A TRAINING REPORT

ON
COMPARATIVE STUDY OF NBFC IN INDIA
Submitted to:
Satyug Darshan Institute of Engineering and Technology

By:
PREETY PODDAR
Roll No. – ( 6027265)
Batch 2016 - 2019

In Partial Fulfillment of

Bachelor of Business Administration

(Industry-Integrated)
(Specialization: Financial Services and Banking)

MAHARSHI DAYANAND UNIVERSITY

ROHTAK (HARYANA)
(November, 2018)

Satyug Darshan Institute of Engineering and Technology

Bhupani Lalpur Road, Village Bhupani
Faridabad - 121002, NCR, Haryana, India
 DECLARATION

I, Ms. Preety Poddar, student of Satyug Darshan Institute of Engineering & Technology here
by declare that this training report titled “COPERATIVE STUDY OF NBFC IN INDIA .” is
the record of authentic work carried out by me during the period from 30th AUGUST 2018 to
05th NOVEMBER 2018 and has not been submitted to any other University or Institute for
the award of any degree / diploma etc.

(Signature)
Preety Poddar

Date:
 BONAFIDE CERTIFICATE

This is to certify that Ms. Preety Poddar, student of Satyug Darshan Institute of
Engineering and Technology has successfully completed the project work titled “A
COMPARATIVE STUDY OF NBFC” in partial fulfillment of requirement for the
completion of Bachelor in Business Administration (BBA II-FSB) course as prescribed by
the Maharshi Dayanand University, Rohtak, (HARYANA).

This project report is the record of authentic work carried out by her during the period from
30th AUGUST 2018 to 05th NOVEMBER 2018. She has worked under my guidance.

(Signature)
Mr. Sajid Akhtar Khan
Associate Professor, BBA Department
Project Guide (Internal)
Date:
 ACKNOWLEDGEMENT

Perseverance, inspiration and motivation have always played a great role in the success of any
venture. At this level of understanding it is often different to understand the wide spectrum of
knowledge without proper guidance and advice.

I have great pleasure and privilege in expressing my deep sense of gratitude to my Project
Guide, Mr. Sajid Akhtar Khan for his guidance and support in completing this project and
giving his valuable insights and suggestion regarding the same, which has helped my project
to shape up the way, it is now. It was only because of his helpful nature that I was given absolute
freedom to explore new directions in this project.

I would take this opportunity to thank Mr. Subhash Arora.

Finally, I would like to thank all my friends and family members who have helped me for the
completion of this project.

Preety Poddar
 PREFACE

Many students may have work on this project in different way/styles. I have also tried to work
on this project in a different way.

It was for the first time I got the opportunity to work in such a prestigious and well-known
organization. And things which I have experienced in my training time are going to help me
throughout my life time. I have worked on this project with great enthusiasm and zeal.

Preety Poddar
DATE:
 TABLE OF CONTENT

S.NO PARTICULARS PAGE NO.

1 Introduction to the study

2 Company Profile

3 Literature review

4 Research Methodology
 Objectives of the Study
 Research Design
 Method of Data Collection
 Limitations of the Study

5 Data Analysis & Interpretation

6 Findings, Conclusion and Suggestions

7 Bibliography

Annexure
 CHAPTER – 1
INTRODUCTION
Non-Banking Financial Companies (NBFC’s)

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.
A non-banking institution which is a company, and which has its principal business of receiving
deposits under any scheme or arrangement or any other manner, or lending in any manner is
also a non-banking financial company (residuary non-banking company).
NBFC in India are registered companies conducting business activities similar to regular banks.
Their banking operations include making loans and advances available to consumers and
businesses, acquisition of marketable securities, leasing of hard assets like automobiles, hire-
purchase and insurance business.
Though they are similar to banks, they differ in a couple of ways. NBFC‟s cannot accept
demand deposits (deposits that can be withdrawn at immediate notice), they cannot issue
checks to customers and the deposits with them are not insured by the DICGC (the India
equivalent of FDIC in the US system). Either the RBI (Reserve Bank of India) or the SEBI
(Securities and Exchange Board of India) or both regulate NBFC‟s.
Though the NBFC‟s has been around for a long time, they have recently gained popularity
amongst institutional investors, since they facilitate access to credit for semi-rural and rural
India where the reach of traditional banks has traditionally been poor.
NBFC‟s have also had a major impact in developing small business in rural India through local
presence and strong customer relationships. Usually the loan officers in such NBFC‟s know
the end customer or have a strong “informal” understanding of the credibility of the borrower
and are able to structure their loans appropriately.

Classification of NBFCs based on the Nature of its business:

 Equipment Leasing Company
 Hire-purchase company
 Loan company
 Investment company
 Infrastructure finance company
TheNBFCs that are registered with RBI are basically divided into 4 categories depending upon
its nature of business:

Reclassification of NBFCs:

However, in terms of the NBFC Acceptance of Public Deposits (Reserve Bank) Directions,
1988 with effect from December6, 2006 the above NBFCs registered with RBI have been
reclassified as:

1. Loan Company (LC)

Loan company means any company which a financial institution is carrying on as its principal
business the providing of finance whether by making loans or advances or otherwise for any
activity other than its own but does not include an Asset Finance Company.

2. Investment Company (IC)

Investment Company is a company which is a financial institution carrying on as it’s principal

business the acquisition of securities.
Investment Companies are further divided into following sub- categories:

• Core Investment Companies:

Core Investment Companies in terms of RBI’s Notification mean:
A non-banking financial company carrying on the business of acquisition of shares and
securities and which satisfies the following conditions as on the date of the last audited balance
sheet: -
(i) It holds not less than 90% of its net assets in the form of investment in equity shares,
preference shares, bonds, debentures, debt or loans in group companies.
(ii) It’s investments in the equity shares (including instruments compulsorily convertible
into equity shares within a period not exceeding 10years from the date of issue) in group
companies constitutes not less than 60% of its net assets.

Net assets, for the purpose of this provision, would mean total assets excluding –
• cash and bank balances;
• investment in money market instruments and money market mutual funds
• advance payments of taxes; and
• deferred tax payment.

(iii)It does not trade in its investments in shares, bonds, debentures, debt or loans in group
companies except through block sale for the purpose of dilution or disinvestment;

(iv)It does not carry on any other financial activity referred to in Section45I(c) and 45I (f) of
the Reserve Bank of India Act, 1934 except:
a) investment in
i. bank deposits,
ii. money market instruments, including money market mutual funds,
iii. government securities, and
iv. bonds or debentures issued by group companies;

b) granting of loans to group companies; and

c) issuing guarantees on behalf of group companies.

• Other Companies

 Asset Finance Company (AFC)

AFC would be defined as any company which is a financial institution carrying on as its
principal business the financing of physical assets supporting productive / economic activity,
such as automobiles, tractors, lathe machines, generator sets, earth moving and material
handling equipment, moving on own power and general-purpose industrial machines.
Financing of physical assets may be by way of loans, lease or hire purchase transactions.

 Mutual Benefit Financial Company (MBFC)

Mutual Benefit Financial Company means a company which is a financial institution notified
by The Central Government under section 620A of The Companies Act 1956.
Non-Banking Financial Companies in India:

Non-Banking Financial Companies (NBFCs) have come a long way from the era of
concentrated regional operations, lesser credibility and poor risk management practices to
highly sophisticated operations, pan-India presence and most importantly an alternate choice
of financial intermediation. Today, NBFCs are present in the competing fields of vehicle
financing, housing loans, hire purchase, lease and personal loans. More often than not, NBFCs
are present where the risk is higher (and hence the returns), reach is required (strong last-mile
network), recovery needs to be the focus area, loan-ticket size is small, appraisal and
disbursement has to be speedy and flexibility in terms of loan size and tenor is required.
NBFCs‟ growth had been constrained due to lack of adequate capital. Going forward, we
believe capital infusion and leverage thereupon would catapult NBFCs‟ growth in size and
scale.
NBFCs are not required to maintain cash reserve ratio (CRR) and statutory liquid ratio (SLR).
Priority sector lending norm of 40% (of total advances) is not applicable to them. While this is
at their advantage, they do not have access to low cost demand deposits. As a result, their cost
of funds is always high, resulting in thinner interest spread.

NBFCs are different from Banks:

 NBFCs cannot accept demand deposits (Demand deposits are funds deposited in an
institution, that are payable immediately on demand e.g.: Savings account, Current account
etc.)
 A NBFC cannot issue cheques, to their customers and is not a part of the payment and
settlement system.
 Deposit insurance facility of Deposit Insurance Credit Guarantee Corporation (DICGC) is
not available for NBFC depositors
 They cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to
time.
 They cannot offer gifts/incentives or any other additional benefit to the depositors.
 They should have minimum investment grade credit rating, from the credit rating agencies.
Type of Services provided by NBFCs:

NBFCs provide range of financial services to their clients. Types of services under non-
banking finance services include the following:

1. Hire Purchase Services

2. Leasing Services
3. Housing Finance Services
4. Asset Management Services
5. Venture Capital Services
6. Mutual Benefit Finance Services (Nidhi) banks.

