CHAPTER – I

INTRODUCTION

1.1 INTRODUCTION
1.2 FINANCIAL SERVICES IN INDIA: AN OVERVIEW
1.3 DEVELOPMENT OF BANKING COMPANIES IN INDIA
1.4 BANKING PROFILE OF NORTH EAST INDIA AND MANIPUR
1.5 DEFINING PRIVATE FINANCIAL INSTITUTIONS
1.6 PRIVATE FINANCIAL INSTITUTIONS IN MANIPUR: AN
OVERVIEW
1.1. INTRODUCTION:

In this modern money- oriented economy, banks and financial institutions

become the most important part of the economy. The socio-economic

development of any part of the world largely depends on the functioning of these

banks and financial institutions and availability of their services, especially the

credit facilities. In absence of these banks and financial institutions which handle

the business of money it is not possible to bring industrial and commercial

development of a society which is ultimately responsible for the socio–economic

development of the society.

The financial system in India comprises of various institutions engaged in

the financial market of the economy. These institutions include (a) the all India

level development financial institutions like Industrial Finance Corporation of

India (IFCI),Industrial Development Bank Of India (IDBI), Industrial Credit And

Investment Corporation Of India (ICICI), National Bank For Agriculture And

Rural Development (NABARD) ; the investment institution like Life Insurance

Corporation Of India(LIC) and Unit Trust Of India (UTI), the state level financial

institutions like State Financial Corporations (SFCs), Small Industry Development

Corporation (SIDCs), and the co-operative banks, mutual funds and the like; (b)

commercial/banking sector comprises of Public Sector Banks (PSBs), Old Private

Sector Banks, New Generation Private Sector Banks(NPSBs), Foreign Banks and

Regional Rural Banks(RRBs) and (c) Non-Banking Financial Companies(NBFCs)

like leasing and hire purchase companies, mutual benefit companies, Petty Finance

Corporations (known as Unincorporated Bodies i.e. UIBs) in the private sector.

Money lenders and indigenous bankers have also been playing an important role in
the society since time immemorial. Thus, the financial system in India is closely

interwoven with its various financial sub-systems in which NBFCs, UIBs and

money lenders do play an important role and constitute significant elements in the

organization of the financial system.

When the US economy is facing the problems of recession, our country’s

economy cannot be affected much by it due to the presence of well organized and

well structured banking and financial system. Though we are proud of having

widely extended network of branches of public sector banks, private sector banks,

foreign banks, Regional Rural Banks, cooperative banks and various

developmental banks and financial institutions under the supervision of various

regulatory and controlling apex institutions, still a large population of rural India

remained unbanked or under banked. Their needs and demands for credit and

other financial services remained unfulfilled. The focus of commercial banks on

priority sectors still remained blurred even after various directives of the apex

institution. There is still a big gap between the services rendered by the organized

banking and financial institutions and the services demanded by the economy

particularly the economy of the rural India. This gap is being bridged by the

presence of various players in the unorganized sector of banking and financial

system. These players in the unorganized sector are providing various financial

services which are both competitive as well as complementary to the services of

the banking and financial institutions in the organized sector. The role being

played by these players of the unorganized sector in the socio-economic

development of rural India cannot be neglected and overshadowed by the

achievements of the organized sector.

 The present study entitled “The Role of Private Financial Institutions in the

Socio-Economic Development of Manipur: A Case Study of Imphal East and

West Districts” is an attempt to analyse the role of Private Financial Institutions,

an integrated term given for the NBFCs and UIBs, in the economic as well as

social development of the state through their tailored cut financial services. People

who are really in need of their services feel that they are the savior for them but on

the other hand some people feel that they are the blood sucker of the public as

their lending rate of interest is very high as compared to that of banks and

financial institutions in the organized sector. They have been fulfilling the credit

needs of a large section of the people ranging from small vegetable vendors to big

businessmen and high ranked government officials. Their services are of various

natures, very prompt and highly flexible to suit the requirements of various ranges

of their beneficiaries. Because of their tailored cut service nature they are still

growing in the presence of highly condensed and concentrated network of various

branches of commercial banks and public sector financial institutions in the capital

district. They are providing competitive as well as complementary and

supplementary services to the organized banking sector.

1.2 FINANCIAL SERVICES IN INDIA: AN OVERVIEW

The role being played by the Private Financial Institutions in the socio-

economic development of the state is through their financial services. To have a

better idea and understanding about the functioning and services of these Private

Financial Institutions it would be more helpful to make a broader watch towards

the Financial Services in India.

 Financial services are an important component of the financial system.

Financial Services fulfill the needs of financial institutions, financial markets and

financial instruments. The smooth functioning of financial system will depend

upon the range of financial services extended by the providers. Financial services

contribute a lot to the efforts of speeding up the process of economic growth and

development. The financial services industry is growing at a very fast rate.

“Financial services in India have witnessed remarkable changes in the recent past

after the implementation of Liberalisation, Privatisation and Globalisation (LPG)

Policy in the economy. Policies of the government, rapid development in the

Information and Communication Technology in the financial services sector

created radical changes in respect of firms, generation of innovative financial

products and financial markets.”1

“In fact, the efficiency of the emerging financial system primarily depends

upon the quality and range of the package of financial services largely provided by

the non-banking financial companies. Although some of these services in India are

at the nascent stage, they represent developments of considerable significance for

the financial systems.”2

Financial services fall broadly into two groups; fund/asset based and fee

based/advisory services. There are different categories of such companies, based

on their principal business –

1. Loan Companies
2. Investment Companies
3. Hire-Purchase Finance Companies

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4. Equipment Leasing Companies

5. Mutual Benefit Finance Companies (Nidhi)
6. Insurance Companies
7. Miscellaneous Non-Banking Companies (Chit)
8. Residuary Non-Banking Companies
9. Housing Finance Companies
10. Stock Broking Companies, and
11. Merchant Banking Company.

Some of the financial services being provided in India are as follows-

I) Merchant Banking
II) Mutual Funds
III) Venture Capital
IV) Credit Rating
V) Lease Financing
VI) Underwriting
VII) Factoring
VIII) Registrars
IX) Security and Exchange Board of India’s Services
X) Stock Exchange Services
XI) Depository Systems, etc.

