Non Banking

Financial Company
(NBFC)
Feasibility Study
VIMAL SINGH
PRN-122

Introduction
A Non Banking Financial Company (NBFC) is a company registered under the Companies Act,
1956 of India, engaged in the business of loans and advances, acquisition of shares, stock, bond
sire-purchase, insurance business, or chit business.

Difference between banks & NBFCs:

A NBFC cannot accept demand deposits.
It is not a part of the payment and settlement system and as such cannot issue cheques to its
customers
Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of
banks.

Market Analysis
Contribution to the economy has grown in leaps and bounds from 8.4% in 2006 to above 14% in March
2015.
A compound annual growth rate (CAGR) comprising 13% of the total credit and expected to reach nearly
18% by 201819.
Factors contributing to the growth of NBFCs are Stress on public sector units (PSUs), improving
macroeconomic conditions, higher credit penetration, increased consumption and disruptive digital trends
will allow NBFCs credit to grow at a healthy rate
of 710% (real growth rate)3 over the next five years.
Most of this growth is expected to be at the cost of
government-owned banks, whose share is
estimated to fall to an all-time low of 58.6 per cent
by 2018-19 (against 64.5 per cent last year).

Financial Analysis
Liberalising foreign investment in the NBFC sector :The finance minister in his Budget speech on 29
February 2016 announced the governments intention to permit FDI in all financial activities.
Funding
sources
for
NBFCs:
According to the Financial Stability
Report, 2015, scheduled commercial
banks (SCBs) have the highest
exposure to NBFCs at 1,927 billion
INR, followed by asset management
companies managing mutual funds
(AMC-MFs) at 1,376 billion INR and
insurance companies at 1,064 billion
INR (as of September 2015).

Licensing
A company registered in india.
Company must have minimum net owned fund of Rs.200 lakhs.
Types of licensing:
Asset Finance Company (AFC)
Investment Company (IC)
Loan Company (LC)
Infrastructure Finance Company (IFC)
Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC)
Non-Banking Financial Company Factors (NBFC-Factors)
Gold Loan NBFCs in India.

Licensing
oInfrastructure Finance Company (IFC)
A company which has net owned funds of at least Rs. 300 Crore and has deployed 75% of its total assets in
Infrastructure loans is called IFC.
oInfrastructure Debt Fund (IDF-NBFC)
The Infrastructure Debt Funds are meant to infuse funds into the infrastructure sector. The importance of
these funds lies in the fact that the infrastructure funding is not only different but also difficult in
comparison to other types of funding because of its huge requirement, long gestation period and long term
requirements.
In India, an IDF can be set up either as a trust or as a company. If the IDF is set up as a trust, it would be a
mutual fund, regulated by SEBI. Such funds would be called IDF-MF.
If the IDF is set up as a company, it would be an NBFC; it will be regulated by the RBI. The IDF guidelines
of the RBI came in September 2011. According to these guidelines, such companies would be called IDFNBFC.
An IDF-NBFC is a non-deposit taking NBFC that has Net Owned Fund of Rs 300 crores or more and which
invests only in Public Private Partnerships (PPP).

Reference
PWC research, non-banking-finance-companies-the-changing-landscape.
http://
www.business-standard.com/article/companies/leading-nbfcs-are-bigger-th
an-many-psus-banks-115073101480_1.html
https://www.indiafilings.com/learn/how-to-get-nbfc-license-in-india/