The above type of companies may be further classified into those accepting deposits or those
not accepting deposits.

Now we take a look at each type of service that an NBFC could undertake.

Hire Purchase Services

Hire purchase the legal term for a conditional sale contract with an intention to finance
consumers towards vehicles, white goods etc. If a buyer cannot afford to pay the price as a
lump sum but can afford to pay a percentage as a deposit, the contract allows the buyer to hire
the goods for a monthly rent. If the buyer defaults in paying the instalments, the owner can
repossess the goods. HP is a different form of credit system among other unsecured consumer
credit systems and benefits. Hero Honda Motor Finance Co., Bajaj Auto Finance Company is
some of the HP financing companies.

Leasing Services

A lease or tenancy is a contract that transfers the right to possess specific property. Leasing
service includes the leasing of assets to other companies either on operating lease or finance
lease. An NBFC may obtain license to commence leasing services subject to , they shall not
hold, deal or trade in real estate business and shall not fix the period of lease for less than 3
years in the case of any finance lease agreement except in case of computers and other IT
accessories. First Century Leasing Company Ltd., Sundaram Finance Ltd. is some of the
Leasing companies in India.

Housing Finance Services

Housing Finance Services means financial services related to development and construction
of residential and commercial properties. An Housing Finance Company approved by the
National Housing Bank may undertake the services /activities such as Providing long term
finance for the purpose of constructing, purchasing or renovating any property, Managing
public or private sector projects in the housing and urban development sector and Financing
against existing property by way of mortgage. ICICI Home Finance Ltd., LIC Housing
Finance Co. Ltd., HDFC is some of the housing finance companies in our country.

Asset Management Company

Asset Management Company is managing and investing the pooled funds of retail investors
in securities in line with the stated investment objectives and provides more diversification,
liquidity, and professional management service to the individual investors. Mutual Funds are
comes under this category. Most of the financial institutions having their subsidiaries as Asset
Management Company like SBI, BOB, UTI and many others.

Venture Capital Companies

Venture capital Finance is a unique form of financing activity that is undertaken on the belief
of high-risk-high-return. Venture capitalists invest in those risky projects or companies
(ventures) that have success potential and could promise sufficient return to justify such
gamble. Venture capitalist not only provides finance but also often provides managerial or
technical expertise to venture projects. In India, venture capital concentrate on seed capital
finance for high technology and for research & development. ICICI ventures and Gujarat
Venture are one of the first venture capital organizations in India and SIDBI, IDBI and others
also promoting venture capital finance activities.

Mutual Benefit Finance Companies (MBFC's)

A mutual fund is a financial intermediary that allows a group of investors to pool their money
together with a predetermined investment objective. The mutual fund will have a fund
manager who is responsible for investing the pooled money into specific securities/bonds.
Mutual funds are one of the best investments ever created because they are very cost efficient
and very easy to invest in. By pooling money together in a mutual fund, investors can
purchase stocks or bonds with much lower trading costs than if they tried to do it on their
own. But the biggest advantage to mutual funds is diversification.

There are two main types of such funds, open-ended fund and close-ended mutual funds. In
case of open-ended fund, the fund manager continuously allows investors to join or leave the
fund. The fund is set up as a trust, with an independent trustee, who keeps custody over the
assets of the trust. Each share of the trust is called a Unit and the fund itself is called a Mutual
Fund. The portfolio of investments of the Mutual Fund is normally evaluated daily by the
fund manager on the basis of prevailing market prices of the securities in the portfolio and
this will be divided by the number of units issued to determine the Net Asset Value (NAV) per
unit. An investor can join or leave the fund on the basis of the NAV per unit.

In contrast, a close-end fund is similar to a listed company with respect to its share capital.
These shares are not redeemable and are traded in the stock exchange like any other listed
securities. Value of units of close-end funds is determined by market forces and is available at
20-30% discount to their NAV.

Financial Sector Reforms & Liberalization measures for NBFCs:

During the period from 1992-93 to 1995-96 Indian Government took many steps to reform
the financial sector like liberalized bank norms, higher ceiling on term loans, allowed to set
their own interest rates, freed to fix their own foreign exchange open position subject of RBI
approval and guidelines issued to ensure qualitative improvement in their customer service.

Foreign equity investments in NBFCs are permitted in more than17 categories of NBFC
activities approved for foreign equity investments such as merchant banking, stock broking,
venture capital, housing finance, forex broking, leasing and finance, financial consultancy
etc. Guidelines for foreign investment in NBFC sector have been amended so as to provide
for a minimum capitalization norm for the activities, which are not fund based and only
advisory, or consultancy in nature, irrespective of the foreign equity participation level.

The objectives behind the reforms in the financial sector are to improve the efficiency and
competitiveness in the system.

Recent trends in Non-Banking Financial Companies Sector:

NBFCs initially cater to the needs of individual and small savings investors and later
developed into financial institutions, providing services similar to those of banks. NBFCs
have many tailor-made services for their clients with lesser degree of regulation. They have
offered high rate of interest to their investors and atrracted many small size investors. In
1998, Reserve Bank of India implemented unprecedented regulatory measures to safeguard
the public deposits.

The Bank has issued detailed directions on prudential norms, vide Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions, 1998. The directions interalia,
prescribe guidelines on income recognition, asset classification and provisioning
requirements applicable to NBFCs, exposure norms, constitution of audit committee,
disclosures in the balance sheet, requirement of capital adequacy, restrictions on investments
in land and building and unquoted shares.

The RBI has issued guidelines for entry of NBFCs into insurance sector in June 2000.
Accordingly, no NBFC registered with RBI having owned fund of Rs.2 Crore as per the last
audited Balance Sheet would be permitted to undertake insurance business as agent of
insurance companies on fee basis, without any risk participation.

The focus of regulatory initiatives in respect of financial institutions (FIs) during 2004-05
was to strengthen the prudential guidelines relating to asset classification, provisioning,
exposure to a single/group borrower and governance norms. Business operations of FIs
expanded during 2004-05. Their financial performance also improved, resulting from an
increase in net interest income. Significant improvement was also observed in the asset
quality of FIs, in general. The capital adequacy ratio of FIs continued to remain at a high
level, notwithstanding some decline during the year.

Regulatory initiatives in respect of NBFCs during the year related to issuance of guidelines
on credit/debit cards, reporting arrangements for large sized NBFCs not accepting/holding
public deposits, norms for premature withdrawal of deposits, cover for public deposits and
know your customer (KYC) guidelines. Profitability of NBFCs improved in 2003-04 and
2004-05 mainly on account of containment of expenditure. While gross NPAs of NBFCs, as a
group, declined during 2003-04 and 2004-05, net NPAs after declining marginally during
2003-04, increased significantly during 2004-05.

How do NBFCs facilitate Economic Development.

. 1. Greater Employment Opportunities and Standard of Living

NBFCs help attain the objective of macroeconomic policies of creating more jobs in the
country by promoting SMEs and private industries through lending them loans. This increase
in new businesses consequently raises the demand for manpower and creates employment.
Furthermore, the Purchasing Power Parity (PPP) of people rises and so does their standard of
living.
2. Strengthening of Financial Market
The financial market relies heavily on Non-banking financial institutions for raising capital.
The start-ups and small-sized businesses are dependent on funds offered by NBFCs and also
in order to maintain liquidity. For an effective functioning and balance in the financial market,
NBFCs play a significant role.

3 Supplying long-term credits

Unlike the regular banks, NBFCs extend long-term credits to infrastructure, commerce and
trade companies. The traditional banks expect timely, schedules and short-term repayment of
loans that may not always suit the requirements of these industries. NBFCs, on the other hand,
fund large projects and so promotes economic growth. They also allow industries to participate
in equity.

4. Mobilisation of Funds
Non-banking financial companies help in rotation of resources, asset distribution and
regulation of income to shape the economic development. They enable converting saving into
investments and thus helps in the mobilisation of funds/resources in the economy.

