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Regulation of Non Banking financial companies in India. A critical analysis of its role in Economic development
by Irwin Cheema on August 4, 2011 Non-banking Financial Institutions carry out financing activities but their resources are not directly obtained from the savers as debt. Instead, these Institutions mobilise the public savings for rendering other financial services including investment. All such Institutions are financial intermediaries and when they lend, they are known as Non-Banking Financial Intermediaries (NBFIs) or Investment Institutions. E.g. Unit Trust of India, Life Insurance Corporation (LIC), General Insurance Corporation (GIC). Apart from these NBFIs, another part of Indian financial system consists of a large number of privately owned, decentralised, and relatively small-sized financial intermediaries Most work in different, miniscule niches and make the market more broad-based and competitive. While some of them restrict themselves to fund-based business, many others provide financial services of various types. The entities of the former type are termed as non-bank financial companies (NBFCs). The latter type is called non-bank financial services companies. Meaning Non-banking Financial Companies (NBFCs) play a vital role in the context of Indian Economy. NBFCs are the intermediaries engaged in the business of accepting deposits and delivering credit. A non-banking financial company is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business, but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property.

They play very crucial role in channelizing the scarce financial resources to capital formation. NBFCs supplement the role of the banking sector in meeting the increasing financial need of the corporate sector, delivering credit to the unorganized sector and to small local borrowers. NBFCs have more flexible structure than banks. Their flexible structure helps in broadening the market by providing the saver and investor a bundle of services on a competitive basis. NBFCs at present providing financial services partly fee based and partly fund based. NBFCs differ widely in their ownership: Some are subsidiaries of large Manufacturers (e.g., T.V. Motors T.V. Finances and Services Ltd). Many others are owned by banks such as ICICI Banks, ICICI Securities Ltd, SBI Capital Market Ltd, Muthoot Bankers Muthoot Financial Services Ltd a key player in Kerala financial services. Other financial institutions are IFCIs IFCI Financial Services Ltd or IFCI Custodial Services Ltd. Some of the prominent NBFCs in India are <![if !supportLists]>1. <![endif]>Infrastructure Development Finance Corporation (IDFC) <![if !supportLists]>2. <![endif]>Rural Electric Corporation ( REC) <![if !supportLists]>3. <![endif]>Industrial Finance corporation of India (IFCI ) <![if !supportLists]>4. <![endif]>GE Capita DEFINITION Non banking Financial Company has been defined under section 45 I(f) of the Reserve Bank Of India as <![if !supportLists]>i) <![endif]>a financial institution, which is a company; <![if !supportLists]>ii) <![endif]>a non-banking institution, which is a company and which has its principal business the receiving of deposits under any scheme or lending in any manner. <![if !supportLists]>iii) <![endif]>such other non-banking institutions , as the bank may with the previous approval of the central government and by notification in the official gazette, specify.

It is compulsory for a NBFC to get itself registered with the RBI as a deposit taking company. This NBFC registration authorizes it to conduct its business as an NBFC. For the registration with the RBI, a company incorporated under the Companies Act, 1956 and eager of commencing business of non-banking financial institution, should have a minimum net owned fund of Rs 25 lakh. A company is treated as a NBFC if its financial assets are more than 50% of total assets (netted off against intangible assets) and income from financial assets is more than 50% of the gross

income as evidenced from its last audited balance sheet. Both these criteria are required to be fulfilled as the determinant factor for principal business of a company. NBFCs have raised large amount of resources through deposits from public, shareholders, directors, and other companies and borrowing by issue of non-convertible debentures, and so on.

NBFCs are different from Banks <![if !supportLists]>1. <![endif]>NBFCs cannot accept demand deposits (Demand deposits are funds deposited in an institution, that are payable immediately on demand e.g.: Savings account, Current account etc). <![if !supportLists]>2. <![endif]>A NBFC cannot issue cheques, to their customers and is not a part of the payment and settlement system. <![if !supportLists]>3. <![endif]>Deposit insurance facility of Deposit Insurance Credit Guarantee Corporation (DICGC) is not available for NBFC depositors. <![if !supportLists]>4. <![endif]>They are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60months. <![if !supportLists]>5. <![endif]>They cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. (Currently the ceiling rate is 12.5%) <![if !supportLists]>6. <![endif]>They cannot offer gifts/incentives or any other additional benefit to the depositors. <![if !supportLists]>7. <![endif]>They should have minimum investment grade credit rating, from the credit rating agencies.

