst 20. 9 per cent of
scheduled commerci al bank s. As a result, the share
of fi nanci al assets of AI FI s i n the combi ned fi nanci al
assets of bank s and AI FI s decli ned ( T able V. 5) .
Assets of FI s r egi ster ed a r i se i n spi te of conti nui ng
losses suffer ed by I FC I and I I BI , whi ch r esulted
i n the er osi on of thei r assets. FI s, whi ch have
hi stor i cally played an i mpor tant r ole, have been
fi ndi ng i t di ffi cult to sustai n thei r oper ati ons i n
the changed oper ati ng envi r onment. Fi nanci al
Table V.4: Resour ces Raised by Fin an cial
Inst it ut ions fr om t he Money Mar ket
( Amount i n R s. crore)
I nstrument 2003-04 2004-05
1 2 3
i ) Term D eposi ts 2, 206 1, 155
i i ) Term M oney 245 175
i i i ) I nter-corporate D eposi ts 1, 329 477
i v) Certi fi cates of D eposi t 408 233
v) Commerci al Paper 1, 847 2, 370
Tot al 6 ,0 3 5 4 ,4 1 0
Percentage of li mi ts 25. 6 30. 0
Ta b le V. 5 : Fi n a n ci a l As s et s of All-In d i a
Fi n a n ci a l In s t i t u t i on s a n d Ba n ks *
( Amount i n R s. crore)
I tem As at Percentage
end-M arch Vari ati on
2004 2005 2003-04 2004-05
1 2 3 4 5
i ) All-I ndi a Fi nanci al
I nsti tuti ons 1, 28, 925 @ 1, 39, 153 8. 4 7. 9
i i ) Scheduled
Commerci al Bank s# 16, 43, 447 19, 87, 456 17. 2 20. 9
Tot al (i+ ii) 1 7 ,7 2 ,3 7 2 2 1 ,2 6 ,6 0 9 16. 6 20. 0
Memo:
FI s assets as percentage
of total assets 7. 3 6. 5
SCBs assets as percentage
of total assets 92. 7 93. 5
* : I ncludi ng i nvestments, loans and advances, money mark et
assets, deposi ts, cash i n hand and balances wi th bank s and
other assets, excludi ng fi xed assets.
@ : E xcl udi ng I D B I . I ncl udi ng I D B I , the amount stands at
R s. 1, 95, 247 crore.
# : As per returns under secti on 42 of the R eserve Bank of I ndi a
Act, 1934 and i nclude cash i n hand and balances wi th the
bank i ng system, i nvestments, bank cr edi t and dues fr om
bank s. I t does not i nclude non-SL R i nvestments, for ei gn
currency assets and bank reserves.
assets of NH B gr ew at the hi ghest r ate, followed
by E X I M B ank and N A B A R D [ A ppendi x T abl e
V. 4( A) and Appendi x T able V. 4( B) ] .
Sources and Uses of Funds
5. 31 T otal sour ces/deployment of funds of FI s
i ncreased from R s. 86, 990 crore to R s. 94, 810 crore
dur i ng 2004-05, r egi ster i ng a r i se of 9. 0 per cent.
I n the case of deployment, whi le fr esh deployment
and repayment of past borrowi ng regi stered a ri se,
other depl oyments, i ncl udi ng i nter est payment
decli ned dur i ng 2004-05 as compar ed wi th the
previ ous year ( T able V. 6 and Appendi x T able V. 5) .
Cost and Maturity of Borrowings
5. 32 Whi le the wei ghted average maturi ty of the
i nstr uments i ssued by FI s shor tened, wei ghted
average cost of funds i ncreased across all FI s duri ng
2004-05 ( T able V. 7 and Appendi x T able V. 6) .
Table V.6: Pat t er n of Sour ces an d Deploymen t
of Funds of Financial Inst it ut ions*
( Amount i n R s. crore)
Sources / Percentage
D eployment of Funds Vari ati on

2003-04 2004-05
2003-04 2004-05
1 2 3 4 5
A) Sour ces of Funds 86,990 94,810 -9.0 9.0
(i+ ii+ iii) (1 0 0 .0 ) (1 0 0 .0 )
( i ) I nternal 58, 263 59, 371 18. 8 1. 9
( 67. 0) ( 62. 6)
( i i ) External 26, 317 32, 670 -18. 5 24. 1
( 30. 3) ( 34. 5)
( i i i ) O thers 2, 410 2, 769 -83. 1 14. 9
( 2. 8) ( 2. 9)
B) Deployment of Funds 86,990 94,810 -9.0 9.0
(i+ ii+ iii) (1 0 0 .0 ) (1 0 0 .0 )
( i ) Fresh deployments 56, 555 61, 635 8. 7 9. 0
( 65. 0) ( 65. 0)
( i i ) R epayment of past
borrowi ngs 17, 590 21, 069 0. 6 19. 8
( 20. 2) ( 22. 2)
( i i i ) O ther deployments 12, 845 12, 106 -50. 7 -5. 8
( 14. 8) ( 12. 8)
of which:
I nterest Payments 5, 611 4, 597 -47. 7 -18. 1
* : I FCI , I I BI , I DFC, T FCI , NABAR D, NHB, SI DBI and EX I M Bank .
Note : Fi gures i n parentheses are percentages to the total.
Source : R especti ve FI s.
