Non Bank Financial Intermediaries
• NBFCs are privately owned, decentralized and relatively small-sized financial intermediaries. • Some are primarily engaged in fund-based activities and others provide financial services of diverse kinds. • The former are know as Non Banking Financial Companies (NBFCs) and the latter are known as Non Banking Financial Services Companies (NBFSCs).
• Two parts
1. 1995-96 2. 2002-03 • During 1995-96, NBFCs had undergone radical transformation. • The post 1995 overview is depicted with whatever information is available.
• There are thousands of NBFCs and only a small proportion of them report to the RBI. • The RBI (Amendment) ...view middle of the document...
The minimum net owned funds of Rs 25 lakh, 1997. The RBI has powers to cancel registration of NBFCs. They have to maintain 15% of their deposits in liquid assets effective from April 1, 1998. They have to create reserve fund and transfer not less than 20% of their net deposits to it every year. The RBI will direct them on issues of disclosures, prudential norms, credit , investment, etc. They have to achieve a minimum capital adequacy norm of 8% by march 31, 1996. They have to obtain a minimum credit rating from anyone of the three credit rating agencies.
• • • • •
• • •
Types of NBFCs registered with RBI The NBFCs that are registered with RBI are: (i) equipment leasing company; (ii) hire-purchase company; (iii) loan company; (iv) investment company. With effect from December 6, 2006 the above NBFCs registered with RBI have been reclassified as (i) Asset Finance Company (AFC) (ii) Investment Company (IC) (iii) Loan Company (LC)
• A ceiling of 15% interest rate on deposits has been prescribed for MBFCs or nidhis, effective from July 8, 1996. • A company will be treated as a nonbanking financial company if its financial assets are more than 50% of its total assets and income from financial assets is more than 50% of the gross income. • All NBFCs with an asset size of Rs. 100 crore and more as per the last audited balance sheet are now considered as systemically important NBFCs and are required to maintain CRAR of 10%. • The Maximum interest rate payable on public deposits by NBFCs are revised to 12.5 % per annum from April 24, 1997.
Some of the important regulations relating to acceptance of deposits by NBFCs are :
• 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. • NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 12.5 per cent per annum. The interest may be paid or compounded at rests not shorter than monthly rests. • NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors. • NBFCs (except certain AFCs) should have minimum investment grade credit rating. • The deposits with NBFCs are not insured. • The repayment of deposits by NBFCs is not guaranteed by RBI.
Some of the important regulations relating to acceptance of deposits by NBFCs are : (contd.)
• Certain mandatory...