1.2.1 Organisation of the Financial Service Industry:

Today the importance of financial services is gaining momentum all over

the world. In these days of complex finance, people expect a Financial Service

Company to play a very dynamic role not only as a provider of finance but also as

a departmental store of finance. With the injection of the economic liberalisation

policy into our economy and the opening up of the economy to multinationals, the

free market concept has assumed much significance. As a result, the clients both

corporate and individuals are exposed to the phenomena of volatility and

 (

uncertainty and hence they expect the financial service company to innovate new

products and services so as to meet their varied requirements.

“Historically there are four classes of financial service firms: 1) Deposit-

taking firms; 2) Insurance type firms; 3) Investment Companies and 4) Securities

Firms. This classification is based mainly on the kinds of liabilities these firms

issue and the regulatory establishments in most developed countries.”3

“Within each of the four basic classes of firms there are a variety of even

more specialized types of financial service firms. The global revolution and

evolution of the financial services industry in part consists of the formation of

hybrid firms, combining functions of two or more specialized types of firms, and

creation of whole new products and types of firms.”4

A) Deposit-Taking Firms:

Deposit-taking firms raise funds by issuing deposit liabilities. These

liabilities must be redeemed upon demand or upon maturity. Deposit-taking

institutions in most countries are segmented, with different institutions

concentrating to varying degrees in the wholesale or retail markets. Commercial

banks in most countries do both retail and wholesale business. Some deposit-

taking institutions, called “thrifts”, concentrate on a retail business. In some

countries, there are deposit-taking firms that specialize in business financing.

Following are the examples of deposit-taking firms-

i) Commercial Banks
ii) Credit Unions
iii) Finance Companies, etc.

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B) Investment Companies:

Pooling savings and investing them is another ancient social and financial

activity. The goal of savers is to earn higher returns than those on deposits and to

participate in the development of the economy directly by the selection of

securities in particular firms. Following are the examples of Investment

companies-

i) Mutual Funds and Real Estate Trusts

ii) Professional Asset Management and Institutional Investors, etc.

C) Insurance Type Firms:

It includes property and casualty Insurance Companies which enter

contracts promising to compensate insured parties for losses due to accident or

theft and Pension Funds which are managed for the benefit of pension fund

participants by professional asset managers.

D) Securities Firms:

Securities are financial claims that can be bought and sold. Nearly all

securities are some kind of stock or bond. They are issued by corporation and

government to raise funds. Some of these firms are –

i) Investment Banks: They are the specialists to assist corporate and

government borrowers requiring funds in going to securities markets.

ii) Brokers and dealers: Brokers find buyers for sellers or sellers for buyers

where as a dealer or market maker offers to buy or sell security

immediately so dealers must hold inventories of securities.

iii) Mortgage Banks: Mortgage bankers originate mortgages, mainly home

mortgages, and sell them to investors.

 '

1.2.2 Regulations of Financial Service Firms:

Keeping in view the growing importance of financial service firms, the

Banking Laws (Miscellaneous Provisions) Act, 1963 was introduced to regulate

the Non-Banking Financial Companies in India. To enable the regulatory

authorities to frame suitable policy measures, several committees were appointed

from time to time, to conduct an in-depth study of these institutions within a

given regulatory framework. The committees which deserve specific mention in

this regard are: Bhabatosh Datta Study Group (1991), Financial Companies. To

enable the regulatory authorities to frame suitable policy measures, several

committees were appointed from time to time, to conduct an in-depth study of

these institutions within a given regulatory framework. The committees which

deserve specific mention in this regard are: Vaghul Committee (1987), Bhabatosh

Datta Study Group (1991), Narasimham Committee on Financial System (1991)

and Shah Committee (1992). The Shah Committee, as a follow-up to the

Narasimham Committee, was the first to suggest a comprehensive regulatory

framework for the NBFCs. While endorsing in principle the Shah Committee

framework of regulation of NBFCs, the RBI has implemented a number of its

recommendations and incorporated them in the RBI directions, which regulate

and supervise the working and operation of such companies. The Khanna Group

1996 has suggested a supervisory framework for NBFCs.

The corporate NBFCs are regulated under the provisions of Chapter-III B

of the RBI Act together with the directions issued under them. The

unincorporated bodies are regulated with reference to the provisions of Chapter-

III C of the RBI Act. In pursuance of the recommendations of the Khanna Group,
 /

the RBI Act was amended in January, 1997 incorporating (i) amendment of the

existing sections (45I, 45MA and 58B), (ii) insertion of new sections (45 IA/B/C,

45 JA, 45 MB/C, 45 NB/C, 45QA/B and 58G) and (iii) substitution by new

section (455).

1.3 DEVELOPMENT OF BANKING COMPANIES IN INDIA:

The nature of function and characteristics of Private Financial Institutions

(PFIs), an integrated term given to those NBFCs and UIBs operating in the state,

bear some similarities/resemblances with those of banking companies. The

evolutionary history of the Banking companies in India also has many similarities

with these of Private Financial Institutions. The study of the history and trends of

the growth of banking companies in the country will make it easier to understand

the nature of the growth of these PFIs in the state and will help to predict their

future.

1.3.1 Evolutionary History:

The history of banking dates back to the thirteenth century when the first

bill of exchange was used as money in medieval trade.

Banking in India has its origin in Vedic times, i.e., 2000 to 1400 BC.

Indigenous bankers and money lenders have played a vital role for centuries.

Modern researchers have revealed that the business of banking was perfectly

understood and fairly practiced by the people of ancient India. During the early

Muslim and Mughal periods the indigenous bankers played an important role in

financing trade and lending money to business men and rulers. However, the

development of modern banking in India began with the banking activities

undertaken by the English Agency Houses at Calcutta and Mumbai, which

combined banking with trading.

The modern banks were introduced in our country during the period of

British Rule. The modern banking in India emerged between the eighteenth and

the beginning of the nineteenth centuries when European agency houses erected a

structure of European controlled banks with limited liability. In 1683, the first

bank was set up in Madras by the officers of East India Company. Banking in

India, on modern lines, was started by English Agency Houses in Calcutta and

Bombay. M/S Alexander & Co., one of the leading agency houses of Calcutta,

started the Bank of Hindustan in 1770, which was the earliest European Bank in

India. The bank was wound up in 1832 after the failure of the founder company.

The earliest bank unconnected with any of the agency houses was the bank of

Calcutta set up in 1806 under the active support of Govt. of Bengal, with the East

India Company having contributed Rs. 10 lakhs out of the capital of Rs. 50 lakhs.

