The non-banking financial sector is witnessing a consolidation process, with smaller NBFCs (deposit-taking)
opting for either merger or closure and some larger ones getting converted into non-deposit-taking
NBFCs. NBFCs are comfortably placed with higher capital. The financial performance of
deposit-taking Non-Banking Financial Companies (NBFCs-D) showed an improvement as reflected
in the increase in their operating profits mainly emanating from growth in fund-based income.
Systemically Important-Non-deposit taking NBFCs (NBFCs-ND-SI) segment continued to rely on
bank finances for their resource requirement. There is sign of deterioration in the quality of assets in
respect of NBFCs-ND-SI. The set of regulations prescribed for NBFCs sector is expected to make the
NBFCs more resilient in the medium term. The combined balance sheets of financial institutions
(FIs) expanded and operating profit as well as net profit have increased significantly. The impaired
assets of the FIs showed increase and are a matter of concern. The increase in expenses of PDs more
than compensated for the increase in income which led to reduced profit. PDs are comfortably placed
with higher CRAR.
1. Introduction
6.1 Non-banking financial institutions (NBFIs)
are an important part of the Indian financial
system. The NBFIs at present consist of a
heterogeneous group of institutions that cater to
a wide range of financial requirements. The major
intermediaries include financial institutions (FIs),
non-banking financial companies (NBFCs) and
primary dealers (PDs).
6.2 This chapter provides an analysis of the
financial performance and soundness indicators
related to each segment of NBFIs during 2011-12.
The chapter is organised into five sections. Section
2 analyses the financial performance of FIs, while
Section 3 discusses the financial performance of
NBFCs-D and NBFCs-ND-SI, including RNBCs.
Section 4 provides an analysis of the performance
of PDs in the primary and secondary markets,
followed by the overall assessment in Section 5.
2. Financial Institutions
6.3 As at end-March 2012, there were five
financial institutions (FIs) under the full-fledged regulation and supervision of the Reserve Bank,
viz., Export Import Bank of India (EXIM Bank),
National Bank for Agriculture and Rural
Development (NABARD), National Housing Bank
(NHB), Small Industries Development Bank of
India (SIDBI) and Industrial Investment Bank of
India (IIBI) (Table VI.1). However, IIBI is in the
process of voluntary winding-up.
Table VI.1: Ownership Pattern of
Financial Institutions |
(As on March 31, 2012) |
Institution |
Ownership |
Per cent |
1 |
2 |
3 |
EXIM Bank |
Government of India |
100 |
NABARD |
Government of India |
99.3 |
|
Reserve Bank of India |
0.7 |
NHB |
Reserve Bank of India |
100 |
SIDBI * |
Public Sector Banks |
62.5 |
|
Insurance Companies |
21.9 |
|
Financial Institutions |
5.3 |
|
Others |
10.3 |
*IDBI Bank Ltd. (19.2 per cent), State Bank of India (15.5 per cent) and
Life Insurance Corporation of India (14.4 per cent) are the three major
shareholders in SIDBI. |
Operations of Financial Institutions
Combined balance sheets of financial
institutions (FIs) expanded
6.4 The financial assistance sanctioned and
disbursed by FIs increased during 2011-12 due
to increase in sanctions and disbursements made
by investment institutions (LIC and GIC) and
specified financial institutions (IVCF and TFCI).
However, sanctions and disbursements made by
IFCI have declined in 2011-12 (Table VI.2 and
Appendix Table VI.1).
Assets and Liabilities of FIs
6.5 The combined balance sheets of FIs
expanded during 2011-12. On the liabilities side,
deposits and ‘bonds and debentures’ remain the
major sources of borrowings during 2011-12. On
the assets side, ‘loans and advances’ continued to
be the single largest component, contributing
more than four-fifth of the total assets of the FIs
(Table VI.3).