Classification OF NBFCs

NBFCs can be classified into different segments depending on the type of activities they undertake: <![if !supportLists]>1. <![endif]>Hire-Purchase Company- It is a company which carries on as its principal business, hire purchase transaction or the financing of such transactions. <![if !supportLists]>2. <![endif]>Investment Company-It means any company which carries on as its principal business the acquisition of securities.

<![if !supportLists]>3. <![endif]>Loan Company- It is a company which carries on as its principal business, the providing of finance whether by making loans or advances or otherwise for any activity other than its own. <![if !supportLists]>4. <![endif]> Mutual Benefit Finance Company- It means any company which is notified by the central government under section 620A of the Companies Act, 1956. <![if !supportLists]>5. <![endif]>Equipment Leasing Company-It is a company which carries on as its principal business, the business of leasing of equipments or the financing of such activity. <![if !supportLists]>6. <![endif]>Residuary Non-banking Company- It is a company which receives deposits under any scheme by way of subscriptions/ contributions and does not fall in any of the above categories. E.g. Sahara Mutual Fund was the first RNBC started in India. <![if !supportLists]>7. <![endif]> Miscellaneous Non- banking Company- It is a company which collects from specified number of subscribers periodically and in turn distributes the same as prizes amongst them. Any other form of chit is also included in this category. <![if !supportLists]>8. <![endif]> Housing Finance Company- It is a company which carries on as its principal business, the financing of the acquisition or construction of houses including the acquisition or development of plots of land for construction of houses. <![if !supportLineBreakNewLine]> <![endif]> Re-classification of NBFCs From December 6, 2006 NBFCs registered with RBI have been re-classified as

<![if !supportLists]>1. <![endif]>Asset finance Companies (AFC) - AFC are financial institutions whose principal business is of financing physical assets such as automobiles, tractors, construction equipments material handling equipments and other machines. E.g.: Bajaj Auto Finance corp. , Fullerton India etc <![if !supportLists]>2. <![endif]>Investment Companies (IC) - ICs generally are involved in the business of shares, stocks, bonds, debentures issued by government or local authority that are marketable in nature. E.g.: Stock Broking Companies, Gilt firms. <![if !supportLists]>3. <![endif]>Loan Companies (LC) - LCs are loan giving companies which operate in the business of providing loans. These can be housing loans, gold loans etc. E.g.: Mannapuram Gold Finance, HDFC Factors contributing to the Growth of NBFCs