5. Growth of National Income

As NBFCs aim to build capital for several industries – private and otherwise – they aid in
accumulating a capital stock for the country. This directly adds on to the national income and
results in the progression of Gross Domestic Product (GDP).
 CHAPTER-2
COMPANY PROFILE
COMPANY PROFILE ON LIC HOUSING FINANCE:

LIC Housing Finance Limited is engaged in the housing finance business. The Company
provides loans for purchase, construction, repairs and renovation of houses/flats to
individuals, corporate bodies, builders and co-operative housing societies. It operates through
its subsidiaries, which include LICHFL Care Homes Limited, which is engaged in the
business of setting up, running and maintaining assisted living community center/care homes
for senior citizens; LICHFL Financial Services Limited, which is engaged in the business of
marketing financial products and services; LICHFL Asset Management Company Limited,
which is engaged in business of managing, advising, administering mutual funds, unit trusts,
investment trusts and to act as financial and investment advisors, and LICHFL Trustee
Company Private Limited, which acts as a trustee to venture capital trusts and funds. The
Company operates primarily in India.

LIC HOUSING FINANCE LTD. - COMPANY HISTORY:

LIC Housing Finance Ltd is one of the largest housing finance companies in India with a key
objective of providing long term finance to individuals for the purchase or construction of
house/flat for residential purposes in India. LICHFL also provides finance on existing
property for business/personal needs and also gives loans to professionals for
purchase/construction of Clinics/Nursing Homes/ Diagnostic Centers/ Office Space and also
for purchase of equipment. The Company also provides finance to builders and developers
engaged in the business of construction of houses or flats for residential purpose and to be
sold by them. The company has one of the widest networks of offices across the country. The
company has its registered and corporate office at Mumbai. It has 9 regional offices 23 back
offices and 249 marketing units across India. LICHFL has set up a representative office in
Dubai and Kuwait to cater to the non-resident Indians in the GLCC countries covering
Bahrain Dubai Kuwait Qatar and Saudi Arabia.LICHFL has four subsidiaries viz. LICHFL
Financial Services Limited LICHFL Asset management Company Limited LICHFL Trustee
Company Private Limited and LICHFL Care Homes Limited. LICHFL Financial Services
was established for undertaking non fund-based activities like marketing of housing loans
insurance products credit card mutual funds Pension Schemes etc. The company provides
multiple financial solutions for every customer segment through its territory offices spread
across the Country.LICHFL Asset management Company is the Investment Manager of
LICHFL Urban Development Fund a Venture Capital Fund with focus on mid income
housing and Income yielding micro infrastructure assets. The LICHFL Urban Development
Fund is sponsored by LIC Housing Finance Limited and co-sponsored by LIC of India.
LICHFL Trustee Company Private Limited currently provides Trusteeship services to
LICHFL Urban Development Fund managed by LICHFL Asset Management Company
Limited. LICHFL Care Homes Limited was established to set up and operate assisted
community living centres for Senior Citizens. It has established Care Homes under two
Projects in Bengaluru and another one in Bhubaneswar is nearing Completion. LICHFL Care
Homes Limited is also developing a Senior Living project at Vasind in collaboration with
TATA value Homes Limited.LIC Housing Finance Ltd was incorporated on June 19 1989.
The company was promoted by LIC of India and went public in the year 1994. The company
is recognized by National Housing Bank and listed on the National Stock Exchange (NSE) &
Bombay Stock Exchange Limited (BSE) and its shares are traded only in Demat format. The
GDR's are listed on the Luxembourg Stock Exchange.In the period of 2001 the company
launched their new scheme called Griha Vikas. In the year 2002 the company signed a deed
of assignment to take over individual housing loan portfolio of Citibank. In the year 2003
they unveiled a new project for elderly people called LICHFL Care Homes. The company
launched their maiden GDR issue in the year 2004. Also, they introduced flexi-fixed scheme
offering fixed rate of interest for first five years and variable thereafter. In October 2005 the
company started offering of 'New Griha Laxmi' housing loans against the security of certain
approved financial assets like Bank Fixed Deposits National Savings Certificates and Life
Insurance Policies. In the year 2006 the company introduced new Griha Jestha for senior
citizens for buying unit of LICHFL Care Homes Ltd. In May 2007 the company launched
maiden Fixed Deposit Scheme.In October 31 2007 the company incorporated LICHFL
Financial Services Ltd for undertaking non fund-based activities like marketing of housing
loans insurance products credit card mutual fund personal loan etc. In February 2008 they
launched reverse mortage for senior citizens above 60 years of age. In February 14 2008 the
company incorporated LICHFL Asset Management Company Private Limited for
undertaking the business of managing advising administering venture funds unit trust
investment trust in India as well as abroad. In March 5 2008 the company incorporated
LICHFL Trustee Company Private Limited for undertaking the business of trustees of venture
capital trust funds - in India and offshore fund. In March 12 2008 they launched a new
venture capital fund for realty projects. During the year 2009-10 the company was awarded
the 'Second Best Home Loan Provider' award by Outlook Profit. During the year 2010-11 the
company launched a unique interest rate scheme namely 'MINI 5' to cater to housing finance
needs of the priority sector population residing in Tier II and Tier III cities.On 6 September
2010 LIC Housing Finance announced that it is applying for a license with the Pension Fund
Regulatory Development Authority (PFRDA) to act as Aggregator under the National
Pension System (NPS) - Lite.The Board of Directors of LIC Housing Finance at its meeting
held on 27 October 2010 approved subdivision of Equity shares of the Company of Rs. 10/-
each into 5 equity shares of Rs. 2/- each. In 2011 LIC Housing Finance crossed Rs 50000
crore loan portfolio milestone. On 21 March 2012 LIC Housing Finance completed allotment
of 3 crore equity shares to LIC of India the promoter of the company on preferential
allotment basis at issue price of Rs 270 per share. In 2013 the company crossed Rs 1000 crore
profit and Rs 75000 crore assets mark. In 2015 the company crossed Rs 1 lakh crore loan
portfolio mark. The Board of Directors of LIC Housing Finance at its meeting held on 15
December 2015 approved the proposal to acquire upto 19.3% in the paid up Equity Share
Capital of LIC Nomura Mutual Fund Asset Management Company Limited from Nomura
Asset Management Strategic Investment Pte Ltd for a consideration not exceeding Rs 27.36
crore and upto 19.3% in the paid up Equity Share Capital of LIC Nomura Mutual Fund
Trustee Company Private Ltd. for a consideration not exceeding Rs 1.52 lakh.In 2017 LIC
Housing Finance crossed Rs 1.5 lakh crore assets mark.

PRODUCTS AND SURVICES PROVIDED BY LIC HOUSING FINANCE

DEPOSITS:

Sanchay Public Deposit Schemes

 Deposit scheme is available for Individuals, limited and private limited companies,
Non-Resident Indians and Cooperative societies and Association of persons.
 Minimum deposit of Rs.10000 and additional increment should be in multiples of
Rs.1000.
 The interest payable is compounded annually on 31st March.
 Rate of interest varies based on the term of deposits.
  The senior citizens are paid additional 0.10% on the deposits of up to Rs.50000 and
0.25% on deposits of Rs.51000 and above.

LOANS:

LOANS AGAINST PROPERTY FOR INDIVIDUALS

 Loans is provided for the following purposes

 Children’s education and marriage.
 Business expansion
 Purchase of property
 The minimum amount of loan is Rs.200000.
 The term of loan is maximum 15 years.
 The loan is repayable in monthly installments.
 Loans are provided against
 The equitable or registered mortgage of the property. The property should not
be more than 35 years old.
 Demand promissory notes.
 The upfront fees are 0.01%+ service tax as applicable
 The loan is only for resident individuals.

LOANS AGAINST RENTAL SECURITIZATION

 This loan is provided to the listed and unlisted companies against the security of the
Commercial properties owned by them like office premises or land or property to be
purchased by them.
 Loan can be utilized for the purpose of existing loans, takeovers or for the purchase of
fixed assets.
 Loans are provided only for the properties which are fully completed.
 Loans are given for the term of 10 years.
LOANS AGAINST PROPERTY NON-RETAIL LOAN
 This loan is provided to the listed and unlisted companies against the security of the
Commercial properties owned by them like office premises or land or property to be
purchased by them.
 Loan can be utilized for the purpose of existing loans, takeovers or for the purchase of
fixed assets.
 Loans are provided only for the properties which are fully completed.
 Loans are given for the term of 10 years.

LOAN AGAINST SECURITIES

 Loans are provided against the deposits made in nationalized banks, deposits in post-
offices like NSC certificates, KisanVikas Patra etc. and LIC policies having surrender
value.
 Loan is provided only upto the 95% of the face value of the securities and the surrender
value of the policies.
 Minimum loan amount given is Rs.50000
 Maximum term for the loan is upto 20 years.
 The loans can be clubbed together with the other home loans taken.

LOANS TO PROFESSIONALS

 Loans are provided for purchasing, extending, modifying of the commercial properties
owned by them for their professional practices and can be used for buying any sort of
equipments.
 Resident Indian professional are only eligible for this loan, companies or partnership
firms associated with the professionals are also eligible for the loan.

The term of loan is of 10 years.

 Payment mode of the loan is through EMI.