147
Non-Banking Financial Inst it ut ions
Table V.7: Weigh t ed Aver age Cost an d Mat ur it y
of Long-t er m Rupee Resour ces
I nsti tuti on Wei ghted Average Wei ghted Average
cost ( per cent) M aturi ty i n years
2003-04 2004-05 2003-04 2004-05
1 2 3 4 5
I FCI 8. 2 3. 2
I I BI 8. 7 18. 0
T FCI 8. 6 10. 4 10. 0 4. 9
I D FC 5. 6 6. 0 5. 9 3. 7
EX I M Bank 5. 9 6. 6 6. 7 4. 2
NABAR D 5. 4 5. 5 5. 4 5. 0
NHB 5. 4 6. 3 3. 2 2. 6
SI D BI 4. 9 5. 9 2. 8 1. 9
: Ni l/Negli gi ble.
D ata are provi si onal.
Source : R especti ve FI s.
Lending Interest Rates
5. 33 NH B i ncreased i ts lendi ng rate duri ng the
year, whi le SI D BI mai ntai ned i ts lendi ng i nterest
rates at the previ ous years level. Pri me lendi ng rate
( PL R ) of I FCI remai ned unchanged at the previ ous
years level ( T able V. 8) .
Fi n an ci al Per for man ce of Fi n an ci al In s t i t u t i on s
5. 34 All-I ndi a FI s, as a gr oup, showed si gni fi cant
i mpr ovement i n thei r fi nanci al per for mance
dur i ng the year ended M ar ch 2005. Net i nter est
i ncome i ncr eased si gni fi cantl y on account of
i ncr ease i n i nter est i ncome on the one hand and
decli ne i n i nter est expendi tur e on the other. T he
i ncr ease i n net i nter est i ncome, however, was
offset, to an extent, by a shar p decli ne i n non-
i nter est i ncome and i ncr ease i n non-i nter est
expendi tur e. O n the whole, oper ati ng pr ofi ts of
FI s i mpr oved as also the net pr ofi ts, despi te net
losses i ncur r ed by I FC I and I I BI ( T able V. 9) .
Table V.8: Len din g Rat e St r uct ur e of Select
Fin an cial In st it ut ion s
( Per cent Per annum)
Effecti ve PL R I FCI SI D BI NH B@
1 2 3 4 5
July 2003 Long-term PLR 12. 5 7. 5-7. 0
M edi um-term PLR 11. 5 6. 9
Short-term PLR 12. 5 10. 0 6. 9
M arch 2004 Long-term PLR 12. 5 6. 7-6. 5
M edi um-term PLR 11. 5 6. 5
Short-term PLR 12. 5 10. 0 6. 4
July 2004 Long-term PLR 12. 5 6. 5-6. 7
M edi um-term PLR 11. 5 6. 3
Short-term PLR 12. 5 10. 0 6. 0
M arch 2005 Long-term PLR 12. 5 7. 3
M edi um-term PLR 11. 5 6. 8
Short-term PLR 12. 5 10. 0 6. 5
: Ni l/Negli gi ble.
@ : R elati ng to the fi xed rate.
Table V.9: Financial Per for mance of Select
All-In dia Fin an cial In st it ut ion s*
( Amount i n R s. crore)
I tem 2003-04 2004-05 Vari ati on
Amount Percent-
age
1 2 3 4 5
A) Income (a+ b) 9,346 9,451 105 1.1
a) I nterest I ncome 7, 694 8, 122 428 5. 6
( 82. 3) ( 85. 9)
b) Non-i nterest I ncome 1, 652 1, 329 -322 -19. 5
( 17. 7) ( 14. 1)
B) Expendit ur e (a+ b) 7,135 6,689 -446 -6.3
a) I nterest Expendi ture 6, 203 5, 660 -543 -8. 8
( 86. 9) ( 84. 6)
b) O ther Expenses 932 1, 029 97 10. 4
( 13. 1) ( 15. 3)
Of which : Wage Bi ll 389 344 -45 -11. 6
Provi si ons for T axati on 666 726 60 9. 0
C) Pr ofit
O perati ng Profi t ( PBT ) 2, 211 2, 762 551 24. 9
Net Profi t ( PAT ) 1, 545 2, 036 491 31. 8
D) Financial Rat ios@
O perati ng Profi t ( PBT ) 1. 7 1. 9
Net Profi t ( PAT ) 1. 2 1. 4
I ncome 7. 2 6. 6
I nterest I ncome 5. 9 5. 7
O ther I ncome 1. 3 0. 9
Expendi ture 5. 5 4. 7
I nterest Expendi ture 4. 8 4. 0
O ther O perati ng Expenses 0. 7 0. 7
Wage Bi ll 0. 3 0. 2
Provi si ons 0. 5 0. 5
Spread
( Net I nterest I ncome) 1. 1 1. 7
@ : As percentage of total assets.
* : R elati ng to I FCI , T FCI , I D FC, I I BI , EX I M Bank , NABAR D,
NHB and SI D BI .
Note : 1. O perati ng Profi t refers to Profi t before Provi si ons
for T axati on/ T ax ( PBT ) .
2. Net Profi t refers to profi ts after T ax Provi si ons
( PAT ) .
3. Fi gures i n parentheses are percentage shares to
the respecti ve total.
Source : Annual Accounts of respecti ve FI s.
148
Repor t on Tr end and Pr ogr ess of Banking in India, 2004-05
5. 35 I nter est i ncome as per centage of aver age
wor k i ng funds of all FI s, bar r i ng I FCI and I I BI ,
decl i ned dur i ng the year. Non-i nter est i ncome
consti tutes a ver y smal l per centage of aver age
work i ng funds for most of the FI s. I D FC earned the
hi ghest return on assets, followed by T FCI , NABAR D,
SI D BI and EX I M Bank . O perati ng profi ts rati o of all
FI s, except I FCI and T FCI , decli ned duri ng the year.