Table VI.2: Financial Assistance Sanctioned and
Disbursed by Financial Institutions |
(Amount in ` billion) |
Category |
Amount |
Percentage
Variation |
2010-11 |
2011-12 |
2011-12 |
S |
D |
S |
D |
S |
D |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
(i) All-India Term-lending Institutions * |
545 |
472 |
478 |
478 |
-12.2 |
1.2 |
(ii) Specialised Financial Institutions # |
9 |
5 |
11 |
8 |
21.3 |
66.8 |
(iii) Investment Institutions @ |
450 |
401 |
544 |
520 |
20.8 |
29.5 |
Total Assistance by FIs (i+ii+iii) |
1,004 |
878 |
1,033 |
1,006 |
2.9 |
14.5 |
S: Sanctions. D: Disbursements.
* : Relating to IFCI, SIDBI and IIBI.
# : Relating to IVCF, ICICI Venture and TFCI.
@ : Relating to LIC and GIC & erstwhile subsidiaries (NIA, UIIC and
OIC).
Notes:
1. Components may not add up to the whole due to rounding
off.
2. Data pertaining to 2011-12 are provisional.
Source: Respective Financial Institutions. |
Table VI.3: Liabilities and Assets of Financial Institutions
|
(As at end-March) |
(Amount in ` million) |
Item |
2011 |
2012 P |
Percentage Variation |
Liabilities |
|
|
|
1. Capital |
49,000 |
62,000 |
26.5 |
|
(1.7) |
(1.8) |
|
2. Reserves |
4,26,071 |
4,65,001 |
9.1 |
|
(14.7) |
(13.8) |
|
3. Bonds & Debentures |
9,00,968 |
10,72,973 |
19.1 |
|
(31.0) |
(31.9) |
|
4. Deposits |
9,27,817 |
10,90,780 |
17.6 |
|
(31.9) |
(32.4) |
|
5. Borrowings |
4,26,807 |
4,95,207 |
16.0 |
|
(14.7) |
(14.7) |
|
6. Other Liabilities |
1,75,493 |
1,77,294 |
1.0 |
|
(6.0) |
(5.3) |
|
Total Liabilities/Assets |
29,06,156 |
33,63,255 |
15.7 |
Assets |
|
|
|
1. Cash & Bank Balances |
65,219 |
67,398 |
3.3 |
|
(2.2) |
(1.9) |
|
2. Investments |
1,18,023 |
1,25,559 |
6.4 |
|
(4.1) |
(3.7) |
|
3. Loans & Advances |
25,61,759 |
29,82,001 |
16.4 |
|
(88.2) |
(88.7) |
|
4. Bills Discounted/ Rediscounted |
35,422 |
29,636 |
-16.3 |
|
(1.2) |
(0.9) |
|
5. Fixed Assets |
5,374 |
5,364 |
-0.2 |
|
(0.2) |
(0.2) |
|
6. Other Assets |
1,86,822 |
1,53,297 |
-17.9 |
|
(6.4) |
(4.6) |
|
P: Provisional.
Notes: 1. Data pertain to 4 FIs, viz., EXIM Bank, NABARD, NHB &
SIDBI.
2. Figures in parentheses are percentages to total Liabilities/
Assets.
Source: Audited OSMOS Returns of EXIM Bank, NABARD and SIDBI
ended March 31, and for NHB June 30. |
Resources Mobilised by FIs
Commercial Paper (CP) is the major source of
funds
6.6 The resources mobilised by FIs during
2011-12 were considerably higher than in the
previous year. The NHB has mobilised the largest
amount of resources, followed by NABARD, SIDBI
and EXIM Bank (Table VI.4).
6.7 During 2011-12, there was a significant
increase in the resources raised by FIs through
commercial paper (CP), which accounted for more
than 70 per cent of the total resources mobilised
from the money market (Table VI.5).