 The securities that can be given against the loans are:
1. Equitable or registered mortgage of the property against which the loan is taken.
2. Demand promissory notes.
3. Guarantee of the Directors or the partners of the company or the firms.
 4. In case of the companies the R.O.C is also required.
5. Additional securities are also given if the equipments of the firm is also
financed.
6. Interest rate has to be confirmed from the nearest centers

HOME LOANS TO INDIVIDUALS

 This loan is given to the individuals for
the PURCHASE/CONSTRUCTION/EXTENSION of a new or existing property.
 The minimum loan amount is Rs.100000
 The loan is sanctioned according to the property cost.

1. 85% of the total cost of the property including stamp-duty and registration charges upto
the loan of 20 lacs.
2. 80% of the total cost of the property including stamp-duty and registration charges upto
the loan of 20lacs-75 lacs.
3. 75% of the total cost of the property including stamp-duty and registration charges for
the loan above Rs.75 lacs.

 Maximum term of loan is 30 years for salaried and 20 years for the self-employed.
 Repayable mode is through EMI.
 The interest rate has to be confirmed from the nearest office.
 The upfront fees have to be confirmed as it is revised time to time.

HOME LOANS TO NON-RESIDENT INDIANS

 This facility is available to the salaried individual having the status of NRI/PIO for
PURCHASE/COSTRUCTION /EXTENSION of a new or an existing property.
 The minimum loan amount is Rs.100000
 The loan is sanctioned according to the property cost:

1. 85% of the total cost of the property including stamp-duty and registration charges upto
the loan of 20 lacs.
2. 80% of the total cost of the property including stamp-duty and registration charges upto
the loan of 20lacs-75 lacs.
 3. 75% of the total cost of the property including stamp-duty and registration charges for
the loan above Rs.75 lacs.

 Maximum term of loan for professionals is 15 years and for others is 10 years.
 Repayable mode is through EMI.
 Interest rates have to be confirmed from nearby centers.
 Upfront fees is payable at prevailing rates.

HOME LOANS TO PENSIONERS

Loans under this scheme are given to the pensioners before retirement for purchasing
construction or extension of a house or a flat.

The person should be 50 years or above of age and is governed under a pension scheme on
retirement.

The loan term is 15 years or 70 years of age whichever is earlier.

An undertaking letter has to be given for the 30% of the loan or the amount decided by the
Area officer which will be paid out of the retirement benefits.

Loans can also be availed after retirement for the same purpose if the person has a stable income
throughout his life can apply for this loan.

The loan has to be paid before 70 years of age. And the loan requires a guarantor.

COMPANY PROFILE OF RELIANCE CAPITAL:

Reliance Capital Limited is a non-banking financial services company. The Company has
interests in asset management and mutual funds, pension funds, life and general insurance,
commercial finance, home finance, stock broking services, wealth management services,
financial products distribution, asset reconstruction and other activities in the financial
services sector. The Company's segments include Finance & Investments, which includes the
corporate lending and investment activities; Asset Management, which includes asset
management activities, including mutual fund and portfolio management services; General
Insurance, which includes the general insurance business; Life Insurance, which includes the
life insurance business; Commercial Finance, which includes the consumer finance and home
finance businesses, and Others, which includes other financial and allied services. It also
offers mortgages, small and medium enterprises (SME) loans, vehicle loans and
infrastructure loans.
RELIANCE CAPITAL LTD. (RELCAPITAL) - COMPANY HISTORY