I FCI earned operati ng profi ts duri ng the year as
agai nst operati ng losses last year. I I BI , however,
conti nued to i ncur operati ng losses. O f all the FI s,
I D FC earned hi ghest operati ng profi ts, followed by
T FCI . R eturn on assets i n respect of I FCI conti nued
to be negati ve. Net profi t per employee was hi ghest
i n the case of T FCI , followed by I D FC ( T able V. 10) .
Sou n d n es s In d i ca t or s
Assets Quality
5. 36 T he asset quali ty of all FI s, except SI D BI
i mpr oved si gni fi cantly dur i ng 2004-05, r eflecti ng
the combi ned i mpact of r ecover y of dues and
i ncr eased pr ovi si oni ng ( T able V. 11) .
5. 37 Sub-standard assets across all FI s decli ned
as at end-M ar ch 2005 i n compar i son wi th the
previ ous year. Whi le doubtful assets of I FCI and I I BI
decli ned, those of SI D BI and EX I M bank i ncreased
( T able V. 12) .
Capital Adequacy
5. 38 Capi tal adequacy r ati o ( CR AR ) of all FI s,
bar r i ng T FCI , decli ned mar gi nally at end-M ar ch
2005 as compar ed wi th end-M ar ch 2004.
N otwi thstandi ng the decl i ne, the C R A R of FI s
r emai ned substanti ally hi gher than the mi ni mum
pr escr i bed r ati o of 9 per cent ( T able V. 13) . C R AR
of I FC I and I I BI er oded fur ther dur i ng the year
on account of hi gh level of NPAs and accumulated
fi nanci al losses.
Res er ve Ba n ks As s i s t a n ce t o St a t e Fi n a n ci a l
Cor p or a t i on s
5. 39 State fi nanci al cor por ati ons ( SFC s) wer e
sancti oned ad hoc bor r owi ng li mi ts for a per i od
of 12 months ( July to June) and extendable by a
maxi mum per i od of 6 months by the R eser ve
B ank ever y year. T hese shor t-ter m fi nanci al
Table V.10: Select Fin an cial Par amet er s of Fin an cial In st it ut ion s
( Per cent)
I nsti tuti on I nterest I ncome/ Non-i nterest O perati ng R eturn on Net Profi t
Average I ncome/ Profi ts/ Average per Employee
Work i ng Funds Average Average Assets ( R s. crore)
Work i ng Funds Work i ng Funds
As at end-M arch
2004 2005 2004 2005 2004 2005 2004 2005 2004 2005
1 2 3 4 5 6 7 8 9 10 11
I FCI 4. 3 7. 4 1. 3 1. 5 -1. 9 1. 8 -16. 9 -2. 2 -5. 34 -0. 63
I I BI 10. 0 11. 1 0. 3 7. 5 -4. 9 -7. 6 NA NA -0. 49 -0. 80
T FCI 11. 8 11. 4 0. 9 0. 2 3. 1 3. 6 1. 6 2. 0 0. 39 4. 40
I D FC 8. 4 7. 9 4. 4 2. 5 5. 4 4. 6 5. 2 4. 3 2. 06 2. 92
EX I M Bank 6. 4 6. 1 0. 8 0. 5 2. 4 2. 0 1. 7 1. 5 1. 20 1. 34
NABAR D 8. 0 6. 9 0. 1 0. 0 3. 6 3. 2 2. 8 1. 8 0. 28 0. 20
NHB 8. 1 6. 7 0. 4 0. 4 2. 2 0. 5 2. 2 0. 3 2. 35 0. 47
SI D BI 7. 3 5. 9 0. 5 0. 6 3. 5 3. 0 2. 0 1. 7 0. 27 0. 26
Source : Balance sheets of respecti ve FI s.
Table V.11: Net Non-Per for ming Asset s
( At end-M arch)
( Amount i n R s. crore)
I nsti tuti on Net NPAs Net NPAs/ Net L oans
( per cent)
2004 2005 2004 2005
1 2 3 4 5
I FCI 3, 865 2, 688 32. 3 28. 0
I I BI 800 405 38. 0 27. 3
T FCI 144 68 21. 1 11. 0
I D FC
EX I M Bank 129 109 1. 3 0. 9
NABAR D 1 1
NHB
SI D BI 226 407 2. 4 3. 9
: Ni l/Negli gi ble.
Source : Balance sheets of respecti ve FI s.
149
Non-Banking Financial Inst it ut ions
I nsti tuti on As at end - M arch
Standard Sub-Standard D oubtful Assets L oss Assets
2004 2005 2004 2005 2004 2005 2004 2005
1 2 3 4 5 6 7 8 9
I FCI 8, 116 6, 909 899 205 2, 966 2, 483
I I BI 1, 304 1, 079 274 23 526 382
T FCI 539 531 30 4 115 64
I D FC 4, 419 7, 050
EX I M Bank 10, 046 12, 714 76 47 53 62
NABAR D 48, 789 48, 354 1 1
NHB 6, 580 10, 812
SI D BI 9, 249 9, 845 29 8 197 399 62 51
: Ni l/Negli gi ble.
Source : Balance sheets of respecti ve FI s.
