A PROJECT REPORT ON

“NON -BANKING FINANCIAL COMPANIES:AN OVERVIEW”

SUBMITTED

TO THE UNIVERSITY OF MUMBAI

AS A PARTIAL REQUIREMENT FOR

COMPLETING THE DEGREE OF

M.COM (BANKING AND FINANCE) SEMESTER I

SUBJECT: FINANCIAL SERVICES

SUBMITTED BY:

DILSHAAD SHAIKH

ROLL NO: 42

UNDER THE GUIDANCE OF

MR. SAPTHAGIRI SIRISILLA

SIES COLLEGE OF COMMERCE AND ECONOMICS,

PLOT NO. 71/72, SION MATUNGA ESTATE

T.V. CHIDAMBARAM MARG,

SION (EAST), MUMBAI – 400022.

CERTIFICATE

This is to certify that Miss.____________________________________________________________________________________________of M.Com (Banking and Finance) Semester I (academic year 2014-2015) has successfully completed the project on ______________________________________________________under the Guidance of Dr. __________________________________________.

_________________ ___________________ (Project Guide) (Course Co-ordinator)

___________________ ___________________ (External Examiner) (Principal)

Place: _____________ Date: ___________

DECLARATION

I, __________________________________________________Student M.Com (Banking and Finance) Semester I (academic year

2014-2015) hereby declare that, I have completed the project on ______________________________________________________________.

The information presented in this project is true and original to the best of my knowledge.

Place: _____________Date:_____________

___________________Name:

Roll No.:

ACKNOWLEDGEMENT

I would like to thank the University of Mumbai, for introducing M.Com

(Banking and Finance) course, thereby giving its students a platform to be

abreast with changing business scenario, with the help of theory as a base and

practical as a solution.

I am indebted to the reviewer of the project ,Prof. Sapthagiri Sirisilla my

project guide who for his support and guidance. I would sincerely like to thank

her for all her efforts.

Last but not the least; I would like to thank my parents for giving the best

education and for their support and contribution without which this project

would not have been possible.

______________________

Name :Roll no:

OBJECTIVE OF THE STUDY

The objectives of the study are as follows:

          On one hand its role on functional and performance in different areas of group of

companies. However, the scope of research encompasses a much wider spectrum.

1.       To review the concept of NBFC’s.

2.       To review the growth and development of NBFC’s.

3.       To examine the role of NBFC’s in promotion of Indian Money Market.

4.       To identify the problem of NBFC’s

5. To review the challenge & future outlook of NBFC’s

EXECUTIVE SUMMARYThe cope of NBFCs is fast growing with multiplication of financial services. Some of NBFCs

are also engaged in underwriting through subsidiary unit and by offering allied financial

services including stock broking, investment banking, assets management and portfolio

management

Non-Banking Financial Companies are those companies, which are not banking companies

under the banking regulation Act, but carry out financial activities of providing finance.

These companies may or may not accepting deposit from the public. These provide lease

finance,housing finance, trade in share, general loan and advance for share trading, hire

purchase specially against automobile.

In recent times non- baking financial companies (NBFCs) have emerged substantial

contributors to the Indian economics growth by supplementing the effort of banks and other

financial institutions. They pay key role in the direction of saving and investment .in wave of

rapid industrial development &liberalization of the financial sector, key financial institution

and professional have promoted financial institution to create have promoted financial

institution to create a diversified and competitive financial system.

NBFCs intermediate between saver and investor. These companies also know as finance

companies, lease companies, loan companies etc.

Traditionally, the NBFCs have dominated the market for retail finance. Their forte has

been credit delivery to areas not covered by banks and FIs. Thus, NBFCs are perhaps better

acquainted and more sensitive to the latent needs of the retail customer. With such new areas

as insurance being opened up, top-rung NBFCs are presented with an opportunity to grow.

But these areas fall outside the NBFCs' traditional sphere of competence and raise questions

about the sensibility of their move.

The issue assumes greater significance considering that the average NBFC will be

pushed down to relatively untouched or untapped areas where credit information may be

scarce. But this perception does not hold water when one considers that the top NBFCs have

one of the lowest levels of non-performing assets (NPAs) in the financial sector

The last couple of years have seen significant developments in the financial sector

that have raised competition across-the-board. Non-banking finance companies (NBFCs)

have perhaps felt the pressure most. Consequently, top-rung NBFCs are changing tack, and

initiating moves to become financial supermarkets. They are seeking to provide as many

services as possible, and their fate will be decided by how successful they are.

Supermarkets in the making Leading NBFCs have gradually extended their product

portfolio to include asset management companies (AMCs), housing finance firms and are

now readying to enter insurance.