This was the first Presidency Bank subsequently renamed as Bank of Bengal in

1809, after having received the formal Charter of Incorporation. The initiative for

setting up camp from the Govt. of Bengal as it needed the help of a bank to

prevent the depreciation of its bills which constituted an important mode of raising

money for financing its wars and which could not be discounted, if required,

except on substantial discount5. The Charter contains several restrictive provisions

on the form and volume of business, with the Government reserving to itself

ample powers of control. The Bank of Bombay was incorporated in 1840 and the

Bank of Madras in 1843, with their Charters containing the structural and

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regulatory framework designed on lines similar to that of the Bank of Bengal. The

three presidency banks had the privilege for the issue of currency notes on a

restrictive scale.

The first joint-stock bank with limited liability, the General Bank of India,

was set up in 1786, but it perished in 1793. The Act of 1860 permitted the

organization of joint-stock banks with limited liability. As a result some big banks

came into existence, prominent among them being the Allahabad Bank (1865), the

Alliance Bank of Simla (1865), the Oudh Commercial Bank (1881), the Punjab

National Bank (1894), and the People’s Bank of India (1901). Up to 1874, 14

joint-stock banks with limited liability were established mostly by the Europeans.

The first fully Indian bank was the Oudh Commercial Bank followed by the

Punjab National Bank and the People’s Bank of India. However, all the banks

established during the period, except the Allahabad Bank and the Punjab National

Bank, failed subsequently.

The next stage of the development of joint-stock banking began in 1906

with the launching of the Swadeshi Movement. As a result the Bank of India

(1906), the Canara Bank (1906), the Indian Bank of Madras (1907), the Bank of

Baroda (1908), the Central Bank of India (1911) and a large number of small

banks were established before the outbreak of First World War in 1914. In 1913,

there were 13 large banks, each having capital and reserves exceeding Rs. 5 lakhs,

and about 500 small banks operating in the country.

As in all other countries, banking in India had its teething troubles. The

banking crises developed from time to time and resulted into failure of many
banks. There was a serious banking crisis between 1913 and 1917 when 87 banks

with a total paid-up capital of Rs. 175 lakhs had failed. Another crisis developed

between 1921 and 1924. The Great Depression of 1930s also affected the banks

adversely. Between 1922 and 1936, no less than 373 banks had collapsed. 372

more banks closed their doors between 1936 and 1940. The banks in Southern

India particularly had failed in a larger number during this period.

The Second World War gave an opportunity of development and expansion

of banking in India. Some of the most important banks established during the war

period were the United Commercial Bank, the Hindustan Commercial Bank, the

Hindustan Mercantile Bank, the Bank of Rajasthan, the Bank of Maharashtra, the

Indian Overseas Bank, and the Dena Bank. But the growth of banking was neither

well planned nor properly controlled. Between 1939 and 1943, 482 banks with a

total paid-up capital of Rs. 94 lakh had failed. These were mostly small banks.

In 1947, the partition of the country put a heavy strain on the banks. The

Reserve Bank and the Government helped the banks facing crisis and some of

these escaped failure. Between 1947 and 1951, the number of bank failures each

year was 37, 45, 53, 45, and 62 respectively.6

“Between 1770 and 1850, agency houses established the Bank of

Hindustan, the Commercial Bank, the Calcutta Bank, the Bank of Calcutta and the

Bank of Bombay. Later, the Commercial Bank and the Calcutta Bank merged to

form the Union Bank.”7

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 “Indian banks came to be established primarily in the wave of Swadesi

Movement in 1905, and the growth of Indian Joint Stock Banks followed an all

together different patterns.”8 They were not allowed to enjoy the advantages of

financing foreign trades instead these Indian banks depended on their own social

roots for financing local trade and industries. The larger of the banks usually

confined their business to the larger land holders, plantation community and others

who posses tangible and marketable security. Smaller banks were generally loan

offices and advanced money to the professional and agricultural classes.

“The banking crisis of 1913-14 appeared to be the first occasion when the

issue of Government’s duties and responsibilities in such circumstances was

raised. In the four years following 1913, eighty seven banks with over half of the

total paid up capital had failed.”9 The authorities were constrained to accept a

certain measure of responsibility by playing interest free Government balances at

the disposal of Presidency banks to enable them to help banks in temporary

difficulties.

“The sudden boom of investment in the 1900s, led to the emergence of

leading joint stock banks such as the Punjab National Bank (1895), the Bank of

India (1906), the Indian Bank (1907), the Bank of Baroda (1909), Central Bank of

India (1911), and the Union Bank of India (1919). The major function of these

banks was to finance foreign trade while domestic trade was largely handled by

the Multani shroffs and moneylenders.”10

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 “Between 1941 and 1945, the number of banks rapidly increased from 473

to 737 but these banks suffered from certain limitations such as inadequate capital

structure and unsound methods of operations and management. To overcome these

limitations, the government, in consultation with the RBI, enacted the Banking

Companies Act in 1949. Through elimination and mergers, the number of banking

institutes was reduced.”11

“Between 1947and 1969, the banks were under private ownership of the

Maharajas, or Kings, of the princely states of India. These banks used to serve rich

families and industrial houses and this narrowed the growth of banking system.

The RBI accelerated the task of consolidation in 1960, when the scope of the

Banking Companies Act was widened. This compulsory reconstruction and/or

merger of weak units with sound ones led to a decline in the number of banks from

548 in 1947 to 89 in 1969.”12

1.3.2 Important Milestones in Banking Development:

The most important events in the evolutionary history of Indian banking

system are given bellow. These are the milestones in the development of banking

in the country. These events led to the step by step development into the present

organized banking and financial system in the country.

1.3.2.1 Establishment of RBI:

While the need for a unified and central authority in the matter of

regulation and supervision of the currency and banking system came to be

recognized from time to time, the decision to have one continued to be postponed

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on one account or another. In the wake of crisis of 1860s, the Secretary and

Treasurer of Bank of Bengal, G. Dickson, came out with a scheme of

amalgamating the three Presidency Banks. The proposal did not find favour with

the government on the ground that its influence would overshadow that of the
13
government itself. The matter was again revived through the plea put forth by

Everand Hambro in his note appended to the Fowler Committee (1898), but it was

put in cold storage on the ground of practical difficulties.

Within a decade thereafter, there was a revival of discussion favouring the

establishment of a central bank, motivated largely by the interests of the

mercantile and financial community of the United Kingdom. While the

government did not take any definite lead in the matter, the Chamberlain

commission (1913) devoted a good deal of attention to it. The first definitive

proposal emerged when in the wake of the recommendations of the Hilton Young

Commission (1926) the gold standard and the Reserve Bank of India was

introduced in the Legislative Assembly in January 1927 to constitute a new

“Reserve Bank” as a Central Bank of the country.