Table VI.4: Resources Mobilised by Financial Institutions |
(Amount in ` billion) |
Institutions |
Total Resources Raised |
Total Outstanding
(As at end-March) |
Long Term |
Short Term |
Foreign Currency |
Total |
2010-11 |
2011-12 |
2010-11 |
2011-12 |
2010-11 |
2011-12 |
2010-11 |
2011-12 |
2011 |
2012 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
11 |
EXIM Bank |
111 |
88 |
15 |
55 |
111 |
84 |
237 |
227 |
472 |
547 |
NABARD |
97 |
179 |
185 |
90 |
- |
- |
283 |
269 |
339 |
423 |
NHB |
75 |
555 |
295 |
827 |
- |
- |
370 |
1,382 |
109 |
607 |
SIDBI |
100 |
139 |
23 |
80 |
12 |
20 |
135 |
239 |
341 |
440 |
Total |
384 |
961 |
518 |
1,052 |
123 |
104 |
1,025 |
2,117 |
1,261 |
2,016 |
- : Nil/Negligible.
Note: Long-term Rupee resources comprise borrowings by way of bonds/debentures; short-term resources comprise CP, term deposits, ICDs, CDs and
borrowing from the term money market. Foreign currency resources largely comprise bonds and borrowings in the international market.
Source: Respective FIs. |
Sources and Uses of Funds
6.8 The majority of the funds raised were used
for fresh deployments, followed by repayment of
past borrowings (Table VI.6).
Maturity and Cost of Borrowings and Lending
6.9 The weighted average cost of Rupee
resources raised went up across the board. While the weighted average maturity of Rupee resources
raised by SIDBI and NABARD has gone up, in the
case of EXIM Bank and NHB they came down
during 2011-12 (Table VI.7). While both EXIM
Bank and SIDBI raised their prime lending rate
during the year, the NHB kept it unchanged
(Table VI.8).
Table VI.5: Resources Raised by Financial
Institutions from Money Market
|
(As at end-March 2012) |
(Amount in ` million) |
Instrument |
EXIM |
NABARD |
NHB |
SIDBI |
Total |
1 |
2 |
3 |
4 |
5 |
6 |
A. Total |
49,355 |
90,347 |
28,953 |
50,915 |
2,19,570 |
i) Term Deposits |
8,193 |
70 |
2,184 |
8,419 |
18,866 |
ii) Term Money |
- |
4,381 |
- |
- |
4,381 |
iii) Inter-corporate Deposits |
- |
- |
- |
- |
- |
iv) Certificate of Deposits |
536 |
12,810 |
- |
- |
13,346 |
v) Commercial Paper |
40,626 |
73,086 |
4,889 |
42,496 |
1,61,097 |
vi) Short-term loans from banks |
- |
- |
21,880 |
- |
21,880 |
Memo: |
|
|
|
|
|
B. Umbrella Limit |
75,458 |
2,07,941 |
41,550 |
89,673 |
4,14,622 |
C. Utilisation of
Umbrella limit
(A as percentage of B) |
65.4 |
43.5 |
69.7 |
56.8 |
53.0 |
- : Nil/Negligible.
Source: Fortnightly return of resources mobilised by financial institutions, |
Table VI.6: Pattern of Sources and Deployment
of Funds of Financial Institutions |
(Amount in ` billion) |
Item |
As at end-March 2011 |
As at end-March 2012 |
Percentage Variation |
1 |
2 |
3 |
4 |
A. Sources of Funds (i+ii+iii) |
2,978 |
4,252 |
42.8 |
|
(100.0) |
(100.0) |
|
i. Internal |
1,632 |
2,623 |
60.7 |
|
(54.8) |
(61.7) |
|
ii. External |
1,191 |
1,495 |
25.6 |
|
(40.0) |
(35.2) |
|
iii. Others@ |
155 |
134 |
-13.7 |
|
(5.2) |
(3.2) |
|
B. Deployment of Funds (i+ii+iii) |
2,978 |
4,252 |
42.8 |
|
(100.0) |
(100.0) |
|
i. Fresh Deployment |
1,747 |
2,739 |
56.8 |
|
(58.7) |
(64.4) |
|
ii. Repayment of past borrowings |
840 |
1,290 |
53.7 |
|
(28.2) |
(30.4) |
|
iii. Other Deployment |
391 |
222 |
-43.2 |
|
(13.1) |
(5.2) |
|
of which: Interest Payments |
142 |
145 |
1.9 |
|
(4.8) |
(3.4) |
|
@ Includes cash and balances with banks, balances with the Reserve
Bank and other banks.