Table V.12: Asset Classificat ion of Financial Inst it ut ions
accommodati ons were back ed by the pledge of ad
hoc bonds i ssued by the i ndi vi dual SFC s and
guar anteed by the concer ned State G over nment/
Uni on T erri tory to enable the SFCs to ti de over thei r
tempor ar y li qui di ty pr oblems. I n M ay 2004, the
R eserve Bank deci ded to di sconti nue the ad hoc
borrowi ng faci li ty to all SFCs from 2004-05.
3 . NON-BANKING FINANCIAL
COMPANIES
5. 40 Non-bank i ng fi nanci al compani es represent
a heterogenous group of i nsti tuti ons separated by
thei r type of acti vi ty, organi sati onal structure and
portfoli o mi x. Four types of i nsti tuti ons, categori sed
i n ter ms of thei r pr i mar y busi ness acti vi ty and
under the regulatory purvi ew of the R eserve Bank ,
are equi pment leasi ng compani es, hi re purchase
compani es, l oan compani es and i nvest ment
compani es. T he resi duary non-bank i ng compani es
( R NBCs) have been classi fi ed as a separate category
as thei r busi ness does not conform to any of the
other defi ned classes of NBFC busi nesses. Besi des,
ther e ar e other NBFCs, viz. , mi scellaneous non-
bank i ng compani es ( C hi t Fund) , mutual benefi t
fi nance compani es ( Nidhis and Potenti al Nidhis)
and housi ng fi nance compani es, whi ch are ei ther
par ti al l y r egul ated by the R eser ve B ank or ar e
outsi de the pur vi ew of the R eser ve B ank . T hi s
secti on broadly focuses on the poli cy developments
and oper ati ons of NB FC s under the r egul ator y
purvi ew of the R eserve Bank . H owever, i n vi ew of
thei r di ver se natur e, oper ati ons of NB FC s and
R NBCs have been di scussed separately. Besi des,
operati ons of NBFCs not accepti ng publi c deposi ts
but havi ng asset si ze of R s. 500 crore and above
have also been di scussed separately i n vi ew of thei r
i mpli cati ons for systemi c ri sk .
Table V.13: Capit al Adequacy Rat io of Select Fin an cial In st it ut ion s*
( Per cent)
I nsti tuti on As at end-M arch
1999 2000 2001 2002 2003 2004 2005
1 2 3 4 5 6 7 8
I FCI 8. 4 8. 8 6. 2 3. 1 0. 95 -17. 0 -23. 4
I I BI 11. 7 9. 7 13. 9 9. 2 -11. 0 -20. 1 -41. 1
T FCI 15. 4 16. 2 18. 6 18. 5 19. 8 22. 8 27. 4
I D FC 235. 5 119. 7 85. 5 56. 7 51. 3 36. 9 28. 6
EX I M Bank 23. 6 24. 4 23. 8 33. 1 26. 9 23. 5 21. 6
NABAR D 53. 3 44. 4 38. 5 36. 9 39. 1 39. 4 38. 8
NHB 17. 3 16. 5 16. 8 22. 1 27. 9 30. 5 22. 5
SI D BI 26. 9 27. 8 28. 1 45. 0 44. 0 51. 6 50. 7
* : Net of provi si oni ng and wri te-offs.
Source : Balance sheets of respecti ve FI s.
150
Repor t on Tr end and Pr ogr ess of Banking in India, 2004-05
Regu la t or y a n d Su p er vi s or y In i t i a t i ves
5. 41 T he focus of r egul at or y i ni t i at i ves i n
r espect of NBFC s dur i ng 2004-05 was on deposi t
acceptance nor ms and i mpr oved di sclosur es.
Issuance of Guidelines on Credit Cards by NBFCs
5. 42 NBFCs were allowed to enter i nto credi t card
busi ness on thei r own or i n associ ati on wi th another
N B FC or a schedul ed commer ci al bank . T he
permi ssi on to thi s effect was granted on a selecti ve
basi s k eepi ng i n vi ew the fi nanci al posi ti on of the
company and i ts record of compli ance. NBFCs are
not al l owed t o i ssue any debi t car d as i t
tantamounts to openi ng and operati ng a demand
deposi t account, whi ch i s the exclusi ve pri vi lege of
bank s. Emergency cash wi thdrawal faci li ty through
AT M s of associ ate bank may only be allowed to
credi t card holders as a short-term advance wi th a
reasonable li mi t and necessary bui lt-i n safeguards.
NBFC s have been advi sed to be sel ecti ve whi l e
i ssui ng credi t cards wi th adequate apprai sal on the
standi ng of the appli cant. I t was clari fi ed that any
NBFC, i ncludi ng a non-deposi t tak i ng company,
i ntendi ng to engage i n the acti vi ty of i ssue of credi t
car d woul d have t o obt ai n a C er t i fi cat e of
R egi str ati on, apar t fr om speci fi c per mi ssi on to
enter i nto thi s busi ness fr om the R eser ve Bank .
T he NBFC would have to sati sfy the requi rement
of a mi ni mum net owned fund of R s. 100 crore and
such other ter ms and condi ti ons as the R eser ve
Bank may speci fy to thi s effect from ti me to ti me.
Acceptance of Publ i c Deposi ts by NBFCs
Registered in Non-public Deposit Taking Category
5. 43 NBFC s whi ch wer e gr anted C er ti fi cate of
R egi str ati on ( C oR ) i n the non-publ i c deposi t
tak i ng categor y should meet the mi ni mum capi tal
r equi r ement of R s. 2 cr or e for bei ng el i gi bl e to
apply to the R eser ve Bank for accepti ng deposi ts.