Reserve Bank of India, the apex bank in the Indian Banking and Financial

System was established in the year 1934 with the passing of Reserve Bank of India

Act, 1934 following the recommendations of the Hilton Young Commission and

started commencing its operations from April 1, 1935. In 1935, by this Act, RBI

was constituted to- (i) regulate the issue of bank notes. (ii) organize the system of

commercial banking. (iii) act as a banker to the commercial banks. (iv) conduct

the banking and financial operation of the Government, etc.

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1.3.2.2 Banking Regulation Act, 1949:

Before 1949, there was no separate legislation governing the banking

companies in common with other companies. This Act contained a few provisions

specially applicable to banks. The Banking Companies (Restriction of Branches)

Act, 1946, and the Banking Companies (Control) Ordinance, 1948, covering

particular regulatory aspects paved the way for the enactment of the Indian

Banking Companies Act, 1949. It has come to be renamed as Banking Regulation

Act, 1949 from March, 1966. Important changes in several provisions of the Act

were made from time to time, designed to enlarge or to impart flexibility to the

relative provisions.

The passing of Banking Regulation Act, 1949 was one of the most

important events in the history of Indian Banking. This Act came into force on 16th

March, 1949. The RBI has been empowered by this Banking Regulation Act of

1949 to supervise, control, inspect, etc. the commercial banks, nationalized banks,

private sector banks, foreign banks, regional rural banks, etc. This Act provides

various rules and regulation of establishing, running and expansion of banks in the

country.

1.3.2.3 Establishment of State Bank of India:

State Bank of India (SBI) is the leading nationalized bank in our country. It

has the most widely distributed branches in India and its branches are also being

opened in different countries of the world. The State Bank of India plays the role

of the representative of RBI in places where it has no its branches.

The SBI was established on July 1, 1955 on the recommendation of the

Rural Credit Survey Committee by nationalizing the Imperial Bank of India which
 0

was formed in the year 1921 by merging the three Presidency Banks, i.e., Bank of

Bombay, Bank of Madras and Bank of Bengal. The State Bank of India was

formed with a special responsibility to -

(i) help co-operatives and agriculture finance.

(ii) finance small scale industries and open a network in urban and rural areas.

The State Bank of India (Subsidiary Banks) Act, 1959 enabled the State

Bank of India to take over those State-owned or State-associated banks which

were willing to become its subsidiaries. With the integration of the State Bank of

Bikaner and the State Bank of Jaipur as one unit on January 1, 1963, the number

of subsidiary banks of SBI reduced from 8 to 7. These seven subsidiary or

associate banks, namely, the State Bank of Hyderbad, the State Bank of Bikaner,

the State Bank of Indore, the State Bank of Travancore, the State Bank of Mysore,

the State Bank of Patiala and the State Bank of Saurashtra, together with the State

Bank of India formed which is popularly known as the ‘State Bank Group’ of

banks at present.

1.3.2.4 First Phase of Nationalisation of Banks:

The nationalisation of fourteen major Indian Scheduled banks in the private

sector, having deposits of Rs. 50 crores or over each, as on the last Friday of June

1969, with effect from July 19, 1969, was a historic and momentous event in the

history of Indian banking development. The aggregate deposits of these fourteen

banks, at the end of 1968, amounted to Rs. 2, 741.8 crores, nearly 72 per cent of

the total deposits of the Indian scheduled banks. Their advances amounting to Rs.

1, 743.6 crores were 65 per cent of the total advances. These banks had a total

paid-up capital of Rs.28.5 crores which was about 1per cent of their aggregate
 '

resources. Their owned funds at the end of 1968 amounted to Rs. 66 crores and

their aggregate net profits amounted to Rs. 6.6 crores. These fourteen nationalized

banks were

(1) The Canara Bank

(2) The Bank of Baroda

(3) The Central Bank of India

(4) The Bank of India

(5) The Punjab National Bank

(6) The United Commercial Bank

(7) The United Bank of India

(8) The Allahabad Bank

(9) Syndicate Bank

(10) Indian Overseas Bank

(11) Indian Bank

(12) Bank of Maharashtra

(13) Dena Bank and

(14) Union Bank of India.

Nationalisation was resorted to on the ground that the commercial banking

system did not play its proper role in the planned development of the nation.

There were lots of controversies on the issue of nationalisation of banks.

The bankers and shareholders were not ready to accept the nationalisation, but

after issuing a fresh Ordinance on February 14, 1970 the nationalisation of 14

major banks were confirmed. This Ordinance was replaced by the Banking
 /

Companies (Acquisition and Transfer of Undertakings) Act, 1970, which was

enforced retrospectively with effect from July 19, 1969.

1.3.2.5 Second Phase of Nationalisation of Banks:

In the year 1980 again, six more scheduled commercial banks having

deposits of Rs. 200 crores or more were nationalized under the Banking

Companies (Acquisition and Transfer of Undertakings) Ordinance, 1980. A total

amount of Rs. 18.50 crores was made payable as compensation through the boards

of directors to the shareholders of these six banks. These six banks were:

(1) Andhra Bank

(2) Corporation Bank

(3) New Bank of India

(4) Oriental Bank of Commerce

(5) Punjab and Sind Bank and

(6) Vijaya Bank.

With the nationalisation of six more banks on April 15, 1980, altogether

there were 28 public sector banks (comprising the SBI and its 7 subsidiaries and

20 nationalized banks) excluding Regional Rural Banks. But later on it was

reduced to 27 due to the merger of the New Bank of India with the Punjab

National Bank in September 1993 as it was making losses during the past four

years. After the nationalisation of major banks the branch expansion gained

momentum and the Indian banking System has recorded rapid progress.

In addition to the above events in the history of evolution of banking in

India, Narasimham Committee Report on the Banking System in India was

another important milestone. Though, most of its recommendation was

controversial and stiff opposition came from bank unions and political parties in

the country, the Government of India accepted all the major recommendations of

Narasimham Committee and started implementing them straight away. The

recommendation of Narasimham Committee, 1991 were revolutionary in many

respects.

With the introduction of New Economic Reforms in 1991 in the country,

there came the Liberalization of banking sector. With the liberalization of this

sector, many foreign and Indian private banks are allowed to enter into the sector

and to operate in the country. With the coming up of these foreign and Indian

private banks, there is huge competition between nationalized banks and private

and foreign banks resulting into a great change and improvement in banking

technology, financial products and customer care services.

