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A PRESENTATION ON

NBFCs, MFIs
and

CO-OPERATIVE BANKS

CONTENT
     Meaning IRDA Guidelines RBI Regulations New Category of NBFCs Documents to be Submitted to RBI for Registration  List of NBFCs in Bangalore  Major products offered by NBFCs in India

Meaning
A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business, but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property.

IRDA Guidelines
The NBFCs should obtain requisite permission from IRDA and comply with the IRDA regulations for acting as `composite corporate agent' with insurance companies. The NBFCs should not adopt any restrictive practice of forcing its customers to go in only for a particular insurance company in respect of assets financed by the NBFC. The customers should be allowed to exercise their own choice.

IRDA Guidelines (continued)


 As the participation by a NBFC's customer in insurance products is purely on a voluntary basis, it should be stated in all publicity material distributed by the NBFC in a prominent way. There should be no `linkage' either direct or indirect between the provision of financial services offered by the NBFC to its customers and use of the insurance products. The premium should be paid by the insured directly to the insurance company without routing through the NBFC. The risks, if any, involved in insurance agency should not get transferred to the business of the NBFC.

RBI Regulations
Guidelines for new deposits
Customer identification: 'Know Your Customer' (KYC) should be the key guiding principle for identification of an individual / corporate customer (depositor or borrower). Accordingly, the KYC framework should have two-fold objective, (i) to ensure customer identification and verifying his identity and residential address; and (ii) to monitor transactions of a suspicious nature. NBFCs should ensure that the identity of the customer, including beneficial owner is done based on disclosures by customers themselves.

RBI Regulations (continued)


Typically easy means of establishing identity would be documents such as Permanent Account Number (PAN), ration card, driving license, Election Commission's identity card, passport, etcetera in case of individuals and registration certificate, partnership deed/agreement, etcetera and other reliable documents in respect of companies, firms and other bodies. Verification through such documents should be in addition to the introduction by a person known to the NBFC.

RBI Regulations (continued)


Procedures for existing customers In respect of existing customers, NBFCs should ensure that gaps and missing information in compliance of KYC guidelines on customer identification procedure is filled up and completed before June 30, 2004.
Ceiling and monitoring of cash transactions NBFCs would normally not have large cash withdrawals and deposits. However, wherever transactions of Rs 10 lakhs (Rs 1 million) and above are undertaken, they should keep record of these transactions in a separate register maintained at branch, as well as at Registered Office. Such information should be made available to regulatory and investigating authorities, when demanded.

RBI Regulations (continued)


Guidelines and monitoring procedures The board of directors of NBFCs should formulate policies and procedures to operationalise the guidelines and put in place an effective monitoring system to ensure compliance by their branches. Early computerization of branch/office reporting will facilitate prompt generation of such reports and monitoring.

RBI Regulations (continued)


Internal control systems Duties and responsibilities should be explicitly allocated among the staff for ensuring that policies and procedures are managed effectively and that there is full commitment and compliance to an effective KYC programmer in respect of both existing and prospective customers/clients.

RBI Regulations (continued)


Internal audit/inspection Internal auditors must specifically scrutinize and comment on the effectiveness of the measures taken by branches / offices of NBFC in adoption of KYC norms and steps towards prevention of money laundering. Specific cases of violation should be immediately brought to the notice of head / controlling / registered office.

RBI Regulations (continued)


Record keeping
NBFCs should prepare and maintain proper documentation on their customer relationships and cash transactions of Rs 10 lakhs and above. The records of all such transactions should be retained for at least ten years after the transaction has taken place and should be available for perusal and scrutiny by audit functionaries as well as regulators and law enforcement authorities; as and when required, at the branch as well as at registered office.

RBI Regulations (continued)


Training of staff and management It is important that all the operating and management staff is made fully aware of the implications and understand the need for strict adherence to KYC norms. NBFCs may take suitable steps to impart training to their operational staff on anti-money laundering measures.