A ccor di ngl y, N B FC s wer e advi sed t o ensur e
com pl i ance wi t h t hi s r equi r em ent bef or e
appl yi ng to the R eser ve B ank for appr oval to
accept publ i c deposi ts.
Preparation of Balance Sheet as on March 31 of
Every Year
5. 44 I n terms of the extant di recti ons, every NBFC
i s requi red to prepare i ts balance sheet and profi t
and l oss account as on M ar ch 31 ever y year.
H owever, a few compani es obtai ned per mi ssi on
di rectly from the R egi strar of Compani es ( R oC) for
extensi on of the fi nanci al year as requi red under
the provi si ons of the Compani es Act, 1956. I n order
to ensure that there i s no eventual vi olati on of the
di recti ons of the R eserve Bank , NBFCs were advi sed
that whenever an NBFC i ntends to extend the date
of i ts bal ance sheet as per pr ovi si ons of the
Compani es Act, i t should tak e pri or approval of
the R eserve Bank before approachi ng the R oC for
thi s purpose. I t was also clari fi ed that even i n the
cases where the R eserve Bank and the R oC grant
extensi on of ti me, the company i s r equi r ed to
furni sh to the R eserve Bank a proforma balance
sheet ( unaudi ted) as on M arch 31 of the year and
the statutory returns due on the above date.
Premature Withdrawal of Deposits by NBFCs,
RNBCs and MNBCs
5. 45 NBFCs whi ch have defaulted i n repayment
of deposi ts, are prohi bi ted from mak i ng premature
repayment of any publi c deposi ts ( i n the case of
NBFCs) or deposi ts ( i n the case of M NBCs/R NBCs)
or granti ng any loan agai nst such deposi ts ( i n the
case of NBFCs/M NBCs) , except i n the case of death
of a deposi tor or for r epayi ng ti ny deposi t, i.e.,
deposi ts up to R s. 10, 000. T he remai ni ng amount
and the i nter est ther eon may be pai d only after
maturi ty. I n the case of normally run compani es,
the premature repayment, after the lock -i n peri od,
wi ll be at the sole di screti on of the company and
cannot be cl ai med as a matter of r i ght by the
deposi tor. H owever, i n the event of death of the
deposi tor, publi c deposi t/deposi ts may be repai d
pr ematur el y, even wi thi n l ock -i n per i od to the
survi vi ng deposi tor or legal hei r/s of the deceased
deposi tor. T he r ate of i nter est to be pai d on
pr ematur e r epayment of deposi ts has also been
rati onali sed by the R eserve Bank .
Reporti ng System for NBFCs not Accepti ng/
Holding Public Deposits and Having Asset Size
of Rs.500 Crore and Above
5. 46 N B F C s not accept i ng/hol di ng publ i c
deposi ts and havi ng an asset si ze of R s. 500 cr or e
and above wer e advi sed to submi t a quar ter l y
r etur n i n the pr escr i bed for mat begi nni ng fr om
the quar ter ended September 2004 wi thi n a
per i od of 30 days of the month followi ng the close
of t he quar t er. I t was al so advi sed t hat a
pr ovi si onal r etur n for the quar ter ended M ar ch
of ever y year may be submi tted, wi thi n 30 days of
the close of the quar ter and a fi nal r etur n duly
cer ti fi ed by the statutor y audi tor s shoul d be
151
Non-Banking Financial Inst it ut ions
submi tted, wi th a copy of the audi ted bal ance
sheet, as soon as the same i s fi nali sed but not
l at er t han S ept ember 30 of t he year. N on-
submi ssi on of r etur n would be vi ewed ser i ously
and penal acti on would be tak en for such non-
compl i ance. Wi th effect fr om September 2005,
peri odi ci ty of return has been reduced to monthly
and cut off poi nt for submi ssi on of return has been
reduced to asset si ze of R s. 100 crore and above.
Cover for Public Deposits
5. 47 I n order to protect deposi tors i nterest, all
NB FC s accepti ng/hol di ng publ i c deposi ts wer e
advi sed to ensure that there i s full cover avai lable
at all ti mes for publi c deposi ts accepted by them.
Whi l e cal cul ati ng thi s cover, the val ue of al l
debentures ( secured and unsecured) and outsi de
l i abi l i ti es other than the aggr egate l i abi l i ti es to
deposi tors may be deducted from total assets. For
thi s pur pose, they wer e advi sed that the assets
shoul d be eval uat ed at t hei r book val ue or
reali sable/mark et value, whi chever i s lower. NBFCs
are requi red to report to the R eserve Bank i n case
the asset cover calculated, as advi sed, falls short
of the li abi li ty on account of publi c deposi ts. T hey
were further di rected to create a floati ng charge on
the statutor y li qui d assets i nvested as r equi r ed
under Secti on 45-I B of the R BI Act, 1934 i n favour
of thei r deposi tors and that the charge should be
duly regi stered i n accordance wi th the requi rements
of the Compani es Act, 1956.