A number of factors have contributed to the growth of NBFCs in India. Comprehensive regulation of the banking system and absence or relatively lower degree of regulation over NBFCs has been one of the main reasons for their growth. During recent years regulation over their activities has been strengthened. The merit of non-banking finance companies lies in the higher level of their customer orientation. They involve lesser pre or post-sanction and requirements, their services are marked with simplicity and speed and they provide tailor-made services to their clients. NBFCs cater to the needs of those borrowers who remain outside the purview of the commercial banks as a result of the monetary and credit policy of RBI. In addition, marginally higher rates of interest on deposits offered by NBFCs also attract a large number of depositors. The growing role of NBFCs were recognized by the Second Narasimham Committee (1998), beside Vasudev Committee (1996) and Khanna Committee (1995) Regulation of NBFCs In 1960s, the Reserve Bank made an attempt to regulate NBFCs by issuing directions to the maximum amount of deposits, the period of deposits and rate of interest they could offer on the deposits accepted. Norms were laid down regarding maintenance of certain percentage of liquid assets, creation of reserve funds, and transfer thereto every year a certain percentage of profit, and so on. These directions and norms were revised and amended from time to time. In 1997, the RBI Act was amended and the Reserve Bank was given comprehensive powers to regulate NBFCs. The amended Act made it mandatory for every NBFC to obtain a certificate of registration and have minimum net owned funds. Ceilings were prescribed for acceptance of deposits, capital adequacy, credit rating and net-owned funds. The Reserve Bank also developed a comprehensive system to supervise NBFCs accepting/ holding public deposits. Directions were also issued to the statutory auditors to report non-compliance with the RBI Act and regulations to the RBI, Board of Directors and shareholders of the NBFCs. The Task Force constituted by Government of India under the Chairmanship of Shri C.M. Vasudev submitted its report on October 28, 1998, after reviewing the existing regulatory framework for NBFCs. The Govt. of India framed the Financial Companies Regulation Bill, 2000, to implement the recommendations requiring statutory changes, as also consolidate the law, relating to NBFCs and unincorporated bodies with a view to ensuring depositor protection. According to this bill, all NBFCs will be known as Financial Companies instead of NBFCs. NBFC regulated by RBI act, 1934 <![if !supportLists]>1. <![endif]>After RBI amendment act 1997, registration of NBFC is mandatory. To obtain the certificate of registration it need to have net owned fund of Rs. 25 lakhs or such other amount, not exceeding Rs. 200 lakhs as specified by RBI. <![if !supportLists]>2. <![endif]>For certificate of registration NBFC has to make an application to RBI as prescribed by it. If NBFC is already in existence on the commencement of the RBI (Amendment) act1997 then an application for registration is to be made before the expiry of 6 months from such commencement and such NBFC can carry on its business until a

certificate of registration is issued to it or rejection of application for registration is communicated to it. <![if !supportLists]>3. <![endif]>NBFC is in existence on the commencement of the RBI (amendment) act 1997 and having NOF less then Rs. 25 lakhs is given 3 year from such commencement to fulfil the requirement and can continue its business. If further period is required then after recording the reason in writing RBI extends the time period to an additional 3 years with the condition that such company will inform the RBI within 3 months about the fulfilment of this requirement. <![if !supportLists]>4. <![endif]>For considering the application for registration RBI need to inspect the books of NBFC or otherwise fulfill the prescribed conditions of the RBI. <![if !supportLists]>i) <![endif]>the NBFC is in a position to pay its depositors when claim accrue; <![if !supportLists]>ii) <![endif]>the general character of the management of the NBFC is not prejudicial to the interest of the depositors/public; <![if !supportLists]>iii) <![endif]>it has adequate capital structure and earning prospects; <![if !supportLists]>iv)<![endif]>any other condition specified by Reserve Bank. <![if !supportLists]>5. <![endif]>RBI can cancel the certificate of registration if company does not comply with conditions or fail to carry its business. <![if !supportLists]>6. <![endif]>NBFCs have to invest in unencumbered approved securities, valued at a not exceeding current market price, an amount which, at the close of business on any day, shall not be less than 5.0 percent but not exceeding 25.0 percent specified by RBI, of the deposits outstanding at the close of business on the working day of the second preceding quarter. <![if !supportLists]>7. <![endif]>Every NBFC shall create a reserve fund and transfer thereto a sum not less than 20.0 per cent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared. Such fund to be created by every NBFC irrespective of the fact whether it accepts deposits or not. Further, no appropriation can be made from the fund ft purpose without prior written approval of RBI. Regulations on NBFCs taking Deposits <![if !supportLists]>1. <![endif]>All NBFCs are not entitled to accept public deposits. Only those NBFCs holding a valid certificate of registration with authorization to accept public deposits can accept/hold public deposits.