1.4. BANKING PROFILE OF NORTH EAST INDIA AND MANIPUR:

The Private Financial Institutions, NBFCs and UIBs, are existing in the

country as well as in this particular region because of the gaps in the operation of

banks as well as in providing their financial services

Table No.1.1
Households Availing Banking Services
Households Rural Urban
Total Percentage Total Percentage
(Crore) (Crore)
Total Numbers 13.80 - 5.40 -
Nos. availing banking services 4.20 30.10 2.70 49.50
Source: Table H-13 Census of India 2001.

There is still a larger population of the country which could not get the

banking services for either one or the other reason. Although a higher percentage
of urban India uses banking services, in terms of number of households, it is far

lesser than in rural India. Because of these reasons these PFIs are successfully

operating in both the rural as well as urban areas of the country. So, it has been felt

the need to study the banking profile of the North Eastern Region and Manipur.

1.4.1 Banking Profile of NE India:

The North East India, with a land mass of 2,55,059 sq. km ( 9 percent of

country’s total land mass), hosts a population of 38,539 million as per 2001 census

and support 3.75percent of India’s population. However, as the North Eastern

States are dominantly rural, so, out of India’s total rural population of 741,660,

293 in2001 North Eastern States’ share of rural population is 4.38 percent. In case

of urbanization, all North Eastern State except Mizoram are behind national

average. Assam is the most populous state with least urbanization and Mizoram is

the least populous state with highest urbanization in the region.

As per report of Centre for Monitoring Indian Economy (CMIE), the

selected indicators for the levels of development of all states and districts of India

with all criteria taken together, India is given the value of 100, rest of the states

related to national average of 100. The North Eastern States show a remarkable

uniformity, values ranging 54-55 marks only. However, Arunachal Pradesh is the

only state having a little higher value with 66 marks.

The structure of banking sector in North East India can be classified into

three sectors i.e. commercial banks, regional rural banks and cooperative banks.

There are at present 1229 commercial bank branches comprising of State

Bank of India, Associate Bank of SBI and 21 other scheduled commercial banks,
643 RRB branches and 229 cooperative bank branches spreading all over the

region as on March, 2004. Out of the total number of scheduled commercial banks

820, 131, 93, 63, 49, 47 and 26 were functioning in the states of Assam,

Meghalaya, Tripura, Nagaland, Arunachal Pradesh, Manipur and Mizoram

respectively. Thus, SBI is the lead bank in the region with 448 branches out of

1229 scheduled commercial banks in the region. The detailed information

regarding banking profile of the region can be seen from the table 1.2.

Table 1.2
Distribution of Bank Branches in North East India
as on 31st March, 2004
States SCBs RRBs Coop. Total Bank CD
Banks Branches Ratio
Arunachal Pradesh 49 17 31 97 25.4
Assam 820 398 68 1286 32.5
Manipur 47 29 15 91 34.5
Meghalaya 131 51 39 221 30.6
Mizoram 26 53 10 89 39.3
Nagaland 63 8 21 92 17.9
Tripura 93 87 45 225 29.2
North East Total 1229 643 229 2101 31.2
Sources: (i) Basic Statistics of North Eastern Region, 2006, pp 342
(ii)Reserve Bank of India, Action Points Matrix, July 2006.

There are 18,277 population per branch of bank as on 31st March, 2004

which has been improved slightly in the year 2006 with 17,819 population per

bank branch against the all India level data of 14,777 population per bank branch

as on 30th June 2006 as shown in table 1.3. Thus, except three states i.e. Arunachal

Pradesh, Meghalaya and Mizoram, all the remaining states of the regions are

lacking in number of bank branches as per the coverage of population per branch.
 Table 1.3
Population per Branch of Bank in NE India
States Populations as No. of Populatio No. of Population
per 2001 SCB n per SCB per Bank
Census Branches Bank Branche Branch
(2004) Branch s (2006)
1 2 3 4 5 6
Arunachal 10,91,117 97 11,249 98 11,134
Pradesh
Assam 2,66,38,407 1286 20,714 1323 20,135
Manipur 22,93,896 91 25,208 93 24,665
Meghalaya 23,06,069 221 10,434 229 10,070
Mizoram 8,91,058 89 10,011 93 9,581
Nagaland 19,88,636 92 21,616 93 21,383
Tripura 31,91,168 225 14,183 226 14,120
NE Total 3,84,00,351 2101 18,277 2155 17,819
All India 1,02,87,00,000 NA NA 69,616 14,777
Sources: Basic Statistics of NE Region, 2006, pp 342

The table 1.4 also represents the state wise distribution of commercial bank

branches in North East India. Among the eight states that Assam is having the

highest number of bank branches with 1,243 as on 30th June 2006, with an

increased of eight bank branches from that of June 2006; followed by Meghalaya

with 185 and Tripura with 181 respectively. Sikkim accounts 7(seven) new bank

branches opened in 2004-05 and Assam with 12 more new bank branches during

the same period. Manipur is having the highest number of population covered by

per bank branch with 33,000 and least one is Sikkim with 10,000 only, which is

much lower as compared with the population coverage of the country and of the

region which are 16,000 and 22,000 respectively.

 Table 1.4
State-wise Distribution of Commercial Bank Branches in NE India
Region No. of Branches No. of Branches Average
th
as on 30 June Opened During Population per
Bank Branch
(in ‘000)
2005 2006 July July’05 June June
’04 to to June 2005 2006
June ‘06
‘05
1 2 3 4 5 6 7
Arunachal 67 69 -- 2 17,000 17,000
Pradesh
Assam 1,235 1,243 12 10 23,000 23,000
Manipur 77 77 1 -- 33,000 33,000
Meghalaya 185 189 1 4 13,000 13,000
Mizoram 79 79 -- -- 12,000 12,000
Nagaland 73 74 -- 1 29,000 29,000
Sikkim 56 56 7 -- 10,000 10,000
Tripura 181 182 -- 1 19,000 19,000
NE India 1,953 1,969 21 18 22,000 22,000
Source: Indian Institute of Banking and Finance

State-wise coverage of banking services in NE India is presented in Table

1.5. Among the eight different states of the region, Manipur is having the least

number of populations covered by the bank with only 9 people out of 100, which

means 91 persons are yet to get the services of banks. Here, one of the

Government of India’s recent reforms i.e. the Financial Inclusion must be

implemented through various SHG-BLP and other NGOs in the state along with

other states of the region.