Know Your Customer (KYC) Guidelines Anti-
Money Laundering Standards
5. 48 NBFCs/R NBCs were advi sed i n January 2004
to follow certai n customer i denti fi cati on procedure
for openi ng of accounts and moni tori ng transacti ons
of a suspi ci ous nature for the purpose of reporti ng
i t to the appr opr i ate author i ty. T he k now your
customer ( K YC) gui deli nes wer e r evi si ted i n the
context of the r ecommendati ons made by the
Fi nanci al Acti on T ask Force ( FAT F) on Anti -M oney
L aunder i ng ( AM L ) standar ds and on Combati ng
Fi nanci ng of T er r or i sm ( CFT ) . Subsequently, the
R eserve Bank i ssued detai led gui deli nes to bank s
based on the r ecommendati ons of the Fi nanci al
Acti on T ask Force and the paper i ssued on Customer
D ue D i l i gence ( C D D ) for bank s by the B asel
Commi ttee on Bank i ng Supervi si on. NBFCs were
advi sed on February 21, 2005 to adopt the same
gui deli nes wi th sui table modi fi cati ons dependi ng on
the acti vi ty undertak en by them and ensure that a
proper poli cy framework on K YC and AM L measures
i s formulated and put i n place wi th the approval of
the Board wi thi n three months. NBFCs are requi red
to ensure full compli ance wi th the provi si ons of the
gui deli nes before D ecember 31, 2005.
Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act,
2002
5. 49 C er tai n secti ons of the SA R FA E SI A ct,
2002 wer e amended by passi ng the E nfor cement
of Secur i ty I nter est and R ecover y of D ebts L aws
( Amendment) Act, 2004. T he amendment to the
A ct was necessi tated i n vi ew of the Supr eme
C our t j udgment and suggesti ons r ecei ved fr om
var i ous sour ces i ncl udi ng I ndi an B ank s
Associ ati on ( I BA) , NH B and the G over nment. T he
consti tuti onal val i di ty of the SAR FAE SI Act was
chal l enged i n the Supr eme C our t i n the case of
M ar di a C hemi cal s L td. vs. I C I C I B ank L td. and
other s. T he Supr eme C our t whi l e uphol di ng the
Act decl ar ed sub-secti on ( 2) of Secti on 17 of the
A ct, r equi r i ng the defaul ti ng bor r ower to pr e-
deposi t 75 per cent of the l i abi l i ty i n case the
bor r ower wants to appeal agai nst the or der of
the attachment of an asset, as ultra vi res of
Ar ti cl e 14 of the C onsti tuti on of I ndi a.
Supervision of NBFCs
5. 50 Super vi sor y over si ght by the R eser ve Bank
over NBFCs encompasses a four-pronged strategy;
( a) on-si te i nspecti on based on the C A M E L S
methodology; ( b) off-si te moni tori ng supported by
state-of-the-art technology; ( c) mark et i ntelli gence;
and ( d) excepti on r epor ts of statutor y audi tor s.
D uri ng the peri od Apri l 2004 to M arch 2005, a total
of 573 ( 318 deposi t tak i ng compani es and 255 non-
deposi t tak i ng compani es) regi stered NBFCs were
i nspected. I n addi ti on to the i nspecti ons, the Bank
also conducted 236 snap scr uti ni es.
Registration
5. 51 B y the end of M ar ch 2005, the R eser ve
Bank had r ecei ved 38, 096 appli cati ons for gr ant
of C er ti fi cate of R egi str ati on ( C oR ) . O f these, the
R eser ve Bank has appr oved 13, 187 appli cati ons
( net of cancellati on) , i ncludi ng 474 appli cati ons
( net of cancellati on) of compani es author i sed to
accept/hold publi c deposi ts. T he total number of
NBFC s i ncr eased to 13, 261 ( net of cancellati on)
by end-J une 2005, of whi ch 507 wer e publ i c
deposi t accepti ng compani es ( T able V. 14) .
152
Repor t on Tr end and Pr ogr ess of Banking in India, 2004-05
Pr ofi le of NBFCs (i n clu d i n g RNBCs )
5. 52 T he number of r epor ti ng NBFCs ( r egi ster ed
and unr egi ster ed) decli ned fr om 875 at end-M ar ch
2003 to 777 at end-M ar ch 2004 and fur ther to
573 at end-M ar ch 2005. T he decli ne was mai nly
due to the exi t of many NBFCs fr om deposi t tak i ng
acti vi ty. T he number of R NBC s, whi ch wer e fi ve
at the end-M ar ch 2003, decli ned to thr ee at end-
M ar ch 2004 and r emai ned unchanged at that level
at end-M ar ch 2005. Assets and publi c deposi ts
accepted by r epor ti ng N B FC s, whi ch decl i ned
dur i ng the year ended M ar ch 2004, i ncr eased
margi nally duri ng the year ended M arch 2005 even
as the number of reporti ng NBFCs decli ned sharply.
T he net owned funds of NBFCs i ncreased i n 2004
as well as 2005 ( T able V. 15) . D eposi ts of r epor ti ng
N B FC s consti tuted 1. 1 per cent of aggr egate
deposi ts of scheduled commer ci al bank s at end-
M ar ch 2005 as agai nst 1. 2 per cent at end-M ar ch
2004 and 1. 5 per cent at end-M ar ch 2003.
5. 53 R eflecti ng the decli ne i n publi c deposi ts held
by NBFCs, the share of NBFC deposi ts i n broad
li qui di ty ( L
3
) has decli ned sharply over the years
( Chart V. 2) .
