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Ê NBFC consist mainly of finance companies which carry on hire purchase finance,
housing finance, investment, loan, equipment leasing or mutual benefits.
Ê Reserve Bank(Amendment Act) 1997:- NBFC means
1. A Financial institute which is a company.
2. NBFC has it¶s principal business as receiving of deposits under any Scheme or
arrangement or lending in any manner.
 
  
1. Brokers of loanable funds.
2. Mobilization Of Savings.
3. Channelization of fund into Investment.
4. Stabilize the capital market.
5. Provide Liquidity.
        
1. Hire Purchase Services.
2. Leasing Services.
3. Housing Finance Services.
4. Asset Management Company.
5. Venture Capital Companies.
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1. Greater Reach.
2. Flexibility in tapping resources.
3. Retail Services to small and medium business.
4. Important Components of Financial Market.
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1. Certificate of Deposits

A. NBFC Criteria
1. 2 years of profitable operations
2. NBFC/directors lawful conduct
3. Annual credit rating exceeds minimum Inv. Grade
4. Disclosure statement to accompany application for
permission

B. Credit rating to be published in all ads

C. No CoD if credit rating falls below criterion

2 Commercial paper, foreign debentures, redeemable

capital, Lines of Credit, rediscounting
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1. Time based Classification into:
a) Substandard(90 days),
b) doubtful(180 days); and
c) Loss (1 yr, TBs 180 days, Credit Card 180 days)
2. Provisioning @ 25%, 50% & 100%
3. No provisioning for Govt. guaranteed exposure
4. Additional subjective evaluation
5. Declassification of rescheduled loans
6. FSV ( other than realizable assets)
a) In case of leasing & IFS:
i. Discounted for yr 1, 2 & thereafter as 80%, 70% &
50%
ii. Revaluation every 3 years by independent valuer
b) In case of HFS
i. Discounting @ 70%
ii. Revaluation every 10 years by independent valuer
7. Types of charges
8. Quarterly credit review by NBFCs, annual by Auditors
9. Reversal of provision Cash receipt> 20%, 50%, 100% of NPL)
10. Quarterly list of delinquent / rescheduled accounts to SEC
½
 
A An NBFC engaged in Leasing shall meet the following conditions:

Assets invested > 70% of total assets

Investment in Shares < 50% equity of NBFC

Investment in shares
Of one company < 10% equity of
NBFC/Co

Lease period > 3 years

A May not engage in land / residential building leases

½
  

  
 
    
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1. Scope of work includes:
a. Money market activities,
b. Capital market activities (including managing client
portfolios)
c. Project financing activities; &
d. Corporate finance services
e. General activities
2. Investment limits %age of NBFC equity
Shares < 100
Shares of1 company < 10
Equity futures < 100
Single future < 10
Reverse Repo & CFS < 250
Single CFS security < 25 (i.e. 10% of above)
 

3. Margin Loans
Total < 50
To 1 client < 10
(Margin shall be at least 30% of loan)
Margin loans approved according to pre- defined BoD policy

4. Underwriting commitments fully backed

½
   
 
1. Additional functions w.r.t property:
a) Mortgage finance to purchase/construct/alter
property
b) Surveys and valuation
c) Arrange insurance
d) Manage mortgage investments
Investment in: Limit
HFS > 70% total assets
Shares < 50% NBFC equity
Shares of 1 co < 10% -do-
Financing:
One party < Rs 20 million
Total Monthly Installments
±Consumer loan < 60% NDI
DE ratio < 85:15
Period of Mortgage loan < 20 years
2. Appoint Lawyer, valuer
3. Review market every quarter
½
 
 

 

 
V
  


1. Exposure by NBFC to one person/group of Cos. < 40% of equity
2. Raise funds by: shares issue and private placement for VP

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A. Designation of qualified fund manager to manage upto 3 CIS
B. At least 1 investment Committee, formed by BoD

1. Comprise fund manager, Chief Investment Officer

other Key Personnel of AMC
2. Reportable to CEO
3. Quorum for investment decisions is 2/3
4. Ensure compliance with constitutive
documents/policies
C. AMC to fulfill SEC conditions for managing multiple CIS
D. Shari¶a appointed for Islamic CIS

  
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1. Acquiring control of an investee through CIS

2. Transaction with 1 broker>10% annual brokerage
exp
3. Accepting deposits from CIS
4. Loans from CIS assets
5. Undertake brokerage services
6. Enter underwriting contracts, invest in CIS except as
allowed
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