1. NBFC’s and BANK
SERVICE OPERATIONS MANAGEMENT

2. What are NBFC’s
 A company registered Company Act -1956
 NBFCs are financial intermediaries engaged primarily in the
business of
1. Loans and advances
2. acquisition of shares/stock/bonds/debentures/securities issued by
government or local authority or other securities of like marketable
nature,
3. leasing,
4. hire-purchase,
5. insurance business,
6. chit business

3. Different Types Of NBFC’s
NBFC
TRADITIONAL MODERN
APPROACH OF APPROACH OF RESIDUARY
CLASSIFICATIO CLASSIFICATIO NBFC
N N
Equipment Hire Purchase Asset Finance
Company Loan Company
Leasing Co. Company
Investment Investment
Loan Company
Company Company

4. Features of NBFC’s
 Registration with RBI is mandatory
 All the NBFC are not entitled to accept public deposits
 NBFC can accept public deposit for a minimum period of 12
months and maximum 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
 NBFCs cannot offer gifts/incentives or any other additional benefit
to the depositors

5. CONTD.
 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
 There are certain mandatory disclosures about the company in the
Application Form issued by the company soliciting deposits
 If a NBFC defaults in repayment of deposit, the depositor can approach
A. Company Law Board or
B. Consumer Forum or
C. file a civil suit to recover the deposits.

6. All About Indian Banks:
 The basic function of a bank is to accept deposits from public for
the purpose of lending.
 Directed under the RBI guidelines.
 Around 26 nationalized bank in India.
 13 old private sector banks.
 7 new age private sector banks.
 Around 30 foreign banks.

7. Functions

8. Primary Functions
 Accepting Deposits
The bank collects deposits from the public. These deposits can be of
different types, such as :-
1. Saving Deposits
2. Fixed Deposits
3. Current Deposits
4. Recurring Deposits

9. CONTD.
 Granting of Loans and Advances
The bank advances loans to the business community and other
members of the public. The rate charged is higher than what it pays
on deposits. The difference in the interest rates (lending rate and the
deposit rate) is its profit.
The types of bank loans and advances are :-
1. Overdraft
2. Cash Credits
3. Loans
4. Discounting of Bill of Exchange

10. Secondary functions
 Agency Functions
The bank acts as an agent of its customers. The bank performs a
number of agency functions which includes :-
Transfer of Funds
1. Collection of Cheque
2. Periodic Payments
3. Portfolio Management
4. Periodic Collections
5. Other Agency Function

11. CONTD.
 General Utility Functions
The bank also performs general utility functions, such as :-
Issue of Drafts, Letter of Credits, etc.
1. Locker Facility
2. Underwriting of Shares
3. Dealing in Foreign Exchange
4. Project Reports
5. Social Welfare Programs
6. Other Utility Functions

12. Why NBFC’s?
 Only 34% of Indian individuals have access to banks.
 Banks have a lot of constraints in lending.
 Conditions for getting a loan.
 Proximity of financial services.
 Size of loans.
 Higher risk taking ability.
 Innovative business model.
 Expert skills.
 Relationship with customers.
 Single product and dedicated business.

13. Some examples
 In infrastructure financing credit risk evaluation is the main job.
 For collecting the dues they use human resources and pay them
lower than what banks pay. Banks lack here.
 In truck financing majority of the truck drivers don’t have proper
papers to get the loans.
 Many SME’s in India are like truck drivers.
 In home finance, housing finance companies (HFC) flourish with
higher focus and better customer service.
 NBFC’s are the top priority in the above sectors.

14. BANKS Vs. NBFC’s
 NBFC cannot collect deposits in the manner of a bank
 Interest rates for NBFC’s are different compared
 NBFC is not a part of the payment and settlement system and as such an
NBFC cannot issue cheque drawn on itself
 NBFC cannot issue Demand Drafts like banks
 While banks are incorporated under banking companies act, NBFC is
incorporated under company act of 1956.
 Deposit insurance facility of DICGC is not available for NBFC
depositors unlike in case of banks.
 NBFC cannot engage into -
1. agriculture activity,
2. industrial activity,
3. sale/purchase/construction of immovable property

15. THANK YOU
RAHUL H - 73
GANAPATHY S - 85