Sikkim is having the highest coverage of 24 persons out of 100 population,

followed by Tripura and Meghalaya with 21 each, Assam and Arunachal Pradesh

with 20 each and 14 persons in Mizoram. All the states of the region must give
 1

more efforts to bring financial inclusion to those who are living in outreached

areas.

Table 1.5
State-wise Coverage of Banking Services in North East India
States Current Savings Total No. Total No. of
Account Account of Population Accounts/100 of
Accounts 2011 Population
Census
1 2 3 4 5 6
Arunachal 10,538 2,09,073 2,19,611 13,82,611 20
Pradesh
Assam 3,78,729 50,71,058 54,49,787 3,11,69,272 20
Manipur 12,514 2,00,593 2,13,107 27,21,756 9
Meghalaya 24,305 4,58,779 4,83,084 29,64,007 21
Mizoram 3,441 1,17,885 1,21,326 10,91,014 14
Nagaland 13,819 1,95,452 2,09,271 19,80,602 11
Sikkim 4,097 1,25,365 1,29,462 6,07,688 24
Tripura 33,257 6,38,241 6,71,498 36,71,032 21
NE India 4,80,700 70,16,446 74,97,146 4,55,87,982 19
Source: (i) Indian Institute of Banking and Finance. (ii)Census of India, 2011

1.4.2 Banking Profile of Manipur:

Manipur is situated in extreme north eastern corner of the country

bordering with Myanmar on the east, Nagaland on the north, Mizoram on the

south and Assam on the west. It is surrounded by hills in all sides and of the total

area nine tenth is covered with the hilly areas. On the other hand out of 93 existing

bank branches as on 2006, lion shares of banks are spread in Imphal West and

Imphal East districts. Below The table 1.6 given below shows the banking profile

of Manipur spreading in all the nine districts of the state. Imphal West district is

having the highest number of bank branches with 32 scheduled commercial banks,

of which 20 are Associated Scheduled Commercial banks, 5 are RRBs and 7 of

 (

them are banks having cooperative nature in the state with the lowest population

per branches of bank, followed by 11 in Imphal East district and 9 each in two

valley districts i.e. Thoubal and Bishnupur districts.

Table 1.6
Populations per Bank Branch in Manipur
Districts ASCBs RRBs Coop. Total Population Population
Banks Bank as per 2011 per Bank
Branch census Branch
(Provisional)
Imphal West 26 5 7 38 5,14,683 13,544
Imphal East 8 4 4 16 4,52,661 28,291
Thoubal 5 4 2 11 4,20,517 38,229
Bishnupur 3 3 3 9 2,40,363 26,707
Chandel 4 2 -- 6 1,44,028 24,005
Churachandpur 9 1 1 11 2,71,274 24,661
Tamenglong 3 3 1 7 1,40,143 20,020
Senapati 9 4 1 14 3,54,972 25,355
Ukhrul 4 2 1 7 1,83,115 26,159
Total 71 28 20 119 27,21,756 22,872
Sources: (i) SLBC, Manipur, March 2012 (ii) www.censusindia.gov.in

On the other hand, Churachandpur district is having only five bank

branches comprising of three Associated Scheduled Commercial Banks (ASCBs) ,

one RRB and one cooperative bank.rendering services for 2,27,905 population.

Out of the five hill districts, Churachandpur constitutes the highest population per

branches of bank with 45,581 populations. Ukhrul district is another district

having the lowest number of bank branches with only four for a population of 1,

48,778 as per 2001 census resulting in an average population of 35,195 per bank

branch. To cover such a large population in hilly areas is not only the difficult task
 0

but also impossible to get the services being provided by the bank which is a

burning issue of these days that is ‘financial inclusion’.

Among the nine districts, Senapati is the second in having number of bank

branches but being a hilly district the advantages of having the second highest

bank branches is neutralized. Except Imphal West district all the remaining eight

districts are below the national average of population per bank of 14,777 persons.

Fortunately, Imphal West district is covering 13,887 populations per bank as on

2006.

1.5 DEFINING PRIVATE FINANCIAL INSTITUTIONS:

According to Section 45 I(C) of the RBI Act, Financial Institution means a

non-banking institution which carries on as its business or part of its business

activities like granting of loans and advances (lending), acquisition of shares

(Investment), leasing, hire purchases, insurance, conduct of chit fund or

collection of money under any scheme. An institution whose principal business is

agricultural operation, industrial activity, trading or real estate business is not a

Financial Institution. So, it can be said that those Financial Institutions in the

private sector are Private Financial Institutions.

For the purpose of the present study Private Financial Institution is an

integrated term given to NBFCs and UIBs. So, the Private Financial Institutions in

this study mean the Unincorporated Bodies (UIBs) engaged in financial activities

which are registered under Bombay Moneylenders’ Act, 1946 at Manipur and

Non-Banking Financial Companies (NBFCS) which are registered under

Companies Act, 1956 and got the Certificate of Registration (CoR) from Reserve

Bank of India (RBI). Basically these UIBs are moneylenders which have taken the
 '

shape of regulated institutional moneylenders. They are registered at the Registrar

of Societies of the respective states and for the state of Manipur they are registered

at the Registrar of Societies, Government of Manipur, Lamphelpat, Imphal. As per

the above definition, it will be clearer to discuss the Private Financial Institutions

(PFIs) as NBFCs and UIBs.

1.5.1 Private Financial Institutions as NBFCs:

Non-Banking Financial Companies/Intermediaries play a significant role in

the economic development of our country by meeting the credit requirements of

millions of people at the doorsteps on demand without insisting on procedural

formalities unlike commercial banks. They are accessible at any time without any

formalities according to the convenience of the needy of credit.

Non-Banking Financial Company has been defined vide clause (b) of sub

section 45 I of Chapter IIIB of RBI Act 1934 as (i) a financial institution, which is

a company; (ii) a non-banking institution, which is a company and which has as its

principal business the receiving of deposits under any scheme or arrangement or in

any other manner and lending in any manner; (iii) such other non-banking

institutions or class of such institutions as the bank may with the previous

approval of the Central Government and by notification in the official Gazette,

specify.

Report of Banking Commission 1972 popularly known as Saraiya

Commission defined ‘NBFI’ as – “NBFI is a generic term in economic literature

and refers to financial institutions whose liabilities are not accepted or used as

means of payment (or money) in the settlement of debts.”14

) -" "3 + 7 !"** " '( =- ->

 /

NBFC has been defined under clause (XI) of paragraph 2(1) of Non-

Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)

Directions, 1998, as: ‘non-banking financial company’ means only the non-

banking institution which is a loan company or an investment company or a hire-

purchase finance company or an equipment leasing company or a mutual benefit

finance company.