<![if !supportLists]>2. <![endif]>New NBFCs are not allowed to raise public deposits for period of two years from the date of registration. After completion of two years, detailed review is taken of the company by the regulator. <![if !supportLists]>3. <![endif]>The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand. <![if !supportLists]>4. <![endif]>NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 12.5 percent per annum. The interest may be paid or compounded at rests not shorter than monthly rests. <![if !supportLists]>5. <![endif]>NBFCs cannot accept deposits from NRI except deposits by debit to NRO account of NRI provided such amount do not represent inward remittance or transfer from NRE/FCNR account. <![if !supportLists]>6. <![endif]>NBFCs with net owned fund (NOF) of less than Rs. 25 lakhs (with or without credit rating) are not entitled to accept public deposits. <![if !supportLists]>7. <![endif]>Evaluation of the quality of management in respect of the promoters/directors is taken into consideration while giving allowance for taking public deposits.

Ongoing Regulations: NBFCs-D (Holding Public Deposits) The NBFCs accepting public deposits should furnish to RBI: <![if !supportLists]> <![endif]>Audited balance sheet of each financial year and an audited profit and loss account in respect of that year as passed in the general meeting together with a copy of the report of the Board of Directors and a copy of the report and the notes on accounts furnished by its Auditors. <![if !supportLists]> <![endif]>Statutory Annual Return on deposits - NBS 1. <![if !supportLists]> <![endif]>Certificate from the Auditors that the company is in a position to repay the deposits as and when the claims arise. <![if !supportLists]> <![endif]>Quarterly Return on liquid assets <![if !supportLists]> <![endif]>Half-yearly Return on prudential norms

<![if !supportLists]> <![endif]>Half-yearly ALM (Asset Liability Management) Returns by companies having public deposits of Rs 20 crore and above or with assets of Rs 100 crore and above irrespective of the size of deposits <![if !supportLists]> <![endif]>Monthly return on exposure to capital market by companies having public deposits of Rs 50 crore and above <![if !supportLists]> <![endif]>A copy of the Credit Rating obtained once a year along with one of the Half-yearly returns on prudential norms

Other Regulations: NBFCs-ND (Not Holding Public Deposits) <![if !supportLists]> <![endif]>The NBFCs-ND having assets size of Rs 100 crore are required to submit a Monthly Return on important financial parameters of the company <![if !supportLists]> <![endif]>Board resolution to be passed to the effect that the company have neither accepted public deposit nor would accept any public deposit during the year

General Norms: RBI Maintenance of Liquid Assets: Minimum level of liquid asset to be maintained by NBFCs is 15 % of public deposits outstanding as on the last working day of the second preceding quarter. Of the 15%, NBFCs are required to invest not less than 10% in approved securities and the remaining 5% can be in unencumbered term deposits with any scheduled commercial bank. Thus, the liquid assets may consist of government securities, government guaranteed bonds and term deposits with any scheduled commercial bank.

Creation and Maintenance of Reserve fund:

All NBFCs are required to create a reserve fund and transfer not less than 20% of their net profit (before declaration of dividend) to the fund.

Submission of Certificate: All NBFCs should submit a certificate from their Statutory Auditors every year to the effect that they continue to undertake the business of NBFI requiring holding of CoR (Company Application Reference Number) under Section 45-IA of the RBI Act, 1934.

Information Exchange: NBFCs are required to furnish the information in respect of any change in the composition of its board of directors, address of the company and its directors and the name/s and official designations of its principal officers and the name and office address of its auditors.

Prudential Norms NBFCs should comply with RBIs policies and directions regarding prudential norms and Deployment of funds

<![if !supportLists]> <![endif]>Income Recognition <![if !supportLists]> <![endif]>Accounting Standards <![if !supportLists]> <![endif]>Classification of Assets <![if !supportLists]> <![endif]>Provision for NPA (Non Performing assets) <![if !supportLists]> <![endif]>Capital Adequacy <![if !supportLists]> <![endif]>Declaration of Purpose, Quantum & Advances of Loan.