Op er a t i on s of NBFCs (Exclu d i n g RNBCs )
5. 54 T otal assets/li abi li ti es of NBFCs ( excludi ng
R NBCs) , whi ch had decli ned sharply by 13. 1 per
cent duri ng 2003-04, i ncreased margi nally duri ng
2004-05. Borrowi ngs represent the maj or source of
funds for NBFCs, followed by owned funds ( capi tal
and r eser ves) and publ i c deposi ts. A l l these
sour ces of funds decli ned dur i ng 2003-04 as well
as 2004-05, except borrowi ngs, whi ch i ncreased
margi nally duri ng 2004-05 after a sharp decli ne i n
Table V.14: Number of Non-Banking
Financial Companies
End-June All NBFCs NBFCs Accepti ng
Publi c D eposi ts
1 2 3
1999 7, 855 624
2000 8, 451 679
2001 13, 815 776
2002 14, 077 784
2003 13, 849 710
2004 13, 764 604
2005* 13, 261 507
* : net of cancellati on.
P
e
r

c
e
n
t
Char t V.2: Shar e of Public Deposit s of NBFCs
in Br oad Liquidit y (L
3
)
Table V.15: Pr ofile of Non -Ban kin g Fin an cial Compan ies
( Amount i n R s. crore)
I tem As at End-M arch
2003 2004 2005
NBFCs of which: NBFCs of which: NBFCs of which:
R NBCs R NBCs R NBCs
1 2 3 4 5 6 7
Number of reporti ng compani es 875 5 777 3 573 3
T otal Assets 58, 071 20, 362 50, 709 17, 955 52, 900 19, 056
( 35. 1) ( 35. 4) ( 36. 0)
Publi c D eposi ts 20, 100 15, 065 19, 644 15, 327 20, 246 16, 600
( 75. 0) ( 78. 1) ( 82. 0)
Net O wned Funds 4, 950 809 5, 098 1, 002 5, 510 1, 065
Note: Fi gures i n parentheses i ndi cate percentages to total outstandi ng deposi ts of NBFCs.
153
Non-Banking Financial Inst it ut ions
2003-04. O n the asset si de, loans and advances, hi re
purchase and equi pment leasi ng assets consti tute
the maj or assets of NBFCs. R eflecti ng the i mpact of
slowdown i n borrowi ng and deposi ts, growth of all
maj or assets such as l oans and advances and
equi pment leasi ng assets, except SL R i nvestments,
decli ned dur i ng 2003-04. T he decli ne i n assets
conti nued dur i ng 2004-05, except hi r e pur chase
assets, bi ll busi ness and SL R i nvestments whi ch
i ncreased sharply ( T able V. 16) .
5. 55 Among NBFC gr oups, assets/li abi li ti es of
hi r e pur chase fi nance compani es and equi pment
leasi ng compani es, whi ch decli ned dur i ng the year
ended M ar ch 2004, i ncr eased mar gi nally dur i ng
the year ended M ar ch 2005. Assets/li abi li ti es of
i nvestment and loan compani es whi ch expanded
dur i ng the year ended M ar ch 2004, decli ned i n
the fol l owi ng year. T hi s br oadl y r efl ected the
i mpact of resources rai sed. Hi re purchase fi nance
compani es, the largest NBFC group, consti tuted 59. 2
per cent of total assets/li abi li ti es of all NBFCs at end-
M arch 2005, followed di stantly by loan compani es
( 15. 7 per cent) , equi pment leasi ng compani es ( 14. 0
per cent) and i nvestment compani es ( 5. 6 per cent)
( T able V. 17) .
Table V.16: Consolidat ed Balance Sh eet of NBFCs
( Amount i n R s. crore)
I tem As at end-M arch Vari ati on
2003 2004 2005 2003-04 2004-05
Absolute Per cent Absolute Per cent
1 2 3 4 5 6 7 8
Liabilit ies
1. Pai d-up capi tal 2, 860 2, 327 2, 106 -533 -18. 6 -221 -9. 5
( 7. 6) ( 7. 1) ( 6. 2)
2. R eserves and Surplus 4, 745 4, 414 3, 855 -331 -7. 0 -559 -12. 7
( 12. 6) ( 13. 5) ( 11. 4)
3. Publi c D eposi ts 5, 035 4, 317 3, 646 -718 -14. 3 -671 -15. 5
( 13. 4) ( 13. 2) ( 10. 8)
4. Borrowi ngs 24, 480 20, 852 21, 842 -3, 628 -14. 8 990 4. 7
( 64. 9) ( 63. 7) ( 64. 5)
5. O ther Li abi li ti es 589 844 2, 394 255 43. 3 1, 550 183. 6
( 1. 6) ( 2. 6) ( 7. 1)
Tot al Liabilit ies/Asset s 37,709 32,754 33,843 -4,955 -13.1 1,089 3.3
Asset s
1. I nvestments
i ) SLR I nvestments 1, 453 1, 707 1, 772 254 17. 5 65 3. 8
( 3. 9) ( 5. 2) ( 5. 2)
i i ) Non-SLR I nvestments 2, 885 2, 110 1, 736 -775 -26. 9 -374 -17. 7
( 7. 7) ( 6. 4) ( 5. 1)
2. Loans and Advances 13, 398 12, 363 11, 301 -1, 035 -7. 7 -1, 062 -8. 6
( 35. 5) ( 37. 7) ( 33. 4)
3. Hi re Purchase Assets 13, 031 11, 649 14, 200 -1, 382 -10. 6 2, 551 21. 9
( 34. 6) ( 35. 6) ( 42. 0)
4. Equi pment Leasi ng Assets 5, 816 3, 036 1, 971 -2, 780 -47. 8 -1, 065 -35. 1
( 15. 4) ( 9. 3) ( 5. 8)
5. Bi ll Busi ness 450 436 464 -14 -3. 1 28 6. 4
( 1. 2) ( 1. 3) ( 1. 4)
6. O ther Assets 676 1, 453 2, 398 777 114. 9 945 65. 0
( 1. 8) ( 4. 4) ( 7. 1)
Note : 1. Number of reporti ng compani es decli ned to 777 compani es i n 2004 from 875 duri ng 2003.