1.5.1.1 Types of NBFIs:

NBFIs can be classified into different segments depending upon the type of

activities they undertake. The important ones are as follows:

1. Equipment Leasing Company:

Any company which is carrying on as its principal business as the activity

of leasing equipment or the financing of such activity is termed as Equipment

Leasing Company.

2. Hire-Purchase Finance Company:

Any company, which is carrying as its principal business as hire purchase

transaction or the financing of such transactions is known as Hire-purchase

Finance Company.

3. Housing Finance Company:

Any company which is carrying on as its principal business the financing

of acquisition or development of plots of land in connection therewith is called

Housing Finance Company.

4. Investment Company:

Any company which is carrying on as its principal business the acquisition

of securities is termed as Investment Company.

5. Loan Company:

It is a company which is carrying on as its principal business the providing

of finance whether by making loans or advance or otherwise for any activity

other than its own. This category does not include an equipment leasing or hire

purchase finance company or a housing finance company.

6. Mutual Benefit Finance Company (Nidhi Company):

It is those companies which are notified by the Central Government as a

Nidhi Company under section 620-A of the Companies Act 1956.

7. Mutual Benefit Company (Potential Nidhi Company):

A company which is working on the lines of a Nidhi Company but has not

yet been declared by the Central Govt. as minimum NOF of Rs. 10 lakh, has

applied to the RBI for certificate of Registration (COR) and also to the

Department of Companies Affairs (DCA) for being notified as Nidhi Company

and has not contravened directions / regulations of RBI / DCA.

8. Non - Banking Financial Company:

Any hire purchase finance, housing finance, investment loan, equipment

leasing or mutual benefit financial company, but does not include an insurance

company or a stock Exchange or a stock broking company.

9. Miscellaneous Non-Banking Company:

A company carrying on all or any of the following types of business:

(1) Managing, conducting or supervising as a promoter, foreman or agent of any

transaction or arrangement by which the company enters into an agreement with a

specified number of subscribers that everyone of them shall subscribe a certain

sum in installments over a definite period and that everyone of such subscribers
shall in his turn as determined by lot or by auction or by tender or in such other

manner as may be provided for in the agreement be entitled to the prize amount.

(2) Conducting any form of chit or Kuri which is different from the type of

business referred to in sub paragraph (9.1) above.

(3) Undertaking / carrying on or engaging on or executing any other business

similar to the business referred to in sub paragraph ( 9.1) and (9.2).

10. Residuary Non-Banking Company:

A company which receives any deposit under any scheme or arrangement,

by whatever name called, in one lump-sum or in installments by way of

contributions or subscription or by sale of units of certificates or other instruments

or in any other manner and which, according to the definitions contained in the

Non-Banking Financial Companies in the (Reserve Bank) Directions, 1977 or the

Miscellaneous Non Banking Companies (Reserve Bank) Directions, 1977, as the

case may be, is not

i) an equipment leasing company

ii) a hire purchase finance company

iii) a housing finance company

iv) an insurance company

v) an investment company

vi) a loan company

vii) a mutual benefit financial company, and

viii) a miscellaneous non-banking company.

1.5.1.2 Regulatory Authorities of NBFCs:

All the NBFCs are not regulated by the RBI. The regulatory authorities of

different types of NBFCs are shown in Table1.7.

Table1.7
Regulatory Authorities of NBFCs
Sl. Type of NBFCs Name of Regulatory Authority
No.
1 Equipment Leasing Companies RBI
2 Hire-Purchase Finance Companies RBI
3 Loan Companies RBI
4 Investment Companies RBI
5 Residuary Non-Banking Companies RBI
6 Misc. Non-Banking Companies RBI and Registrar of Chits of the
(Chit Funds) concerned States
7 Mutual Benefit Finance companies Department of Company Affairs,
(Nidhis and Potential Nidhis) GoI
8 Micro Finance Companies Department of Company Affairs,
GoI
9 Housing Finance Companies NHB
10 Insurance Companies Insurance Regulatory and
Development Authority of
India(IRDA)
11 Stock Broking Companies SEBI
12 Merchant Banking Companies SEBI

Source: Report on Trend and Progress of Banking in India, 2003-04, RBI, Page
147.

1.5.2 Private Financial Institutions as Unincorporated Bodies:

The Unincorporated Bodies (UIBs) dealing with financial services which

are also termed as ‘Petty Finance Corporations’15 play a significant role in the

economic development of our country by meeting the credit requirement of

millions of people at the door steps on demand without insisting on procedural

formalities unlike commercial banks, regional rural banks and co-operative banks.
They are accessible at any time without any formalities according to the

convenience of the needy of credit.

“The UIBs are partnership concerns that’s paid up capital is less than Rs.1

lakh. Major source of their funds is fixed deposits from the public. Such UIBs are

spread throughout the length and breadth of the country and their number is

reported to be very large. They carry the name like “. . . . . . Finance and

Investments” or “. . . . . . . . . . . . Finance Corporation” or “. . . . . . . . . . . Pvt. Ltd.”

or “. . . . . . . . . . . . . . . .& Co.” and thus gives a picture of an incorporated body in

the minds of the innocent depositors. Though these institutions were in existence

since 1960s, they made rapid progress after 1991. The Banking Commission

(1972) and all the subsequent committees have noticed that these institutions are

heavily concentrated on states like Gujarat and Karnataka. These UIBs are

registered with Registrar of Societies. In 1997 when the NBFIs started collapsing

after the CRB fiasco, these UIBs also tumbled down. Most of these institutions

were of the nature of ‘fly-by-night’ operators.”16

According to Reserve Bank of India Act, 1934 UIBs are individuals, firms

or associations of individuals which are not incorporated/registered under

Companies Act, 1956 whose business either wholly or partly includes any of the

activities of financing, or acquisition of securities, letting or delivering of goods

under hire purchase agreement, managing, conducting or supervising, as foreman

of chits or kuries or whose principal business is that of receiving deposits or

lending in any manner.