Directions given to NBFCs and its Auditors by RBI RBI is empowered to give directions to NBFCs and their auditors in matters related to: 1) Profit and Loss account 2) Balance Sheet 3) Books of Accounts 4) Disclosure of liabilities 5) Any other matters or queries

<![if !supportLists]> <![endif]>Special Audits can be done by the RBI of any NBFC and also appoint auditors for the same. <![if !supportLists]> <![endif]>RBI can prohibit any NBFC for taking public deposit for violation of any provisions of RBI act. <![if !supportLists]> <![endif]>Nomination facility for deposits held by a NBFC is introduced. It is on the lines of bank deposits. <![if !supportLists]> <![endif]>If an NBFC is downgraded to below minimum investment grade rating, it has to stop accepting public deposit, report the position within fifteen working days to the RBI. <![if !supportLists]> <![endif]>Once downgraded, within 3 years It has to reduce the amount of excess public deposit to nil or to the appropriate extent permissible under paragraph 4(4) of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. Supervision In order to ensure that NBFCs function on sound lines and avoid excessive risk taking, the RBI has developed a four pronged supervisory framework based on:

<![if !supportLists]>i) <![endif]>On-site inspection structured on the basis of assessment and evaluation of CAMELS (Capital, Assets, Management, Earnings, Liquidity, and Systems) approach. <![if !supportLists]>ii) <![endif]>Off-site monitoring supported by state-of-the-art technology. It is through periodic control reports from NBFCs. <![if !supportLists]>iii) <![endif]>Use of Market Intelligence System. <![if !supportLists]>iv) <![endif]> An exception reports of statutory auditors of NBFCs the RBI supervises companies not holding public deposits in a limited manner. Companies with asset size of Rs 100 crore and above are subject to annual inspection while other non-public deposit companies are supervised by rotation once in every five years.

Contribution of NBFCs in the economy of India 1. 2. 3. 4. 5. 6. 7. 8. Development of sectors like Transport & Infrastructure Substantial employment generation Help & increase wealth creation Broad base economic development Irreplaceable supplement to bank credit in rural segments Major thrust on semi-urban, rural areas & first time buyers / users To finance economically weaker sections Huge contribution to the State exchequer

Role of NBFCS in the economic development: A critical analysis

A robust banking and financial sector is critical for activating the economy and facilitating higher economic growth. Financial intermediaries like NBFCs have a definite and very important role in the financial sector, particularly in a developing economy like ours. They are a vital link in the system. <![if !supportLists]> <![endif]>After the proliferation phase of 1980s and early 90s, the NBFCs witnessed consolidation and now the number of NBFCs eligible to accept deposits is around 600, down from 40000 in early 1990s. The number of asset financing NBFCs would be even lower, around 350, the rest are investment and loan companies. Almost 90% of the asset financing NBFCs are engaged in financing transportation equipments and the balance are in financing equipments for infrastructure projects. Therefore, the role of non-banking sector in both manufacturing and services sector is significant and they play the role of an intermediary by facilitating the flow of credit to end consumers particularly in transportation, SMEs and other unorganized sectors.

<![if !supportLists]> <![endif]>The role of NBFCs in creation of productive national assets can hardly be undermined. This is more than evident from the fact that most of the developed economies in the world have relied heavily on lease finance route in their developmental process, e.g., lease penetration for asset creation in the US is as high as 30% as against 3-4% in India. A conducive and enabling environment has been created for the NBFC industry globally, which has helped it grow and become an essential part of the financial sector for accelerated economic growth of the countries. This is not the case in our country. It is, therefore, obvious that the development process of the Indian economy shall have to include NBFCs as one of its major constituents with a very significant role to play. <![if !supportLists]> <![endif]>NBFCs, as an entity, play a very useful role in channelising funds towards acquisition of commercial vehicles and consequently, aid in the development of the road transport industry. Needless to mention, the road transport sector accounts for nearly 70% of goods movement and 80% of passenger movement across the length and breadth of the country and the role of NBFCs in the growth and development of this sector has been historically acknowledged by several committees set up by the Government and RBI, over the years. In fact, RBIs latest report titled Report on trends on progress of banking in India 2002-2003 observes: Notwithstanding their diversity, NBFCs are characterised by their ability to provide niche financial services in the Indian economy. Because of their relative organisational flexibility leading to a better response mechanism, they are often able to provide tailor-made services relatively faster than banks and financial institutions. This enables them to build up a clientele that ranges from small borrowers to establish corporate. While NBFCs have often been leaders in financial innovations, which are capable of enhancing the functional efficiency of the financial system, instances of unsustainability, often on account of high rates of interest on their deposits and periodic bankruptcies, underscore the need for reinforcing their financial viability.