New Category of NBFCs


i. ii. iii. iv. v. vi. Asset Finance Company (AFC) Investment Company (IC) Loan Company (LC) Infrastructure Finance Company (IFC) Core Investment Company (CIC) Infrastructure Debt Fund- Non- Banking Financial Company (IDF-NBFC) vii. Non-Banking Financial Company Micro Finance Institution (NBFC-MFI)

Documents to be Submitted to RBI for Registration


Minimum NOF requirement Rs. 200 lakhs Application to be submitted in two separate sets tied up properly in two separate files Annex II to be submitted duly signed by the director/Authorized signatory and certified by the statutory auditors Annex III (directors profile) to be separately filled up for each director. Care should be taken to give details of bankers in respect of firms/companies/entities in which directors have substantial interest In case the directors are associated or have substantial interest in other companies, indicate clearly the activity of the companies (whether NBFC or not)

Documents to be Submitted to RBI for Registration (continued)


Board Resolution to the effect that the company has not accepted any public deposit, in the past (specify period)/does not hold any public deposit as on the date and will not accept the same in future without the prior approval of Reserve Bank of India in writing Board resolution stating that the company is not carrying on any NBFC activity/stopped NBFC activity and will not carry on/commence the same before getting registration from RBI Auditors Certificate certifying that the company is/does not accept/is not holding Public Deposit Auditors Certificate certifying that the company is not carrying on any NBFC activity Net owned fund as on date

Documents to be submitted to RBI for registration (continued)


Board Resolution specifically approving the submission of the application and its contents and authorising signatory Certifying compliance with section 45S of Chapter IIIC of the RBI Act, 1934 in which director/s of the company has substantial interest Details of changes in the Memorandum and Articles of Association duly certified Last three years Audited balance sheet along with directors & auditors report Details of clauses in the memorandum relating to financial business Details of change in the management of the company during last financial year till date if any and reasons thereof

Documents to be Submitted to RBI for Registration (continued)


Details of acquisitions, mergers of other companies if any together with supporting documents. Details of group companies/associate concerns/subsidiaries/holding companies Details of infusion of capital if any during last financial year together with the copy of return of allotment filed with Registrar of Companies Details of the bank balances/bank accounts/complete postal address of the branch/bank, loan/credit facilities etc. Availed

Documents to be Submitted to RBI for Registration (continued)


Business plan for next three years indicating market segment to be covered without any element of public deposits Cash flow statement, asset/income pattern statement for next three years Brief background note on the activities of the company during the last three years and the reasons for applying for NBFC registration II(b) is the company engaged in any capital market activity? If so, whether there has been any non-compliance with SEBI Regulations? (Statement to be certified by Auditors).

Documents to be Submitted to RBI for Registration (continued)


Whether any prohibitory order was issued in the past to the company or any other NBFC/RNBC with which the directors/promoters etc. were associated? If yes, details there of Whether the company or any of its directors was/is involved in any criminal case, including under section 138(1) of the Negotiable Instruments Act? If yes, details thereof Whether the company was granted any permission by ECD to function as Full-fledged Money Changers? Whether the company was/is authorised by ECD to accept deposits from NRIs Whether Fit and Proper Norms for Directors have been fulfilled

List of NBFCs in Bangalore


 Bagmane Leasing And Finance Pvt. Ltd.  Chaitanya India Fin Credit Pvt Ltd.  Gundlupet Finance And Investments Pvt. Ltd.  Infrastructure Development Corporation (Karnataka) Ltd.  Life Line Fin-Invest Pvt. Ltd  McDowell Holdings Ltd  M.V.S. Finvest Pvt. Ltd.  NABARD Financial Services Ltd.  Prolific Finvest Pvt. Ltd.

List of NBFCs in Bangalore (continued)


 Shanthala Finance Private Ltd.  Siddalingeshwar Finance Private Ltd.,  Vasavi Finvest Ltd., Shimoga  Dr B.R. Ambedkar Development Corporation Ltd.  Regal Investment & Trading Co. Pvt. Ltd.  Cisco Systems Capital ( India) Pvt. Ltd.  Ujjiwan Financial Services Pvt. Ltd.  Jupiter Capital Ltd. Janalakshmi Financial Services Pvt. Ltd.