Notes: 1. EXIM Bank, NABARD, NHB and SIDBI.
2. Figures in parentheses are percentages to totals.
Source: Respective FIs. |
Table VI.7: Weighted Average Cost and
Maturity of Rupee Resources Raised by
Select Financial Institutions |
Institutions |
Weighted Average Cost (Per cent) |
Weighted Average Maturity (years) |
2010-11 |
2011-12 P |
2010-11 |
2011-12 P |
1 |
2 |
3 |
4 |
5 |
EXIM Bank |
8.4 |
9.0 |
2.9 |
2.8 |
SIDBI |
7.0 |
7.2 |
2.5 |
3.7 |
NABARD |
7.1 |
9.5 |
1.1 |
1.9 |
NHB |
7.2 |
8.8 |
2.5 |
0.9 |
P: provisional.
Source: Respective FIs. |
Financial Performance of FIs
The profitability of FIs substantially increased
with reduction in wage bill
6.10 Both the operating profit and net profit of
FIs increased significantly during 2011-12 (Table
VI.9). The return on assets (RoA) is highest for
SIDBI followed by the NHB, EXIM Bank and
NABARD (Table VI.10).
Table VI.8: Long-term PLR Structure of Select
Financial Institutions |
(Per cent) |
Effective |
EXIM Bank |
SIDBI |
NHB |
1 |
2 |
3 |
4 |
March 2011 |
14.0 |
11.0 |
10.5 |
March 2012 |
15.0 |
12.75 |
10.5 |
Source: Respective FIs. |
Table VI.9: Financial Performance of Select
All-India Financial Institutions |
(Amount in ` million) |
|
2010-11 |
2011-12 |
Variation |
Amount |
Percentage |
A) Income (a+b) |
1,85,018 |
2,26,647 |
41,629 |
22.5 |
a) Interest Income |
1,80,167 |
2,16,887 |
36,720 |
20.4 |
|
(97.4) |
(95.7) |
|
|
b) Non-Interest Income |
4,851 |
9,760 |
4,909 |
101.2 |
|
(2.6) |
(4.3) |
|
|
B) Expenditure (a+b) |
1,37,422 |
1,62,908 |
25,486 |
18.5 |
a) Interest Expenditure |
1,22,589 |
1,48,852 |
26,263 |
21.4 |
|
(89.2) |
(91.4) |
|
|
b) Operating Expenses |
14,833 |
14,057 |
-776 |
-5.2 |
|
(10.8) |
(8.6) |
|
|
of which |
|
|
|
|
Wage Bill |
10,981 |
10,175 |
-806 |
-7.3 |
C) Provisions for Taxation |
12,819 |
16,451 |
3,632 |
28.3 |
D) Profit |
|
|
|
|
Operating Profit (PBT) |
39,374 |
48,849 |
9,475 |
24.1 |
Net Profit (PAT) |
26,556 |
32,399 |
5,843 |
22.0 |
E) Financial Ratios @ |
|
|
|
|
Operating Profit |
1.46 |
2.81 |
|
|
Net Profit |
0.98 |
1.03 |
|
|
Income |
6.85 |
7.23 |
|
|
Interest Income |
6.67 |
6.92 |
|
|
Other Income |
0.18 |
0.31 |
|
|
Expenditure |
5.09 |
5.20 |
|
|
Interest Expenditure |
4.54 |
4.75 |
|
|
Other Operating Expenses |
0.55 |
0.45 |
|
|
Wage Bill |
0.41 |
0.32 |
|
|
Provisions |
0.47 |
0.52 |
|
|
Spread (Net Interest Income) |
2.13 |
2.17 |
|
|
@: as percentage of Total Average Assets.