1
, $
 1

“There is a financial sector outside the banking sector generally known as

the Non-Banking Financial Companies (NBFCs), NBFCs are the financial

institutions that provide banking services, but do not hold banking licenses. Those

Bodies that are not registered under the Companies Act are referred as the

Unincorporated Bodies (UIBs).”17 Since these Bodies have greater flexibility in

their operations, they are able to reach small investors in attracting their surplus

funds by way of public deposits and offering various incentives and better returns

to them. Moreover, the constrains faced by the formal financial system in reaching

rural /poor households and small business in a flexible and hassle free manner led

almost as a natural consequence to emergence of various types of these bodies,

which range from fairly size NBFCs to much smaller Unincorporated Bodies. The

UIBs have now become an important component of our financial sector. The easy

procedure in their credit facilities and their offer of attractive rates of interest on

public deposit enables their sharp growth over the years. The mushroom growth of

these Bodies in the last decade brought about some unsavory elements to the

sector and fly by night operators started betraying the confidence of the depositors

that had placed on them. This UIBs are being registered with the registered of

societies, Manipur under the Bombay Money Landers Act, 1946, since 2005.

1.6 PRIVATE FINANCIAL INSTITUTIONS IN MANIPUR: AN

OVERVIEW

The Private Financial Institutions are assuming greater importance and

found to be key financial institutions among Banking and other financial

institutions in the socio-economic development of Manipur in particular and

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 (

country as a whole in general. Besides nationalized commercial banks, co-

operative banks, regional rural banks, public financial institutions and other

government funding agencies, these Private Financial Institutions have been

playing a significant role in the socio-economic development of the state through

their different financial services and financial products to different segments of

people of the state.

The wide gap of relation between banks and their customer leads to seek

the financial services particularly credit lending and hire-purchase services from

these Private Financial Institutions especially in four valley districts of Manipur.

There was large scale mushroom growth of these Private Financial Institutions

during the middle part of 1980s in Manipur. Most of these institutions were

accepting deposits as well as lending finance to the needy at the higher rate of

interest. Most of them were unregistered institutions and in this process many of

them have closed down by exploiting innocent and illiterate depositors and many

complaints had been lodged too. To regulate and control this mushroom growth of

Private Financial Institutions, Finance Department, Government of Manipur had

introduced an Act under section 3 of the Bombay Moneylenders’ Act, 1946 as it

being extended to Manipur. The state Government had appointed the Registrar of

Co-operative Societies, Manipur, Additional Registrar of Co-operative Societies,

Manipur and Assistant Registrar of Co-operative Societies (C&B), Manipur as

Registrar General of money lenders, Registrar of Moneylenders and Assistant

Registrar of Moneylenders respectively. With the registration requirement under

this Act, all the private financial institutions of the state must have to act as money

lenders providing money lending or credit lending on various schemes with the
 0

interest rate ceiling of 3 per cent per month without accepting deposit from the

public. A large range of people including government employees, businessmen,

small vegetable vendors and security personnel are directly or indirectly

benefitting from their financial services.

Table 1.8
PFIs in Manipur Registered under Bombay Moneylender Act
Year No. of PFIs Cumulative Total
2005 17 17
2006 16 33
2007 9 42
2008 8 50
2009 11 61
2010 9 70
2011 4 74
2012 4 78
Total =61
Source: Registrar Co-operative Societies, Manipur

At present there are 78 such registered Private Financial Institutions which

are treated as UIBs under Bombay Moneylenders’ Act, 1946 in Manipur. Of these

registered PFIs, 17 of them were registered in 2005, 16 were in 2006, 9 were in

2007, 8 in 2008, 11 in 2009, 9 in 2010, 4 of them were registered during the year

2011 and another 4 as on 31st Dec., 2012.

On the other hand, there were only two ‘B’ category Non-Banking

Financial Companies, namely, the City Commercial Investment Co. Pvt. Ltd.,

Uripok and North Eastern Trade-Finance & Investment Company Ltd.,

Khuyathong which cannot accept public deposits as per RBI’s guidelines.

 '

Recently, the Certificate of Registration (CoR) of North Eastern Trade-Finance &

Investment Company Ltd. has been cancelled vide RBI order dated 12.6.2009. A

very recent development in the NBFC sector of the state is that one of the most

popular and most extensively expanded Private Financial Institution, UNACCO,

has done the acquisition of an NBFC based at Guwahati, Assam. Besides these

NBFCs as mentioned above there are numerous Unincorporated Bodies (UIBs)

which are engaged in financial services by either registering themselves under

Moneylenders’ Act/ Indian Partnership Act/ Societies Registration Act or

unregistered bodies with the main business of providing credit facilities to various

segments of people of the state. They are observed to be doing yeoman service to

the people by providing loans.

“Apart from these NBFCs and UIBs, Pyramidal Structure Money

Circulation Scheme, various schemes floated by Questnest, doing their business in

the state as their registration is other state based, the State Government has no

interference and some of them may be fly by night operators. The public have lost

their hard earned money by financing in Golden Forest, Veerbhumi, Aditya

Financing, etc. Although the State is well equipped with the Chit Fund Act and

Rules, Prize Chit and Money Circulation Banning Act and Rules, Moneylenders’

Act and Rule, Economic Offence Wing in the Police Department, etc., being a

remote corner of the country many other State based companies try to exploit by

virtue of the loopholes available under this or that.”18

“ . . . . . . . . . . . due to the lack of knowledge either on the individual or the

registering authorities there were cases of UIBs in the state using the words

0
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 /

‘bank’, ‘banker’, ‘banking’ and ‘Ltd .’ To be named some Imphal Commerce

Bank Ltd., United Manipur Bank, Loyalam Bank, Women Commerce and

Industry Bank Ltd., City Commercial Bank Ltd., Lainingthou Ltd., etc.”19 It may

be mentioned that the use of word ‘Limited’ without registration under Companies

Act is violation of Section 631 of the Companies Act. As per the report of DIG of

the state it is cleared by now that these Private Financial Institutions have taken

out these above mentioned words from their names.

The present research work entitled “The Role of Private Financial

Institutions (NBFCs & UIBs) in the Socio-Economic Development of Manipur: A

Case study of Imphal East and West Districts” is being confined to the NBFCs

licensed by the RBI and UIBs registered under Moneylenders’ Act at the Registrar

of Societies, Lamphelpat, Imphal, Manipur. The various thrift and credit

cooperative societies, money circulation schemes, multi level marketing schemes

or pyramid structure money circulation scheme, marup and tender (local names

given to those financial activities which are much similar with the activities of a

chit fund) or chit, unregistered local moneylenders, local gold mortgagers and

other state based financial institutions are kept out of the scope of this study.

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