1.
NON BANKING FINANCIAL
INSTITUTION
NAVEEN SAINI
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2.
CONTENTS
 Meaning
 Difference between NBFI and banks
 Importance
 Role of NBFI
 Functions
 Regulations
 Types
 Guidelines
 Current status
 Top five NBFI
 Conclusion

3.
Financial institution
 A financial institution is an institution
which collects funds from the
public, and places them in financial
assets, such as deposits, loans and
bonds rather than tangible property.
FINANCIAL
INSTITUTION
Banking
institution
Non banking
institution

4.
NON BANKING FINANCIAL
INSTITUTION
 A non-bank financial institution (NBFI) is
a financial institution that does not have a
full banking license or is not supervised by
a national or international banking
regulatory agency.
 Non-banking financial institutions, are
financial institutions that provide banking
services, but do not hold a banking license.
These institutions are not allowed to take
deposits from the public.

5.
NBFI’s VERSUS BANK’s
BANKS NBFIS
Definition Banking is acceptance of deposits
withdraw able by cheque or
demand;
NBFI cannot accept
demand deposits
NBFI are companies
carrying financial business
Scope of business Scope of business of the bank is
limited.
There is a various types of
business regarding
financial activities.
Major limitation on
Business
No non banking activity are
carried.
Cannot provide checking
facilities.
Need for a license License norms are tightly
controlled and generally it is
perceived to be quite difficult to get
a license for a bank
It is comparatively much
easier to get a registration
as an NBFI.
Regulations BR Act and RBI Act lay down the
stringent control over the bank.
Much lesser control over
NBFI

6.
IMPORTANCE
 Non banking financial institutions have
the following importance in Indian
economy.
 Greater reach.
 Flexibility in tapping resources.
 Retail services to small and medium
business.
 Important component of financial
market.

7.
Role of NBFIs
 Development of sectors like Transport &
Infrastructure
 Substantial employment generation
 Help & increase wealth creation
 Broad base economic development
 To finance economically weaker sections

8.
FUNCTIONS
 Brokers of loanable funds.
 Mobilization of savings.
 Channelization of funds into
investment,
 Stabilize the capital market,
 Provide liquidity.

9.
REGULATIONS
 RBI Act, 1934, it is mandatory that every
NBFI should be registered with RBI to
commence or carry on any business of
non-banking financial institution.

10.
TYPES
types
Risk
pooling
institutions
Contractual
saving
institutions
Market
makers
Specialized
sectoral
financiers
Financial
services
providers

11.
Cont.
 Risk-pooling institutions:
Insurance companies underwrite economic risks
associated with illness, death, damage and other risks
of loss.
There are two main types of insurance companies:
(a)general insurance (b)life insurance.
 Contractual savings institutions:
Contractual savings institutions (also called institutional
investors) give individuals the opportunity to invest in
collective investment vehicles (CIV).
Collective investment vehicles pool resources from
individuals and firms into various financial instruments
including equity, debt and derivatives.
Eg- mutual funds, pension funds.

12.
cont
 Market makers
Market makers are broker-dealer institutions that
quote a buy and sell price and facilitate
transactions for financial assets. Such assets
include equities, government and corporate
debt, derivatives, and foreign currencies.
 Specialized sectoral financiers:
They provide a limited range of financial services
to a targeted sector. For example, real estate
financiers channel capital to prospective
homeowners, leasing companies provide
financing for equipment and payday lending
companies that provide short term loans to
individuals that are under banked or have limited
resources.

13.
Cont.
 Financial service providers
Financial service providers include
brokers management consultants, and
financial advisors, and they operate on a
fee-for-service basis.
Their services include: improving
informational efficiency for the investors
and, in the case of brokers, offering a
transactions service by which an investor
can liquidate existing assets.

14.
COMPANY’S UNDER NBFC
They are also categorized in a different
format among 8 categories
LOAN COMPANY
HIRE PURCHASE COMPANY
INVESTMENT COMPANY
MUTUAL BENEFIT COMPANY
HOUSING FINANCE COMPANY
EQUIPMENT LEASING COMPANY

15.
GUIDELINES ON FAIR
PRACTICES
• Application for loans and their processing.
• Loan appraisal and termsconditions.
• Disbursement of loan.
• Customer acceptance policy.
• Customer identification procedure.
• Monitoring of transactions.
• Risk management.
• Kyc for existing accounts.
• Appointment of principal officer

16.
Current status
 NBFI have improved their operations and
strategies. Industry experts opine that they
are much more mature today than they were
during the last decade.
 In fact, aggressive strategies helped LIC
housing finance to grab new customers and
increase its market share in national
mortgage market.
 The segment which was hit hardest was
vehicle financing.
 Fortunately, since vehicle finance is asset
based business, their asset quality did not
suffer as against other consumer financing
business.

17.
Top five NBFCs in India:
• Housing Development Finance
Corporation Limited
• Power Finance Corporation Limited
• Rural Electrification Corporation
Limited
• National Bank of Agricultural and
Rural Development
• Infrastructure Development Finance
Company Limited

18.
FUTURE PROSPECTS
Some of the future prospects of NBFI
are-
 FUTURE CAPITAL
 ASHOK LEYLAND FINANCE.
 RELIANCE CAPITAL.

19.
FUTURE CAPITAL
 Future Capital, the financial arm of
Future Group, will soon start rolling out
Money Bazaars across the country.
 This one stop-shop would be providing
numerous services like-
o Housing loans
o Personal loans
o Insurance
o MFs
o Credit cards

20.
ASHOK LEYLAND FIN.
 Traditionally, ALF has depended on
commercial vehicle financing for a significant
proportion of its revenue.
• The other segment they are concentrating
on is passenger cars.
• The other segment they have is multi-
utility vehicles (MUVs).
• The move of Ashok Leyland Finance to
launch a finance portal that would be
used to sell products of other
financial intermediaries.

21.
RELIANCE CAPITAL
 Reliance Capital, an arm of the Anil
Dhirubhai Ambani Group, will set up a
separate housing financial subsidiary
and non-banking financial company
(NBFC) for the consumer finance sector.
 Ambani said his company is also
planning to selectively expand its-
o Asset management.
o Life insurance.
o Broking operations.

22.
CONCLUSION
 Strengthening the professionalism of
NBFC sector through education and
training, making them more organised.
 RBI needs to educate people about
NBFC.
 The credit delivery mechanism needs to
be more transparent and hassle free.
 There should be more stringent norms for
the defaulters.