Notes: 1. Figures in parentheses are percentages to total Income/
Expenditure.
2. Percentage variation could be slightly different because
absolute numbers have been rounded off to ` million.
Source: Audited OSMOS Returns of EXIM Bank, NABARD and SIDBI
ended March 31, and for NHB June 30. |
Table VI.10: Select Financial Parameters of Financial Institutions |
(As at end-March) |
(Per cent) |
Institution |
Interest Income/ Average Working Funds |
Non-Interest Income/ Average Working Funds |
Operating Profit/ Average Working Funds |
Return on Average Assets (Per cent) |
Net Profit per Employee (` million) |
2011 |
2012 |
2011 |
2012 |
2011 |
2012 |
2011 |
2012 |
2011 |
2012 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
11 |
EXIM Bank |
6.5 |
7.1 |
0.5 |
0.6 |
2.2 |
2.5 |
1.2 |
1.1 |
24 |
27 |
NABARD |
6.2 |
6.5 |
0.1 |
0.2 |
1.3 |
1.4 |
0.9 |
0.9 |
3 |
4 |
NHB * |
7.7 |
8.6 |
0.04 |
0.05 |
1.7 |
2.1 |
1.1 |
1.3 |
32 |
38 |
SIDBI |
8.0 |
8.5 |
0.3 |
0.2 |
2.9 |
3.4 |
1.8 |
2.0 |
5 |
5 |
*: Position as at the end of June.
Source: Statements furnished by the FIs. |
Soundness Indicators: Asset Quality
NPAs of FIs have gone up substantially during
the year
6.11 At the aggregate level, the net NPAs of FIs
have increased substantially. The increase in net
NPAs, however, was attributable mainly to SIDBI
and EXIM Bank. While NABARD has maintained
the same level, the NHB has reported no NPAs
during 2011-12 (Table VI.11).
6.12 There was a substantial increase in the
sub-standard and doubtful assets of EXIM Bank
(Table VI.12). The higher NPAs in respect of EXIM
Bank may be a reflection of the continued
unfavourable external environment, especially in
the context of India’s increased integration with
the world economy.
Capital Adequacy
FIs are comfortably placed with capital
6.13 During the year 2011-12, all four FIs have
maintained a higher CRAR than the minimum
stipulated norm of 9 per cent (Table VI.13).
3. Non-Banking Financial Companies
Three new categories of NBFCs have been
created – Infrastructure Debt Funds (NBFC-IDF),
Micro Finance Institution (NBFC-MFI) and NBFC-Factors
6.14 NBFCs are classified into two categories,
based on the liability structure, viz., Category ‘A’ companies (NBFCs accepting public deposits or
NBFCs-D), and Category ‘B’ companies (NBFCs
not raising public deposits or NBFCs-ND).
NBFCs-D are subject to requirements of capital
adequacy, liquid assets maintenance, exposure
norms (including restrictions on exposure to
investments in land, building and unquoted
shares), ALM discipline and reporting
requirements; in contrast, until 2006 NBFCs-ND
were subject to minimal regulation. Since April 1,
2007, non-deposit taking NBFCs with assets of `1
billion and above are being classified as
Systemically Important Non-Deposit taking
NBFCs (NBFCs-ND-SI), and prudential regulations,
such as capital adequacy requirements and
exposure norms along with reporting requirements,
have been made applicable to them. The asset
liability management (ALM) reporting and
disclosure norms have also been made applicable
to them at different points of time.
Table VI.11: Net Non-Performing Assets |
(As at end-March) |
(Amount in ` million) |
Institutions |
Net NPAs |
Net NPAs/Net Loans (Per cent) |
2011 |
2012 |
2011 |
2012 |
1 |
2 |
3 |
4 |
5 |
EXIM Bank |
930 |
1,558 |
0.2 |
0.3 |
NABARD |
298 |
371 |
0.02 |
0.02 |
NHB |
.. |
.. |
.. |
.. |
SIDBI |
1,321 |
1,847 |
0.3 |
0.4 |
All FIs |
2,549 |
3,776 |
0.1 |
0.13 |
.. : Not Available.