<![if !supportLists]> <![endif]>NBFCs play a crucial and prominent role in the rural and social sectors of the economy by providing finance for the acquisition of trucks, buses and tractors, which operate mainly in rural and semi-urban India. In fact, our exposure to the rural / social sectors is direct and pronounced, since financing for acquisition of vehicles provides a spin-off benefit by creating jobs and opportunities in the rural parts of our country. <![if !supportLists]> <![endif]>With the economic revival pegged to the development of the rural and suburban economies, NBFCs role in deposit mobilisation and credit extension can hardly be over-emphasized. Given Indias large unorganized markets, there is a huge demand for unsecured credit in areas where banks do not have adequate reach. NBFCs fill this gap. Specialising in funding sectors where there is a credit gap, the core strengths of NBFCs lie in their strong customer relationships, excellent understanding of regional dynamics, welldeveloped collection systems, and personalised services. These institutions play a crucial role in extending credit to the countryside, thus preventing the concentration of credit risk in banks. In urban areas too, NBFCs focus on segments neglected by banks-non-salaried individuals, traders, transporters and stock brokers. These institutions are also instrumental in generating substantial

employment in these regions. <![if !supportLineBreakNewLine]> <![endif]> <![if !supportLists]> <![endif]>The report of the Standing Committee of Parliament on Finance on The Financial Companies Regulation Bill, 2000, which was tabled in the Lok Sabha, acknowledges, in more than one place, the laudable role played by NBFCs and in Para 1 of the report, it states Further, higher level of customer orientation, fewer pre and post sanction requirements and simple and speedy tailor made services assured them a loyal clientele notwithstanding higher costs. Besides, the higher rate of return offered by NBFCs have drawn a large number of small savers to them. Thus they work like quasi banks and provide fund to the sectors where a credit gap exists. NBFCs have become an accepted and integral part of the Indian financial system in view of their complementary as well as competitive role. <![if !supportLists]> <![endif]>In the past decade, NBFCs have played an important role in the expansion of the consumer durables, housing and transport sectors. The industry is now witnessing a paradigm shift, as competition is eating into the retail finance space, which has been traditionally dominated by NBFCs. As the traditional boundaries between different financial intermediaries blur, market participants are merging to increase their size and reach, while distributing risk over the large base in an attempt to survive. According to the latest available numbers, registered NBFCs declined from more than 13,000 in 2006 to 12,809 in June 2008. The number of deposit-taking NBFCs also decreased to 364 in 2008 from over 450 in 2007 Conclusion NBFCs are gaining momentum in last few decades with wide variety of products and services. NBFCs collect public funds and provide loan able funds. There has been significant increase in such companies since 1990s. They are playing a vital role in the development financial system of our country. The banking sector is financing only 40 per cent to the trading sector and rest is coming from the NBFC and private money lenders. At the same line 50 per cent of the credit requirement of the manufacturing is provided by NBFCs. 65 per cent of the private construction activities was also financed by NBFCs. Now they are also financing second hand vehicles. NBFCs can play a significant role in channelizing the remittance from abroad to states such as Gujarat and Kerala. NBFCs in India have become prominent in a wide range of activities like hire purchase finance, equipment lease finance, loans, investments, and so on. NBFCs have greater reach and flexibility in tapping resources. In desperate times, NBFCs could survive owing to their aggressive character and customized services. NBFCs are doing more fee-based business than fund based. They are focusing now on retailing sector-housing finance, personal loans, and marketing of insurance. Many of the NBFCs have ventured into the domain of mutual funds and insurance. NBFCs undertake both life and general insurance business as joint venture participants in insurance companies. The strong NBFCs have successfully emerged as Financial Institutions in short span of time and are in the process of converting themselves into Financial Super Market. The NBFCs are taking initiatives to establish a self-regulatory organization (SRO). At present, NBFCs are represented by the Association of Leasing and Financial Services (ALFS), Federation