But the NBFCs' latest moves to increase the lines of business may be of a more

permanent nature despite the growing competition from the resource-rich banks and financial

institutions in core and emerging areas. The last few years saw the traditional boundaries

between different categories of financial intermediaries disappear. Thus, the NBFCs had to

contend with heavy competition even in areas that were their preserve.

Working capital loans were traditionally the preserve of banks, and term lending that

of the financial institutions. Now these sets of institutions move in and out each other's areas

freely. And both have also moved into retail financing, the traditional preserve of the NBFCs.

Traditionally, the NBFCs have dominated the market for retail finance. Their forte has

been credit delivery to areas not covered by banks and FIs. Thus, NBFCs are perhaps better

acquainted and more sensitive to the latent needs of the retail customer. With such new areas

as insurance being opened up, top-rung NBFCs are presented with an opportunity to grow.

But these areas fall outside the NBFCs' traditional sphere of competence and raise questions

about the sensibility of their move.

The issue assumes greater significance considering that the average NBFC will be

pushed down to relatively untouched or untapped areas where credit information may be

scarce. But this perception does not hold water when one considers that the top NBFCs have

one of the lowest levels of non-performing assets (NPAs) in the financial sector.

LITERATURE REVIEW

From the purpose of proposed research project entitle Non- Banking financial Companies:An

Overview’.

I study a number of books, journals, newspapers, dissertations and various reports published

time to time. Some of them reviewed are as following.

Sridhar.R (2006) reviewed that mostly NBFC’s target niches. As they are oriented towards

customers and try to keep the cost low, sothey can be targeted to tap unbanked areas also. He

exemplified the growth story of Shriram fin corp. of being converted to top tycoon in NBFC

world with a credit worth of 5000 cr.According to him these institutions have to maintain a

higher CAR ratio compared to banks, as they are more risky.

Dubey.S (2007) analysed that Nbfc’s in India had a great revolution after 1991 liberalization

which led to simple regulatory mechanisms and allowance to greedy investors to park their

money with NBFC’s. With more customers base and unwise investments start rising to have

large profitability. This in turn leads to weak not compatible with strong players and fading of

golden era for NBFC’s.

Aggarwal. M (2010) reviewed that the private banks conversion in to banks is very risky

decision for RBI. As per Official estimates only 30,000 of the total 6, 00,000 habitations in

the country are exposed to banking services, therefore the RBI has mainly targeted this effort

towards rural India

Shollapur M.R[5] in his article in ‘The Indian Journal of Commerce’ has revived concept of

NBFCs. As per him the abstract NBFCs constituted a significant part of finan         cial

system and compliment the service provide by commercial bank in India. The efficiency of

financial services and flexibilities helped them build a large body of client including small

borrower and bigger corporate establishment. The pace of financial liberalization has a

intensified the competition. As a result, there has been a shift towards strategic perspective

marketing process of NBFCs. This perspective enable them tom predict the future impact of

change and help to move out of week area and grab new opportunity through continuous

monitoring system.

R.M Srivastava & Divya Nigam in his book Management of Indian Financial Institution

background material for economic growth and financial institution, types of financial

institution, recent trend Indian financial market. He put enfaces on the fact that the money

market has passed through a phase of substantial adjustment and advancement in recent year.

K.C Shekhar & Lwkshmy Shekhar[8] in his book has explain of NBFCs in India has

been rapid development especially in 1990 owing to their high degree of orientation

towards consumers and implication of section requirement. The role of NBFCs as

effective financial intermediaries arise has been well recognized as they have inherent

abilities to take quicker decision, assume risk and customize their services provided by

bank and market the components on a conceptual basis.

INDEX

SR.NO TOPICS PG.NO1 INTRODUCTION 1-9

1.1 Introduction to Non-Banking Financial Companies

1.2 History of NBFCs1.3 Meaning& Definition of NBFCs1.4 Difference between Banks and NBFCs1.5 Needs & Importance of NBFCs1.6 Merits and Demerits of NBFCs1.7 Role of NBFCs

2 TYPES,SERVICES,REGULATORY FRAMEWORK & ACCEPTANCE OF

DEPOSITS OF NBFCs

10-25

2.1 Different types of NBFCs2.2 Different types of services provided by

NBFCs2.3 Regulatory framework of NBFCs related to

RBI2.4 NBFCs Accepting Deposits2.5 Various Product offered by NBFCs&

Major NBFCs Companies in India3 FINANCIAL

PERFORMANCES,TRENDS&PROGRESS,IMPACT,CHALLENGES& FUTURE

OFNBFCs

26-33

3.1 Financial Performance of NBFCs3.2 Trends& Progress of NBFCs3.3 Impact of Global Financial crisis on

NBFCs3.4 Challenge & Future Outlook of NBFCs

4 SUGGESTION& RECOMMENDATIONS 34-35

5 CONCLUSION 366 BIBLIOGRAPHY 37