2. Fi gures i n parentheses are percentages to total li abi li ti es/assets.
154
Repor t on Tr end and Pr ogr ess of Banking in India, 2004-05
Table V.17: Major Component s of Liabilit ies of NBFCs Gr oup -wise
( Amount i n R s. crore)
NBFC G roup As at end-M arch
L i abi li ti es D eposi ts Borrowi ngs
2003 2004 2005 2003 2004 2005 2003 2004 2005
1 2 3 4 5 6 7 8 9 10
Equi pment Leasi ng 7, 996 3, 744 4, 721 511 344 343 6, 472 2, 811 3, 112
( 21. 2) ( 11. 4) ( 14. 0) ( 10. 1) ( 8. 0) ( 9. 4) ( 26. 4) ( 13. 5) ( 14. 2)
Hi re Purchase 22, 163 19, 929 20, 039 3, 539 2, 963 2, 315 13, 650 12, 141 13, 008
( 58. 8) ( 60. 8) ( 59. 2) ( 70. 3) ( 68. 6) ( 63. 5) ( 55. 8) ( 58. 2) ( 59. 6)
I nvestment 2, 208 2, 422 1, 890 125 106 93 1, 613 1, 718 1, 092
( 5. 9) ( 7. 4) ( 5. 6) ( 2. 5) ( 2. 5) ( 2. 6) ( 6. 6) ( 8. 2) ( 5. 0)
L oan 4, 109 5, 485 5, 319 177 178 157 2, 600 3, 775 3, 679
( 10. 9) ( 16. 7) ( 15. 7) ( 3. 5) ( 4. 1) ( 4. 3) ( 10. 6) ( 18. 1) ( 16. 9)
O thers 1, 233 1, 173 1, 874 683 727 738 145 407 950
( 3. 3) ( 3. 6) ( 5. 5) ( 13. 6) ( 16. 8) ( 20. 2) ( 0. 6) ( 2. 0) ( 4. 3)
Tot al 37,709 32,754 33,843 5,035 4,317 3,646 24,480 20,852 21,842
(10 0.0 ) (10 0.0) (100.0 ) (100 .0 ) (100 .0) (1 00.0) (1 00.0) (100 .0 ) (1 00 .0 )
Note: Fi gures i n parentheses represent percentage share i n total.
Dep os i t s
Profile of Public Deposits of Different Categories
of NBFCs
5. 56 Publi c deposi ts held by all NBFC s decli ned
si gni fi cantly dur i ng the year ended M ar ch 2004
( 14. 2 per cent) as well as M ar ch 2005 ( 15. 6 per
cent) . Si gni fi cantly, publi c deposi ts by all NBFC
gr oups decl i ned i n both the year s, except l oan
compani es, whi ch i ncr eased mar gi nal l y dur i ng
2003-04 and other compani es, whi ch i ncr eased
dur i ng 2003-04 and 2004-05. H i r e pur chase
compani es hel d t he l ar gest shar e of publ i c
deposi ts ( 63. 5 per cent) , fol l owed r emotel y by
equi pment l easi ng compani es, l oan compani es
and i nvestment compani es ( T able V. 18) .
Deposit Size-wise Classification of NBFCs
5. 57 T he number of NBFC s and deposi ts held
by them i n all categor i es of deposi t si ze decli ned
dur i ng the year ended M ar ch 2004 as wel l as
M ar ch 2005, bar r i ng NBFC s i n the deposi t si ze
of R s. 10 cr or e to R s. 20 cr or e, deposi t i n r espect
of whi ch i ncr eased mar gi nally dur i ng 2004-05 and
Table V.18: Public Deposit s h eld by NBFCs Gr oup -wise
( Amount i n R s. crore)
Nature of Busi ness As at end-M arch Percentage
Number of NBFCs Publi c D eposi ts
Vari ati on
2003 2004 2005 2003 2004 2005 2004 2005
1 2 3 4 5 6 7 8 9
1. Equi pment L easi ng 58 46 38 511 344 343 -32. 7 -0. 3
( 10. 1) ( 8. 0) ( 9. 4)
2. Hi re Purchase 439 396 316 3, 539 2, 963 2, 315 -16. 3 -21. 9
( 70. 3) ( 68. 6) ( 63. 5)
3. I nvestment 19 11 5 125 106 93 -15. 2 -12. 3
( 2. 5) ( 2. 5) ( 2. 6)
4. L oan 122 87 54 177 178 157 0. 6 -11. 8
( 3. 5) ( 4. 1) ( 4. 3)
5. O thers* 232 234 157 683 727 738 6. 4 1. 5
( 13. 6) ( 16. 8) ( 20. 2)
Tot al 8 7 0 7 7 4 5 7 0 5 ,0 3 5 4,3 1 8 3,6 4 6 -1 4 .2 -1 5 .6
(1 0 0 .0 ) (1 0 0 .0 ) (1 0 0 .0 )
* : I ncludi ng M i scellaneous Non-Bank i ng Compani es, unregi stered and unnoti fi ed Nidhis.
Note: Fi gures i n parentheses i ndi cate percentages to total.