Reliance Capital Ltd a part of the Reliance Anil Dhirubhai Ambani Group is one of India's
leading private sector financial services companies. Reliance Capital is primarily a holding
company holding investments in its subsidiaries associates and other group companies.
Reliance Capital has interests in asset management and mutual fund life and general
insurance commercial and home finance stock broking wealth management services
distribution of financial products asset reconstruction proprietary investments and other
activities in financial services. Reliance Capital Ltd was incorporated in year 1986 at
Ahmedabad in Gujarat with the name Reliance Capital & Finance Trust Ltd. The company
entered the capital market with the maiden issue in the year 1990. Initially the company
engaged in steady annuity yielding businesses such as leasing bill discounting and inter-
corporate deposits. In the year 1993 the company diversified their business in the areas of
portfolio investment lending against securities custodial services money market operations
project finance advisory services and investment banking. In January 5 1995 the company
changed their name from Reliance Capital & Finance Trust Ltd to Reliance Capital Ltd. In
December 1998 they obtained their registration as a Non-banking Finance Company (NBFC).
During the year 2001-02 the company took a new strategic initiative by entering into the life
insurance and general insurance business. They made investments in Reliance General
Insurance Company Ltd and Reliance Life Insurance Company Ltd by virtue of which the
said two companies became the subsidiaries of the company. Also, they divested their holding
in Observer Network Pvt Ltd and Reliance Net Ltd and thus the said two companies ceased to
be the subsidiaries of the company. The company shifted their registered office to Jamnagar
in Gujarat.During the year 2005-06 Reliance Asset Management (Mauritius) Ltd and
Reliance Asset Management (Singapore) Pte Ltd became subsidiaries of the company. The
company along with their affiliate Reliance Land Pvt Ltd acquired the controlling stake in
Adlabs Films Ltd a leading company engaged in the entertainment sector. Pursuant to such
acquisition the company and Reliance Land Pvt Ltd became Promoters of Adlabs Films
Ltd.During the year the company acquired AMP Sanmar Life Insurance Company Limited
with the approval of Insurance Regulatory and Development Authority (IRDA) which
enabled the company to enter the exciting growth area of life insurance. Pursuant to the
acquisition AMP Sanmar Life Insurance was renamed as Reliance Life Insurance Company
Ltd. They shifted their registered office to Mumbai in Maharashtra.During the year 2006-07
Reliance Venture Asset Management Pvt Ltd Travelmate Services (India) Pvt Ltd Medybiz
Pvt Ltd Net Logistics Pvt Ltd Reliance Capital Research Pvt Ltd and Reliance Technology
Ventures Pvt Ltd became subsidiaries of the company. As per the scheme of amalgamation
Reliance Capital Ventures Ltd was amalgamated with the company. Reliance Mutual Fund
launched 6 new schemes and they increased the number of branches from 81 to 123. In the
Reliance Life Insurance, the distribution network was increased to 217 branches as against
153 branches. Also, Reliance Life Insurance Company Ltd secured the approval of the
Insurance Regulatory & Development Authority (IRDA) to start an additional 130 branches.
Reliance Asset Management (Singapore) Pte Ltd a wholly owned subsidiary of company
received approval from the SEBI and the Monetary Authority of Singapore to commence
operations. In February 2007 the first fund of this subsidiary India Equity Growth Fund
commenced operations. In April 2007 the company formally launched Reliance Money a
comprehensive online financial services and solutions portal which provides the customers
with investment and trading access to equities equity options commodities futures mutual
funds IPOs life and general insurance products offshore investments and credit cards. The
range of offerings the ease of access and the sheer technological edge which Reliance Money
brings is unparalleled in the history of the Indian financial and capital markets. During the
year 2007-08 Reliance Capital Markets Pvt. Ltd. and Reliance Asset Management (UK) Plc
became subsidiaries of the company. Reliance Mutual Fund launched 6 new schemes
Reliance Auto Invest Plan Reliance Secure Child Plan (unit linked plan) Reliance Wealth +
Health Plan (unit linked plan) and Reliance Total Investment Plan Series (Retirement and unit
linked insurance plan) and Group Leave encashment plan. Reliance Money made tie ups with
global partners like Reuters Vasco Valcambi Webaroo World Gold Council and Wincor
Nixdorf to provide the customers better access and wider choice of quality global products. In
May 2007 Reliance Consumer Finance commenced operations. Thus, the company entered
into the fast-expanding consumer finance segment with a wide range of products which
includes personal loans vehicle loans (cars and commercial vehicles) home loans loan against
property and SME loans. In November 2007 Global fund management house Eton Park
bought 4.76% equity stake in the Asset Management Company. In January 2008 RCAM
launched a new fund - Reliance Natural Resources Fund. In February 2008 the company
received approval from Reserve Bank of India to commence the business of asset
reconstruction.During the year 2008-09 Reliance Consultants (Mauritius) Ltd Reliance
Equities International Pvt Ltd Reliance Home Finance Pvt Ltd Reliance Capital Services Pvt
Ltd Reliance Capital (Singapore) Pte Ltd Reliance Consumer Finance Pvt Ltd Reliance
Securities Ltd Reliance Prime International Ltd Reliance Commodities Ltd Reliance
Financial Ltd Reliance Alternative Investments Services Pvt Ltd and Reliance Capital
Pension Fund Ltd became subsidiaries of the company. In January 2009 Reliance ARC
acquired 2 NPAs from Dena Bank for an aggregate acquisition price of over Rs 2 crore.
During the year Reliance Capital Asset Management received approval from Malaysian
Authorities to start operations in Malaysia. Also, RCAM received approval from the
Financial Services Authority in United Kingdom to commence investment advisory
operations in the United Kingdom. Reliance Life Insurance launched 89 new life insurance
policies namely Reliance Super Invest Assure plan Reliance Super Invest Assure Plus Plan
Reliance Guaranteed Return Plan Series I Insurance Reliance Guaranteed Return Plan Series
I Pension Reliance Group Savings Linked Insurance Plan Reliance Group Credit Shield Plan
Reliance Imaan Investment Plan and Reliance Savings Linked Insurance Plan.During the year
2009-10 Reliance Asset Management (Malaysia) SDN BHD became subsidiary of the
company. Reliance Mutual Fund launched a new product feature - 'Reliance Smart Step'.
Reliance Life Insurance launched five new life insurance policies namely Reliance Jan
Samriddhi Plan Reliance Traditional Group Gratuity Plan Reliance Traditional Super Invest
Assure Plan Reliance Life Highest NAV Guarantee Plan and Reliance Life Super Golden
Years Senior Citizen Term 10 plans. In May 2009 Reliance Mutual Fund launched a new fund
- Reliance Infrastructure Fund. Reliance Spot Exchange is a new initiative of the company in
the exchange space by setting up modern exchanges in various segments. They commenced
operations by launching Reliance Spot Exchange (RSX) in October 2009. In June 2010 the
company transferred their Consumer Finance Division (CFD) business to two of their wholly
owned subsidiaries namely Reliance Home Finance Pvt Ltd (RHFPL) and Reliance
Consumer Finance Pvt Ltd (RCFPL) with effect from April 01 2010.During the year 2010-11
Reliance Exchangenext Ltd Reliance Spot Exchange Infrastructure Ltd Quant Capital Pvt Ltd
Quant Broking Pvt Ltd Quant Securities Pvt Ltd Quant Commodities Pvt Ltd Quant
Commodity Broking Pvt Ltd Quant Capital Advisors Pvt Ltd Quant Capital Finance and
Investments Pvt Ltd Reliance Wealth Management Ltd Quant Investment Services Pvt Ltd
Qoppa Trading Pvt Ltd and Valankulam Investments & Trading Pvt Ltd became subsidiaries
of the company. Also, Medybiz Pvt Ltd Net Logistics Pvt Ltd and Reliance Capital Services
Pvt Ltd ceased to be subsidiaries of the company. During the year Reliance Commercial
Finance Pvt Ltd (RCFPL) a wholly owned subsidiary of the company was amalgamated with
the company with effect from April 1 2010. In June 2010 the Brokerage and Financial
Services Business of Reliance Equities International Pvt Ltd was demerged into Quant
Broking Pvt Ltd with effect from April 1 2009. In February 2011 the Infrastructure Division
of Reliance Money Infrastructure Pvt Ltd was demerged into Reliance Capital Asset
Management Company Ltd. In October 2011 the company completed the sale of a 26% stake
in Reliance Life Insurance to Nippon Life Insurance Company for a consideration of Rs 3062
crore. In February 2012 the Company through their wholly owned subsidiary Sun
International (South Africa) Ltd acquired additional interest in Real Africa Holdings Ltd
subsequently increasing their ownership to 99%. In March 2012 Nippon Life Insurance
Company signed final agreements with the company to acquire 26% stake in Reliance Capital
Asset Management (RCAM) India's profitable Asset Management Company (AMC). On 17
August 2012 Reliance Capital announced completion of transaction for sale of 26 per cent
stake in Reliance Capital Asset Management (RCAM) to Nippon Life Insurance.On 1
February 2013 Reliance Capital Asset Management Singapore (RCAMS) a subsidiary of
Reliance Capital Asset Management (RCAM) India announced that the company has crossed
US$ 1 billion AUM milestones in its offshore funds.On 21 June 2013 Reliance Capital
announced major decisions to support Government's objective of curbing gold imports.
Reliance Capital announced that it has decided to suspend sale of gold in physical form
(including inter alia supply of gold coins for sale through India Post) and also as an
investment product across all its businesses and subsidiaries. In addition, Reliance Capital's
Commercial Finance Division has decided to suspend financing against gold as a security.
Further Reliance Capital Asset Management (RCAM) a part of Reliance Capital has decided
to suspend new subscriptions in Reliance Gold Savings Fund. Existing SIP investors will not
be affected by this decision. On 12 March 2015 Sumitomo Mitsui Trust Bank Limited of
Japan completed acquisition of 2.77 per cent strategic stake in Reliance Capital. Sumitomo
Mitsui Trust Bank has acquired an initial 2.77 percent strategic stake in Reliance Capital
amounting to Rs 371 crore (US$ 58.4 million) through preferential allotment with a lock-in
period of one year. The investment has been made at Rs 530 per share. As part of the
agreement Reliance Capital intends to establish a new bank in India with support of
Sumitomo Mitsui Trust Bank as strategic partner as and when RBI's policies permit formation
of the same. Both companies will also collaborate in providing solutions for their clients
including inter alia in the area of M&A opportunities in India and Japan and will assist each
other in distribution of their respective financial products through their networks. Sumitomo
Mitsui Trust Group is the fourth largest bank in Japan (in terms of market capitalization and
corporate loans) and Japan's largest financial institution managing assets of US$ 682 billion
with assets under custody of US$ 1.8 trillion as of September 30 2014.On 3 June 2015
Gujarat International Finance Tec-City (GIFT) a Government of Gujarat project announced
the allotment of 5 lakh sq ft of space to Anil Ambani led Reliance Capital Limited (RCL).
The company was allotted this space in the International Finance Service Centre (IFSC)
Special Economic Zone being set up under the GIFT project. This is the largest space taken
by any private sector company in IFSC under GIFT till date. On 4 August 2015 Reliance
MediaWorks Ltd. (RMW) announced the completion of the transaction for sale of its
multiplexes business to Carnival Cinemas Ltd. in the largest ever deal in the sector in India.
The sales proceeds will be used to reduce Reliance Capital's leverage by approx. Rs. 700
crore through a combination of transfer of debt of RMW and infusion of cash proceeds. The
transaction is in furtherance of Reliance Capital's stated objective of focusing purely on its
core financial services businesses significantly reducing exposure to non-core investments in
the media and entertainment sector and reducing overall debt. On 21 October 2015 Reliance
Capital Asset Management (RCAM) a part of Anil Ambani led Reliance Capital signed
definitive agreements to acquire Goldman Sachs Asset Management's (GSAM) onshore
business in India. Reliance Capital Asset Management will pay a total sum of Rs 243 crore
(US$ 37.5 million) in cash to acquire all onshore mutual fund schemes including exchange
traded funds of GSAM India.On 17 March 2016 Reliance Capital announced the completion
of the transaction for receipt of approx. Rs 1200 crore (US$ 180 million) from Nippon Life
Insurance for additional 14 per cent stake sale in Reliance Capital Asset Management
(RCAM). Nippon Life Insurance (NLI) a Fortune 500 company and one of the largest life
insurers in the world now becomes a co-sponsor of Reliance Mutual Fund along with
Reliance Capital and will own 49 per cent in Reliance Capital Asset Management. In line
with the new shareholding the name of Reliance Capital Asset Management would be
changed to Reliance Nippon Life Asset Management.On 30 March 2016 Reliance Capital
announced the completion of additional 23 per cent stake sale in Reliance Life Insurance to
Nippon Life Insurance. Nippon Life Insurance now holds 49 per cent stake in Reliance Life
Insurance. In line with the new shareholding Reliance Life Insurance will be renamed as
Reliance Nippon Life Insurance Company.On 23 November 2016 Reliance Capital
announced value unlocking in the Radio and TV businesses that will reduce its debt by
approx. Rs 1900 crore (US$ 283 million) upon final completion of stake sale transactions.
These transactions form part of Reliance Capital's stated strategy to reduce leverage and
exposure in non-core business of media and entertainment. Reliance Broadcast Network
Limited (RBNL) the largest operator of FM channels in India has signed definitive and
binding agreements with Zee Media Corporation Limited (ZMCL) to sell 49% stake in its
radio broadcast business. Simultaneously Zee Entertainment Enterprises Ltd (ZEEL) a
separate entity under Zee Group will acquire 100% stake in the Group's General
Entertainment TV business. The transaction pegs the combined Enterprise value of Radio and
TV business at approx. Rs 1900 crore (US$ 283 million). On 16 March 2017 Reliance
Capital Limited (RCL) announced plans to separate out its retail Health Insurance business
from its General Insurance business into a standalone wholly owned subsidiary. The Board of
Directors of Reliance General Insurance Company Limited (RGIL) a subsidiary of Reliance
Capital Limited (RCL) has approved this proposal subject to necessary IRDA and other
approvals. Reliance Health Insurance Ltd. the proposed new company for Health Insurance
business will be a wholly owned subsidiary of Reliance CapitalOn 24 March 2017 Reliance
Capital announced completion of transfer of its commercial finance division - Reliance
Commercial Finance Limited (RCFL) - into a separate wholly owned subsidiary. RCFL is
amongst the leading SME lenders in the Indian non-banking finance space with a focus on
asset backed lending and productive asset creation. The Commercial Finance division has an
aggregate asset under management (including securitized portfolio) portfolio of Rs 16191
crore (US$ 2.4 billion) as of 31 December 2016.On 3 July 2017 Billionloans Financial
Services Pvt. Ltd. (Billionloans) announced that it had closed a seed funding round of
approximately Rs 7 crore (US$ 1 million) from Reliance Corporate Advisory Services
Limited a wholly-owned subsidiary of Reliance Capital. Billionloans is a technology-enabled
financial services company focused on providing flexible and affordable financing options to
individuals and small businesses that have so far found it difficult to access loans from the
traditional banking system to meet their aspirationsOn 13 July 2017 Reliance Capital Ltd.
announced that it has received Rs 378 crore from Nippon Life Insurance (NLI) a Fortune 500
company and one of the largest life insurers in the world upon completion of the transaction
for increasing NLI's equity stake in Reliance Nippon Life Asset Management Limited
(RNAM) to 49%. RNAM is the largest asset manager in India in terms of AUM managing
Rs. 358059 crores (US$ 55.2 Billion) as of 31 March 2017 across mutual funds pension funds
managed accounts and offshore funds. On 22 September 2017 shares of Reliance Home
Finance Ltd. were listed on BSE and NSE consequent to a Scheme of Arrangement. As per
the Scheme shareholders of Reliance Capital were allotted one share free of cost in Reliance
Home Finance for every one share held in Reliance Capital on record date. Reliance Home
Finance Limited (RHFL) provides a wide range of solutions like home loans LAP
Construction finance and Affordable housing loans. The company also provides property
solutions' services that help customers find their dream homes/property along with financing.
The company has a strong distribution network with over 1750 distributors serving over
36000 customers across more than 100 locations through a hub and spoke model across the
country. Reliance Home Finance Limited is a subsidiary of Reliance Capital.Reliance Money
a brand by Reliance Commercial Finance Limited (RCFL) a subsidiary of Reliance Capital
Limited announced on 9 October 2017 that it has signed an agreement with Indian Renewable
Energy Development Agency Limited (IREDA) to receive funding of Rs 300 crore. IREDA is
a Government of India Enterprise under the administrative control of Ministry of New and
Renewable Energy (MNRE). This loan assistance offered by IREDA will be utilized by
Reliance Commercial Finance Limited for lending to its renewable energy and energy
efficiency projects.In late October 2017 Reliance Nippon Life Asset Management
successfully completed an initial public offer (IPO). The IPO was a mix of a fresh issue of up
to 2.44 crore equity shares by the company and an offer for sale of up to 3.67 crore equity
shares by Reliance Capital Limited and Nippon Life Insurance Company the promoter selling
shareholders. On 17 November 2017 Reliance General Insurance Company Limited (RGI)
announced that it has signed a comprehensive Bancassurance - Corporate Agency agreement
with Yes Bank India's 5th largest private sector bank with the objective to distribute multiple
general insurance products to the customers of Yes Bank further augmenting its distribution
network. Reliance General Insurance Company Ltd (RGI) a 100% subsidiary of Reliance
Capital Limited.
PRODUCTS OF RELIANCE FINANCE
 Reliance finance has business in
 Assets management
 Mutual funds
 Life insurance and general insurance
 Commercial finance
 Home finance
 Stock broking
 Weath management services
 Distribution of financial products
 Private equity
 Assets reconstruction
 Proprietary investment and
 Other activities in finance.
 CHAPTER-3
LITERATURE REVIEW
IMPORTANCE OF NBFC’S
According to RBI Non-Banking Finance Companies (NBFCs) is a constituent of the
institutional structure of the organized financial system in India. NBFCs perform a significant
and important role in our financial system. They facilitate the process of channelising of public
savings and provide better return to the depositors. We are aware that due to liberalization and
globalisation, banking industry and financial sector has gone through many reforms. In the
present economic environment, it is very difficult to cater need of society by Banks alone so
role of Non-Banking Finance Companies and Micro Finance Companies become
indispensable. The activities of non-banking financial companies
(NBFCs) in India have undergone qualitative changes over the years through functional
specialisation. The role of NBFCs as effective financial intermediaries has been well
recognised as they have inherent ability to take quicker decisions, assume greater risks, and
customise their services and charges more according to the needs of the clients. While these
features, as compared to the banks, have contributed to the proliferation of NBFCs, their
flexible structures allow them to unbundle services provided by banks and market the
components on a competitive basis. The distinction between banks and non-banks has been
gradually getting blurred since both the segments of the financial system engage themselves in
many similar types of activities. At present, NBFCs in India have become prominent in a wide
range of activities like hire-purchase finance, equipment lease finance, loans, investments, etc.
By employing innovative marketing strategies and devising tailor-made products, NBFCs have
also been able to build up a clientele base among the depositors, mop up public savings and
command large resources as reflected in the growth of their deposits from public, shareholders,
directors and their companies, and borrowings by issue of non-convertible debentures, etc.
According to KPMG survey The Indian Non-Banking Finance Company (NBFC) sector has
often been relegated to the shadows, in most discussions on the Indian Financial Services (FS)
industry. Banks, insurance companies and capital market players take centre stage and
invariably, NBFCs attract public attention only during times of crisis. Little attention has been
paid to the silent but effective manner in which NBFCs have spread their operations across the
country. NBFCs have provided financial solutions to sections of society who hitherto were at
the mercy of unorganized players for credit and savings products, which were delivered on
economically and socially usurious terms. ronically, in recent times, NBFCs are once again in
the spotlight for their perceived strengths and capabilities rather than their problems. While
this re-rating ought to bring cheer to a much-maligned sector, a degree of caution needs to be
instilled within potential investors in NBFCs, who need to clearly understand the true drivers
of value for finance companies. This understanding is imperative to enable a better judgment
of the intrinsic worth of NBFCs. This article proceeds to illustrate the key factors responsible
for the strong re-rating of the NBFC sector, as well as discuss the validity of each of these
factors, as actual drivers of value. Today, the NBFC sector is as financially sound as it has ever
been. To an extent, this can be attributed to the very problems affecting the sector which have
resulted in the purging of several players, leaving the fittest few to dominate the landscape.
Taking the Reserve Bank of India ‘s (RBI) definition of ‗reporting NBFC’s as a proxy for non-
dormant players, a mere 24 NBFCs held 92.7 percent of the total assets of all NBFCs in 2005-
2006. The balance assets, amounting to less than 8 percent of the total, were fragmented across
439 NBFCs. In addition to this consolidation, at present, NBFCs in general are well-capitalized
with strong parent support. A majority of active NBFCs reported capital adequacy ratios
exceeding 12 percent