of India Hire Purchase Association (FIHPA) and Equipment Leasing Association of India (ELA). The Reserve Bank wants these three industry bodies to come together under one roof. The Reserve Bank has emphasis on formation of SRO Particularly for the benefit of smaller NBFCs. Thus to conclude in the view of above NBFCs play a important role in economic development.
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India's non-banking financial companies (NBFCs) posted decent growth in revenues and profits in the OctoberDecember quarter, despite higher provisioning. An analysis of 355 NBFCs showed an improvement in their performance in the three-month period. The Reserve Bank of India, which has been continually strengthening the supervisory framework for the sector, had asked NBFCs to make a 0.25% provision on standard assets or performing loans. Of the 355 NBFCs selected for this study, 46% was found to have increased their efficiency during the third quarter of the fiscal. Aggregate income of 355 NBFCs rose 27.2% to R24,156 crore during October-December2010 from R18,991 crore in the same period of the previous year. Their combined net profit posted a higher rise, increasing by 36.5% to R5,123 crore, resulting in a sharp increase in return on total income of 21.21% in the quarter under review from the 19.76% recorded in the previous year.

However, 190 of... the 355 NBFCs witnessed a fall in the PAT-to-total income ratio, while 165 NBFCs showed a higher ratio in the quarter over the previous year. Mortgage lenders posted significant profit growth compared with other lenders on the back of a substantial increase in loans and lower non-performing assets. GIC Housing Finance was the best performer (from 20.04% growth in October-December 20009 to 33.04% in October-December 2010). Others putting up a better show included Dewan Housing (15.41% to 15.96%), Can Fin Homes (16.27% to 17.22%) and HDFC (24.30% to 26.83%). Bajaj Finance and Shriram Transport, which provide auto loans to rural and semi-urban areas, giving them an edge over banks on pricing, also posted significant improvement in the third quarter of this fiscal. Profit growth at Bajaj Finance was up from 10.94% in October-December 2009 to 19.67% in the same quarter this fiscal, while the corresponding figures for Shriram Transport were 20.29%...and 21.34%. Others with improved figures included First Leasing (from 22.80% to 58.12%), Mukesh Babu Financial Services (21.95% to 52.05%), Magma Fincorp (9.64% to 14.26%) and Reliance Capital (4.24% to 7.76%). On the other hand , a significant fall was observed in the case of Tourism Finance Corporation (35.38% to 25.68%), Edelweiss Capital (23.27% to 14.01%), Muthoot Capital Services (31.06% to 23.32%), Sakthi Finance (8.77% to 1.71%) and Bajaj FinServ (26.51% to 20.07%). The top five NBFCs in terms of profit after tax in the third quarter this fiscal were HDFC (R891 crore), Rural Electrification Corporation (R664 crore), Power Finance Corporation (Rs 658 crore), Bajaj Holdings and Investment (R501 crore) and IDFC (R 321 crore)....

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229.27 1,000.09 188.34 4.99 47.21 198.59 10.04 -0.67 20.70 37.41 60.82 30.58

25,510.71 4,603.16 1,390.16 2,583.28 452.31 1,639.68 1,617.88 642.64 78.54 966.85 1,426.93

Inventure Grow Kalyani Invest Indiabulls Sec SBI Gold ETF MOSt M50 ETF BF Investment ICICI Gold ETF Industrial Inv MOSt M100 ETF Kotak Nifty ETF Axis Gold ETF Weizmann Forex Nahar Capital Spectacle Info Summit Sec McDowell Holdg Williamson Mago Almondz Global Hang Seng BEES MOSt NASDAQ 100 Prime Securitie TCI Finance

145.90 515.45 9.50 2,725.35 68.60 46.30 2,744.65 126.00 7.38 519.66 2,726.70 78.90 54.05 16.80 78.40 62.05 54.10 22.50 1,256.43 98.95 16.80 34.00

