ANALYSIS OF NBFC SECTOR

SATHISH KUMAR R

ABIRAMI A
SARAVANA PRABHU B

Industry Structure
Complimentary to banking system 12.7% of the total assets of financial system Operate largely in vehicle financing, hire purchase, lease, personal loans, working capital loans, microfinance, consumer loans, housing loans, loans against shares, investments, distribution of financial products, etc
NBFC

Nature of Business

Acceptance of Deposits

NBFC-D

NBFC-ND

Banks Vs NBFC
NBFC Can accept only Demand deposits Cost of funds Business Model Flexibility Limited reporting/documentation Relaxed regulatory norms Int. rate/ PSL/ Capital Market Exposure

Easy to obtain License, no restriction on number of branches

DICGC not available, cannot issue cheques, NPA classification Recovery Mechanisms SARFAESI, DRT not present

KYC (know-your-customer) norms not Stringent

NPA Classification - 180 days vs 90 days

Classfification Nature of Business

NBFC
Asset Finance Company
# NOF 2crores #CRAR 15%

Investment Company
# NOF 2crores #CRAR 15%

Loan Company
# NOF 2crores #CRAR 15%

Infrastructure Finance Company

# NOF 300crores #CRAR 15% (Tier I-10%)

Infra Debt Funds

# NOF 300crores #CRAR 15%

CIC- ND-SI
# Assets Size >100 crores #CRAR 15%

Micro Finance Institutions

# NOF 5crores #CRAR 15%

Factors
#NOF 5crores CRAR 15%

Growth Drivers
Growing per capita income

Market Size

NBFCs-acceptance of Public Deposits

15000 10000 5000

13572
2.27% 2448 0.12% 1997-98 2005-06 Public Deposits 2753 0.06% 2009-10 0.09% 2011-12

2.50% 2.00% 1.50% 1.00% 0.50%

5841

0.00%

% of Bank Deposits

Source of Funds
SOURCE OF FUNDS - NBFC-D
2010 2011 2012
809 161 171 194 641 698

112

144

P AI D U P C AP I T AL & R E S E R V E S AN D SURPLUS

PUBLIC DEPOSITS

28

41

58

BORROWINGS

O T H E R L I AB I L I T I E S

107

* Figures are in millions

Use of Funds
USE OF FUNDS - NBFC-D
2010 2011 2012
874.00

711.19

780.00

USE OF FUNDS - NBFC-ND-SI

135.00 134.00

2010
88.64 76.00 45.50 63.00 103.00

2011

2012

96.34

25.00

SLR

NON- SLR INVESTMENTS

L O AN S AN D AD V AN C E S

O T H E R AS S E T S 3485

4709

5900

LOANS & ADVANCES

HIRE PURCHASE ASSETS

INVESTMENTS

OTHER ASSETS

* Figures are in millions

1198

1507

1595

417

502

635

788

895

1083

Performance ROA, ROE

ROA
3 2.5 2 1.5 1.9 1 0.5 0 2009 2010 NBFC-D 2011 2012 2013 NBFC-ND-SI 5 0 2009 2010 NBFC-D 2011 2012 2013 NBFC-ND-SI 8.26 7.49 8.08 7 1.5 2.2 2.7 1.57 2.1 2.1 2.71

ROE
2.75 2.82 20 15 10 8.6 15.7 17 25 19.2 17 15.4

Average RoE (post tax) FY 11 12

New Pvt banks Old Pvt banks PSU banks NBFC 13 14

15.3 15 15.4
17.5 15 16 17 18

Performance - NPA
Gross NPAs to Total Advances
2.5 2 2.1 2.1

2 1.3

1.5

0.7

CRAR
45

0.5

40 35
2008 2009 2010 2011 2012

42.1 21 22.2 32.8 20.4 27.5 22.3 28

30 25 20 15 10 5 0 2010

2011 NBFC - D

2012 NBFC-ND-SI

2013

Banks and NBFCs

F06

FY10

FY11

No of NBFCs
Bank Credit of all scheduled Banks NBFC advances as % of Bank Credit Assets of all scheduled banks NBFC assets as a % of Bank assets Deposits of all scheduled banks NBFC Public deposits as % of bank deposits

13014
1,572,780 10.77% 2,531,462 13.06% 2,185,809 1.05%

12630
3,337,659 12.57% 5,258,495 13.33% 4,635,224 0.37%

12409

* Figures are in crores

4,060,843 13.20% 6,146,590 13.78% 5,355,160 0.22%

SWOT Analysis

STRENGTH
Easy and fast appraisal & disbursements Product Innovation and Superior Delivery Strong Market Penetration and increased operating effeciency Collection Effeciency

WEAKNESS
Too much of diversification from core business Increased regulatory coverage No access to SARFAESI or DRT for recovery from bad loans and no access to refinance Volatile business environment

OPPORTUNITIES THREATS
Large untapped market, both rural & urban and also geographically Tie-up with global financial sector giants New opportunities in credit card, personal finance, home equity, etc High cost of funds Restrictions on Deposit taking NBFCs Growing retail thrust within banks and competition from unorganized money lenders Significant slowdown in the economy affecting the various segments of NBFC. Deterioration of asset quality and rising levels of NPA.

Recent Regulatory Changes

Usha Thorat Committee

Tier I Capital of 10%, as against 7.5% recently NPA recognition norm to be lowered to 90 days from 180/360 days Standard asset provisioning -0.40% from March 31, 2014. Acceptance of Deposits Liquidity Management Raising money through private placement of debenture NBFCs finance for Purchase of Gold LTV 60%

Retail NBFC

AUM OF RETAIL NBFC (IN TRILLIONS)

3.5 3.25 2013

2007

0.92

2008

1.44

2009

1.56

2010

1.85

2011

2.37

2012

THANK YOU!!!