ROLE OF NBFC’S
According to EPW Research Foundation (EPWRF The Indian economy is going through a
period of rapid `financial liberalisation'. Today, the `intermediation' is being conducted by a
wide range of financial institution through a plethora of customer friendly financial products.
The segment consisting of Non-Banking Financial Companies (NBFCs), such as equipment
leasing/hire purchase finance, loan and investment companies, etc. have made great strides in
recent years and are meeting the diverse financial needs of the economy. In this process, they
have influenced the direction of savings and investment. The resultant capital formation is
important for our economic growth and development. Thus, from both the macroeconomic
perspective and the structure of the Indian financial system, the role of NBFCs has become
increasingly important. The crucial role of Non-Banking Finance Institutions (NBFIs) in
broadening access to financial services, and enhancing competition and diversification of the
financial sector has been well recognized. The main advantages of these companies lie in their
ability to lower transactions costs of their operations, their quick decision-making ability,
customer orientation and prompt provision of services. While NBFIs are sometimes seen as
akin to banks in terms of the products and services offered, this is strictly not accurate, as more
often, NBFIs play a range of roles that complement banks. Further, Status Note on NBFCs
NBFIs can add to economic strength to the extent they enhance the resilience of the financial
system to economic shocks. A well developed and properly regulated NBFI sector is thus an
important component of broad, balanced, efficient financial system that spreads risks and
provides a sound base for economic growth and prosperity.