Major Products Offered by NBFCs in India


Funding of commercial vehicles Funding of infrastructure assets Retail financing Loan against shares Funding of plant and machinery Small and Medium Enterprises Financing Financing of specialized equipment Operating leases of cars, etc

CONTENT
 Meaning  Definition  Functions  IRDA Regulations  MFIs Headquartered in Bangalore

Meaning of MFI
The term microfinance refers to small-scale financial services, both credit and savings that are extended to the poor in rural, semi-urban and urban areas. A world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers.

Definition of MFI
The proposed Microfinance Services Regulation Bill defines microfinance services as providing financial assistance to an individual or an eligible client, either directly or through a group mechanism for : i. an amount, not exceeding rupees fifty thousand in aggregate per individual, for small and tiny enterprise, agriculture, allied activities (including for consumption purposes of such individual or ii. an amount not exceeding rupees one lakh fifty thousand in aggregate per individual for housing purposes, or iii. such other amounts, for any of the purposes mentioned at items (i) and (ii) above or other purposes, as may be prescribed.

Definition of MFI
MFI as an organisation or association of individuals including the following if it is established for the purpose of carrying on the business of extending microfinance services : i. a society registered under the Societies Registration Act, 1860,

ii. a trust created under the Indian Trust Act,1880 or public trust registered under any State enactment governing trust or public, religious or charitable purposes,

Definition of MFI (continued)


iii. a cooperative society / mutual benefit society / mutually aided society registered under any State enactment relating to such societies or any multistate cooperative society registered under the Multi State Cooperative Societies Act, 2002 but not including :   a cooperative bank as defined in clause (cci) of section 5 of the Banking Regulation Act, 1949 or a cooperative society engaged in agricultural operations or industrial activity or purchase or sale of any goods and services.

Functions of MFI
Group Lending Providing Education

Empower Women

Connecting the World

Not Just Credit

IRDA Regulations on MFIs


IRDA notified Micro-Insurance Regulations on 10th November 2005 with the following key features to promote and regulate microinsurance products. The regulations focus on the direction, design and delivery of the products : A tie-up between life and non life insurance players for integration of product to address risks to the individual, his family, his assets and habitat, Monitoring product design through file and use, Breakthrough in distribution channels with inclusion of NGOs, SHGs, MFIs and PACS to provide micro-insurance, with appropriate compensation for their services, Enlarged servicing activities entrusted to micro-insurance agents, Issue of policy documents in simple vernacular language.

IRDA Regulations on MFIs (continued)


IRDA regulations do not favour composite insurance (i.e., life and non-life insurances by the same company) and also limit the agency tie-up to one life and one non-life insurer. IRDA has allowed insurers to issue policies with a maximum cover of Rs. 50,000 for general and life insurance under these regulations. Another striking feature of the regulation is the provision of extending coverage to the family as a unit as against the system of insurance coverage to individual lives. The insurer has to take IRDAs prior approval for launching microinsurance products through the file and use mode.

MFIs Headquartered in Bangalore


1. 2. 3. 4. 5. 6. 7. BSS Microfinance Pvt. Ltd. Grameen Financial services Pvt. Ltd. Initiatives for Development Foundation Ujjivan Financial Services Pvt. Ltd. Janalakshmi Financial Services Pvt. Ltd. Janodaya Trust Sanghamitra Rural Financial Services

CONTENT
 Meaning  Definition  Principles  List of Co-operative Banks in Bangalore

Meaning and Definition of Co-operative Banks


According to the International Co-operative Alliance Statement of co-operative identity, a co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

Principles of Co-operative Banks


Voluntary and open membership Democratic member control Member economic participation Autonomy and independence Education, training and information Co-operation among Co-operatives Concern for Community

List of Co-operative Banks in Bangalore


 The Karnataka State Co-operative Apex Bank Ltd.  Bangalore City Co-operative Bank Ltd.  Bharath Co-operative Bank Ltd.  Amanath Co-operative Bank Ltd.  Malleshwaram Co-operative Bank Ltd.  Sree Banashankari Mahila Cooperative Bank Ltd.  Arya Vaishya Co-operative Bank Ltd.