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)

___________________
(External Examiner)

Place: _____________
Date: ___________

___________________
(Course Co-ordinator)

___________________
(Principal)

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.

___________________
Name:
Roll No.:

Place: _____________
Date:_____________

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 NBFCs.

2.

To review the growth and development of NBFCs.

3.

To examine the role of NBFCs in promotion of Indian Money Market.

4.

To identify the problem of NBFCs

5.

To review the challenge & future outlook of NBFCs

EXECUTIVE SUMMARY
The 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 NBFCs 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 Nbfcs 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 NBFCs. 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 NBFCs.
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
1
1.1

TOPICS

PG.NO

INTRODUCTION

1-9

1.2

Introduction to Non-Banking Financial

Companies
History of NBFCs

1.3

Meaning& Definition of NBFCs

1.4

Difference between Banks and NBFCs

1.5

Needs & Importance of NBFCs

1.6

Merits and Demerits of NBFCs

1.7

Role of NBFCs

2.1

TYPES,SERVICES,REGULATORY
FRAMEWORK & ACCEPTANCE OF
DEPOSITS OF NBFCs
Different types of NBFCs

2.2
2.3
2.4
2.5

Different types of services provided by

NBFCs
Regulatory framework of NBFCs related to
RBI
NBFCs Accepting Deposits

3.1

Various Product offered by NBFCs& Major

NBFCs Companies in India
FINANCIAL
PERFORMANCES,TRENDS&PROGRES
S,IMPACT,CHALLENGES& FUTURE
OFNBFCs
Financial Performance of NBFCs

3.2

Trends& Progress of NBFCs

10-25

26-33

3.3
3.4

Impact of Global Financial crisis on

NBFCs
Challenge & Future Outlook of NBFCs

SUGGESTION& RECOMMENDATIONS

34-35

CONCLUSION

36

BIBLIOGRAPHY

37