306.39 225.01 219.56 208.24 207.21 174.40 128.51 126.00 116.26 114.79 91.36 91.24 90.51 86.44 85.47 83.05 59.27 58.24 55.43 45.60 44.48 43.77

7.63 325.45 41.83 9.90 3,457.82 -0.10 153.43 2.30 14.23 75.12 17.73 8.97

6.37 37.37 13.26 4.06 13.40 15.03 0.48 -1.15 0.12 6.56 4.21 0.34

335.06 538.14 574.64 81.91 0.23 435.80 6.76 398.51 64.53 321.62 130.37 197.68 97.20

Nagreeka Cap Religare Gold Sentinel Tea BLB Welspun Invest Birla Nifty ETF Blue Chip Religare Nifty INFRA BEES PSU BANK BEES Quantum Gold Reliance BankMF Reliance GOLDMF Kotak PSU Bank Kotak MF-GETF JUNIOR BEES SHARIA BEES BANK BEES Quantum Index Liquid Bees UTI Sunder NIFTYBEES Top of Form

25.65 2,744.30 14.15 3.60 47.65 51.89 1.00 483.10 285.05 344.54 1,323.70 913.00 2,592.25 348.43 2,666.20 102.79 112.60 1,000.08 519.25 1,000.00 891.92 521.28

32.36 31.36 26.11 19.03 17.41 11.08 5.53 4.46 2.56 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

19.70 654.11 2.89 148.17 -

0.63 -17.77 1.11 -1.96 -

129.13 111.18 185.71 24.75 2.77 -

RC

RCF Enter Name

price Balance Sheet

RC

Compare Rel Capital with another

company

Bottom of Form Comparison with Competitors Top of Form

RC

Bottom of Form Balance Sheet P&L Account Cash Flows Quarterly Half Yearly 9 Monthly Yearly

Balance Sheet

------------------- in Rs. Cr. -------------------

Rel Capital

Bajaj Holdings

Bajaj Finserv

Mar '11

Mar '11

Mar '11

Sources Of Funds Total Share Capital 246.16 111.29 72.34

Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities

246.16 0.00 0.00

111.29 0.00 0.00

72.34 0.00 0.00 1,317.82 0.00 1,390.16 0.00 0.00 0.00 1,390.16 Bajaj Finserv

6,781.53 4,491.87 0.00 0.00

7,027.69 4,603.16 13,646.11 0.00 4,836.91 0.00 18,483.02 0.00 25,510.71 4,603.16 Rel Capital Bajaj Holdings

Mar '11

Mar '11

Mar '11

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance 157.34 78.32 79.02 110.03 102.40 72.81 29.59 0.00 345.56 273.83 71.73 0.00 1,357.40 0.00 1.30 0.70

11,166.66 4,573.47 0.00 16.69 0.00 0.00

1,171.16 6.63

Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets

1,187.85 6.63 13,995.42 2,715.53 0.00 170.00

2.00 4.85 0.00 6.85 0.00 15.52 30.30 45.82 -38.97 0.00 1,390.16

15,183.27 2,892.16 0.00 896.30 201.39 0.00 32.80 2,859.26

1,097.69 2,892.06 14,085.58 0.10 69.42 0.00

25,510.71 4,603.16

Contingent Liabilities Book Value (Rs)

1,225.77 286.63 286.11 413.61

7.80 96.08

Source : Dion Global Solutions Limited Explore Rel Capital connections

Growth in the Insurance sector in India

With the opening of the market, foreign and private Indian players are keen to convert untapped market potential into opportunities by providing tailor-made products.

The insurance market is filled up with new players which has led to the introduction of several innovative insurance based products, value add-ons, and services. Many foreign companies have also entered the arena such as Tokio Marine, Aviva, Allianz, Lombard General, AMP, New York Life, Standard Life, AIG, and Sun Life.

The competition among the companies has led to aggressive marketing, and distribution techniques.

The active part of the Insurance Regulatory and Development Authority (IRDA) as a regulatory body has provided to the development of the sector