ON GLOBAL CRISIS
According to CARE: NBFC sector faced significant stresses on asset quality, liquidity and
funding costs due to the global economic slowdown & its impact on the domestic economy.
While all the NBFCs were affected, the impact varied according to the structural features of
each NBFC. Asset-liability maturity (ALM) profiles, type of assets financed and origination /
collection models followed were the primary differentiators within NBFCs. The support
provided by the Reserve Bank of India (RBI) highlighted the explicit acceptance of the
systemic importance of the sector. FY10 was marked by re-aligning of the liability profiles,
tightening of lending norms coupled with closing down of many of the unsecured loan
segments. On a structural basis, the sector is now more robust due to the lessons learned by
NBFCs from this crisis. Profitability is expected to be lower than historical levels due to
conservative ALM management, higher provisioning and avoidance of high yielding unsecured
loan segments. However, profits are at the same time expected to be much more stable & less
susceptible.
 CHAPTER -4
RESEARCH
METHODOLOGY
Research
Redman and Mory define research as a “systemized effort to gain new knowledge.” Some
people consider research as a movement, a movement from the known to the unknown.

Research is an academic activity and as such the term should be used in a technical sense.
According to Clifford Woody, research comprises defining and redefining problems,
formulating hypothesis or suggested solutions; collecting, organizing and evaluating data;
making deductions and reaching conclusions; and at last carefully testing the conclusions to
determine whether they fit the formulating hypothesis.

Research Methodology
Research methodology is a way to systematically study &solve the research problems. If
research wants to claim his study as a good study. He must clearly state the methodology
adopted in conducting the research so that it may be judged by the reader whether the
methodology of work done is so or not.

OBJECTIVE OF THE STUDY

The confined objectives of the present study are:
 To analyze the market of NBFC ‘s in India

 To study the financials of NBFC ‘s

RESEARCH DESIGN
The formidable problem that follows the task of defining the research problem is the
preparation of the design of the research project, popularly known as “Research Design”.
Research design is a plan, structure and strategy of investigation conceived to obtain answers
to research questions and to control variance.

The research used here is descriptive research.

METHOD OF DATA COLLECTION

Information can be collected through both primary and secondary sources.

Primary Data: In some cases, the researchers may realize the need for collecting the first-hand
information. As in the case of everyday life, if we want to have first-hand information or any
happening or event, we either ask someone who knows about it or we observe it ourselves, we
do the both. Thus, the two methods by which primary data can be collected is observation and
questionnaire.

Secondary Data: Any data, which have been gathered earlier for some other purpose, are
secondary data in the hands of researcher. Those data collected first hand, either by the
researcher or by someone else, especially for the purpose of the study is known as primary
data.

The data collected for this project has been taken from the secondary source.
Sources of secondary data are: -
 Internet

 Magazines

 Publications

 Newspapers

 Brouchers

Limitation of the Study:

Although the project aims data making in depth study of loan process at AU Finance but there
is some practical limitation regarding the methodology followed & the overall procedure
these can be summed up under the following points:

 The study is limited to the comparative study of nbfc.

 The study is based on secondary data available from monthly fact sheets, websites and
other books.

 As the study was for short span i.e., 3 years and due to lack of time other areas could
not be well focused.

 No direct access to company data.

 CHAPTER-5
DATA ANALYSYS
AND
INTERPRETATION
NET PROFIT MARGIN

Year Reliance capital LIC housing finance

2015-16 21.14 13.80

2016-17 13.29
25.28

2017-18 25.28 13.29

30
25
20
15
10
5
0
2015-16 2016-17 2017-18

Reliance capital LIC housing finance

INTERPRETATION: -
Net profit margin of Reliance capital and LIC Housing finance is 21.14 and 13.80
respectively in year 2015-16. In year 2016-17 it is 25.28 and 3.29 respectively. And in the
year 2017-18 it is 25.28 and 13.29 which is same as previous year.
SHAREHOLDER FUNDS
Year Reliance capital LIC housing finance

2015-16 253.00 101.00

2016-17 101.00
253.00

2017-18 253.00 101.00

300

250

200

150

100

50

YEAR Reliance capital LIC housing finance

INTERPRETATION: -
Shareholders fund is remain same in all the three years which is 253.00 of Reliance and
101.00 of LIC. It is constant in all three financial years.
NON CURRENT LIABILITIES.
Year Reliance capital LIC housing finance

2015-16 13795.00 113628.24

2016-17 13909.00 106834.27

2017-18 18552.00 93141.07

120000
100000
80000
60000
40000
20000
0
year
2015-16
Series1 Series2 2016-17
Series3 2017-18

INTERPRETATION: -
Non - current liabilities of Reliance and LIC is 13795.00 and 113628.24 respectively in year
2015-16. In the year 2016-17 it is 13909.00 and 106834.27 respectively. And in the year
2017-18 it is 18552.00 and 93141.07.
CURRENT ASSETS
Year Reliance capital LIC housing finance

2015-16 91.00 92.65

2016-17 96.02
130.00

2017-18 179.00 97.12

180
160
140
120
100
80
60
40
20
0
YEAR 2015-16 2016-17 2017-18

Series1 Series2 Series3 Series4

INTERPRETATION: -
Current Assets of Reliance and LIC is 91.00 and 92.65 respectively in the year 2015-16. In
the year 2016-17 it is 130.00 and 96.02 respectively. And in the year 2017-18 it is 179.00 and
97.12 respectively which is more than the previous years.
 FINDINGS,
RECOMMENDATION
AND
CONCLUSION
 FINDINGS
Top-rated NBFCs have not only been successful in managing their market share but also in
protecting their profitability. A combination of the factors cited earlier had helped these
NBFCs earn better returns on their deployment. In fact, almost all the top-rated NBFCs enjoy
a return on total assets that is higher than HDFC Bank's, one of the better-run banks. The
higher return on assets was despite their operating cost ratio being similar to that of HDFC
Bank. For example, operating expenses as a proportion of net margin worked out to 68 per
cent for HDFC Bank. On an average, this was not significantly higher than the ratio for most
top-rated NBFCs. If return on assets were still superior, then it was because of the higher
return on their funds. For top NBFCs, the interest income worked out to 17-21 per cent of
their total assets for the year ended FY. The liquidity in the banking system also helped these
finance companies. Spreads over government securities for AAA rated corporate sector debt
instrument are now only 50 basis points. In other words, if the cost of funds for banking
companies has declined sharply, then top-rated NBFCs have also benefited from such a
decline in interest rates. Some of these companies are now raising funds at 7-8 per cent.

Also, these companies have displayed the ability to manage their portfolio without large
incidence of non-performing assets. For instance, LIC Housing Finance, IDFC and Shriram
Transport Finance boast of net non-performing assets to net advances ratio of less than 1 per
cent. This again has helped them lower the overall cost of operations and, thereby, protect
their profitability. Higher profitability and innovative financing options, such as
securitization, have also helped in boosting the capital adequacy ratio of these NBFCs.
among others, LIC Housing Finance, IDFC and Shriram Transport Finance, Reliance Capital,
boast of capital adequacy ratios upwards of 15 per cent. In other words, their balance sheets
continue to be strong to accommodate further growth in disbursements.
Disbursements - Sharp fall during the crisis
Disbursements were clearly hit during the crisis as is visible from Primary reason for this
initial fall was lack of supply of funds after the market liquidity dried up. Impact however
differed depending on the capital structure of the company, with NBFCs having larger ALM
mismatches and those which had more dependence on mutual funds for funding were affected
more severely as mutual funds themselves faced redemption pressure on their short
term schemes. To support the sector, RBI undertook several measures to improve liquidity
flow to the NBFC sector. This was a significant development as the regulator highlighted the
systemic importance of the sector.
RBI measures to improve liquidity of NBFCs
 The systemically important non-deposit taking non-banking financial companies
(NBFCs-ND-SI) were permitted to raise short-term foreign currency borrowings.
 Allowed banks to avail liquidity support under the LAF for the purpose of meeting the
funding requirements of NBFCs through relaxation in the maintenance of SLR up to
1.5 per cent of their NDTL.
 Risk weights on banks ‘exposures to claims on NBFCs-NDSI were reduced to 100 per
cent from 150 per cent.
 Setting up of a special purpose vehicle (SPV) for addressing the temporary liquidity
constraints of systemically important non-deposit taking non-banking financial
companies (NBFCs-ND-SI).
 Deferring the higher CAR norms for NBFCs-ND-SI by 1 year. While liquidity
conditions started improving from Q4 FY09, disbursements growth remained subdued
for the sector till the first half of FY10. On a y-o-y basis the cumulative disbursements
showed a fall during Q1 FY10 and H1 FY10. This period saw deterioration in asset
quality of most NBFCs, which was especially high in their unsecured loan portfolios.
Lower disbursements were mainly because of the pull back of NBFCs out of
unsecured lending segments. On a cumulative basis 9ME FY10 disbursements
increased by more than 19%. Even if we consider the low base effect of Q3FY09
disbursements, there is clear indication of pick up in disbursements and a positive
outlook for the sector. With improvement in overall economic activity and higher
thrust on infrastructure financing by the government, the scenario is expected to
improve further in FY11.

Cost of Funding - Shot up during the crisis due to short tenure borrowings,
stabilized now & expected to be less volatile due to larger proportion of
long-term funding
Many NBFCs took advantage of the lower interest rate regime at the shorter end of the yield
curve by borrowing short term funds (3months – 1 year) at lower rates and lending for
maturities ranging from 3-4 years at higher rates. However, the level of mismatches differed
between NBFCs and those with higher mismatch faced not only liquidity pressure, but their
cost of funding also increased during this period due to inversing of the yield curve and a
general rise in interest rates. Average borrowings costs1 (on an aggregate basis for CARE
rated NBFCs) increased from around 9.5-10.0% in FY08 to 11.5-12.0% in FY09. This shows
the severity of the impact as financial crisis affected funding costs in the second half of FY09
and led to a 200 bps increase for the entire year. The response by NBFCs was to gradually
replace short term funding with long termsources. This is a significant structural change in
the borrowing profiles that will bring more stability in profitability of the sector. However,
spreads will also be lower compared to historical levels due to this change. During the 9ME
FY10 cost of borrowing reduced from the average of 11.5-12.0% of FY09 to 10.2 10.5% for
the 9-month period and is expected to remain around these levels for FY10. This however is
still higher than the FY08 levels due to the structural move towards longer term borrowings.

Asset Quality – Deteriorated more due to unsecured loans which is now

virtually stopped by most players, provisioning has improved & asset
quality expected not to worsen further.
Asset quality for the sector deteriorated significantly during the crisis. Aggregate Gross NPA
ratio trended from around 1.1% for FY08 to around 2.1% in FY09. While there was
deterioration in all asset classes, unsecured asset classes (Personal Loans, Unsecured SME
loans) showed the maximum deterioration and were the key drivers for overall increase in
NPAs. Apart from the asset-type financed, another differentiator between asset qualities was
the origination & collection model followed. NBFC ‘s which originated majority of their
portfolio through branches & own employees showed better asset quality performance than
those which used the DSA model. Aggregate Gross NPA ratio has further worsened to 3.0%
at the end of 9M FY10, however it is close to peaking out. De-growth in unsecured portfolio
segment has also lowered the portfolio outstanding growth thereby leading to a ‗base effect‘
on the Gross NPA ratio and adding to the rise in reported numbers. Provision coverage has
increased from around 50% for FY09 to around 60% at the end of 9MFY10 as players have
become more conservative. Unsecured lending has virtually stopped for many NBFCs and
underwriting norms have also been tightened in general for other asset classes. These
developments indicate positive structural changes.
 RECOMMENDATION

 Domestic Financial markets can be integrated by making NBFC ‘s Channel partners

to Banks. It will help in better allocation and funds availability. It will also help in
better management of Financial services sector in India.
 Enhancing the credit delivery mechanisms: The credit delivery mechanism needs to
be more transparent and hassle free. There should be more stringent norms for the
defaulters.
 Strengthening the professionalism of NBFC sector through education and training:
NBFC‘s are organized players. Regulatory body needs to educate people about
NBFC.
 To reduce in interest cost and hence benefit the ultimate consumer
 CONCLUSION

It is encouraging that the NBFC sector’s importance is finally being acknowledged across FS
market constituents as well as the regulator. However, the importance attached to the sector is
often transcending into misplaced exuberance. Over simplified and vague drivers for NBFC
valuations such as strategic fit and customer base, can never substitute dispassionate business
analytics. A rational assessment of the intrinsic values of NBFCs factoring issues such as past
performance, structural weaknesses of the sector (for instance funding disadvantages), along
with an identification of real capabilities are essential to ensure that the equilibrium between
price paid and value realized is reached to the extent possible. In the absence of this, India is
sure to witness the re-opening of the NBFC horror story albeit with a new chapter on the
erosion of NBFC investment values affecting investors across categories. Ratings of the
NBFCs whose profitability and asset quality were affected due to the crisis were supported by
their strong parentage. Based on the parental strength some players have raised further equity
and also managed to re-align their business models while maintaining their solvency. overall
positive outlook on the sector due to the better ALM position, focus on relatively safer asset
classes and the demonstrated acceptance of the sector as systemically important by the
regulator. The crisis has imposed an overall sense of ‗caution ‘even for the newer entrants in
the market. Also going forward higher capital adequacy norms will put a fairly conservative
cap on the leverage of the sector thereby improving the credit profile of many entities
(NBFC-NDSI)
 CHAPTER-7
BIBLIOGRAPHY
REFERENCES

http://www.rediff.com/money/2004/jan/07rbi.htm

http://www.scribd.com/doc/22498809/Porter‘s-Five-Forces-Model-of-Competition
http://www.financialexpress.com/news/Column---Why-NBFCs-may-not-want-to-be-
banks/614492/ http://www.stockwatch.in/nbfcs-offering-high-dividends-yet-again-25964
http://www.livemint.com/2010/04/30204917/IDFC-seeks-infrastructure-NBFC.html
http://www.encyclopedia.com/doc/1G1-143176307.html
http://mba-bba-dissertations.blogspot.com/2010/05/capital-structure-of-indiabulls-nbfc.html
http://www.nbfc.rbi.org.in
http://www.rediff.com/money/2007/jul/20nbfc.htm

http://www.thehindubusinessline.com/2009/11/14/stories/2009111451870100.htm
http://indiabudget.nic.in/es98-99/chap35.pdf
http://www.banknetindia.com/finance/fbanking.htm
http://www.mydigitalfc.com/news/nbfcs-again-doling-out-higher-dividend-
fy10-732 www.livemint.com/2008/.../The-multiplicity-of-regulation.html
http://www.coolavenues.com/know/fin/svs_nbfc_1.php3
www.thehindubusinessline.com/.../2005022800330800.htm

Annual Reports:

1. LIC housing finance

2. Reliance capital
ANNEXURE
Balance Sheet of Reliance Capital (-----------in rs crore---------------)
Mar 18 Mar-17 Mar-16

12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 253 253 253
Total Share Capital 253 253 253
Reserves and Surplus 13,915.00 13,448.00 13,028.00
Total Reserves and Surplus 13,915.00 13,448.00 13,028.00
Total Shareholders Funds 14,168.00 13,701.00 13,281.00
NON-CURRENT LIABILITIES
Long Term Borrowings 18,113.00 13,670.00 13,615.00
Deferred Tax Liabilities [Net] 18 3 0
Other Long Term Liabilities 43 13 121
Long Term Provisions 378 223 59
Total Non-Current Liabilities 18,552.00 13,909.00 13,795.00
CURRENT LIABILITIES
Short Term Borrowings 467 3,423.00 3,812.00
Trade Payables 0 0 6
Other Current Liabilities 3,151.00 2,397.00 5,167.00
Short Term Provisions 14 7 293
Total Current Liabilities 3,632.00 5,827.00 9,278.00
Total Capital And Liabilities 36,352.00 33,437.00 36,354.00
ASSETS
NON-CURRENT ASSETS
Tangible Assets 90 123 155
Intangible Assets 1 7 24
Balance Sheet of LIC Housing Finance ------------------- in Rs. Cr. -------------------
Mar 18 Mar-17 Mar-16

12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 101 101 101
Total Share Capital 101 101 101
Reserves and Surplus 12,589.73 10,976.03 9,044.98
Total Reserves and Surplus 12,589.73 10,976.03 9,044.98
Total Shareholders Funds 12,690.72 11,077.03 9,145.98
NON-CURRENT LIABILITIES
Long Term Borrowings 1,10,221.88 1,03,738.89 90,658.14
Deferred Tax Liabilities [Net] 1,042.99 917.27 810.9
Other Long Term Liabilities 1,105.91 1,180.89 865.7
Long Term Provisions 1,257.45 997.23 806.33
Total Non-Current Liabilities 1,13,628.24 1,06,834.27 93,141.07
CURRENT LIABILITIES
Short Term Borrowings 9,384.50 7,587.22 5,440.44
Trade Payables 61.29 58.97 41.39
Other Current Liabilities 35,968.53 25,201.60 22,268.36
Short Term Provisions 118.73 141.32 460.53
Total Current Liabilities 45,533.05 32,989.11 28,210.72
Total Capital And Liabilities 1,71,852.01 1,50,900.41 1,30,497.77
ASSETS
NON-CURRENT ASSETS
Tangible Assets 94.71 92.88 87.2
Intangible Assets 2.41 3.65 4.82
Fixed Assets 97.12 96.52 92.02
COMPANY CERTIFICATE