Source: Audited OSMOS Returns of EXIM Bank, NABARD and SIDBI
ended March 31, and for NHB June 30. |
Table VI.12: Asset Classification of Financial Institutions |
(As at end-March) |
(Amount in ` million) |
Institution |
Standard |
Sub-Standard |
Doubtful |
Loss |
2011 |
2012 |
2011 |
2012 |
2011 |
2012 |
2011 |
2012 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
EXIM Bank |
4,55,628 |
5,37,340 |
1,966 |
4,044 |
2,456 |
3,871 |
358 |
44 |
NABARD |
13,94,594 |
16,49,324 |
- |
221 |
681 |
681 |
10 |
10 |
NHB * |
2,25,814 |
2,85,185 |
.. |
.. |
.. |
.. |
.. |
.. |
SIDBI |
4,59,215 |
5,36,034 |
1,427 |
2,123 |
1,364 |
385 |
- |
1,227 |
All FIs |
25,35,251 |
30,07,883 |
3,393 |
6,388 |
4,501 |
4,937 |
368 |
1,281 |
- : Nil/Negligible. .. : Not Available. *: Position as at the end of June 2011 as per OSMOS returns.
Source: Audited OSMOS Returns of EXIM Bank, NABARD and SIDBI ended March 31, and for NHB June 30. |
Table VI.13 Capital to Risk (Weighted) Assets
Ratio of Select Financial Institutions
|
(As at end-March) |
(Per cent) |
Institution |
2011 |
2012P |
1 |
2 |
3 |
EXIM Bank |
17.0 |
16.4 |
NABARD |
21.8 |
20.6 |
NHB * |
20.7 |
19.7 |
SIDBI |
31.6 |
29.2 |
*: Position as at the end of June 2012 as per OSMOS returns.
P: Provisional.
Source: Audited OSMOS Returns of EXIM Bank, NABARD and SIDBI
ended March 31, and for NHB June 30. |
6.15 NBFCs are also classified in terms of
activities into Asset Finance Companies (AFC),
Investment Companies (IC), Loan Companies
(LC), Infrastructure Finance Companies (IFC),
Core Investment Companies (CIC), Infrastructure
Debt Fund - Non-Banking Financial Companies
(IDF-NBFC), Non-Banking Financial Company–
Micro Finance Institutions (NBFC-MFI) and
NBFC-Factors. During 2011-12, two new
categories of NBFCs, viz., Infrastructure Debt
Funds – NBFC (NBFC-IDF) and Micro Finance
Institution (NBFC-MFI) – were created and
brought under separate regulatory framework. In
addition, a new category of NBFC-Factors was
introduced in September 2012. Earlier in April
2010, a regulatory framework for Systemically
Important Core Investment Companies (CIC NDSI)
was created for companies with an asset size
of `1 billion and above, whose business is
investment for the sole purpose of holding stakes
in group concerns, are not trading in these
securities and are accepting public funds.
Prudential requirements in the form of Adjusted
Net Worth and leverage were also prescribed for
CIC-ND-SIs as they were given exemption from
NOF, capital adequacy and exposure norms.
6.16 An NBFC-MFI is defined as a non-deposit-taking
NBFC (other than a company licensed
under Section 25 of the Indian Companies Act,
1956) that fulfils the following conditions: (i)
Minimum Net Owned Funds of `5 crore (`2 crore
for the North-eastern Region), (ii) Not less than 85 per cent of its net assets are in the nature of
“qualifying assets”, (iii) the income it derives from
the remaining 15 per cent assets in accordance
with the regulations specified in that behalf. An
NBFC which does not qualify as an NBFC-MFI
shall not extend loans to the micro finance sector,
in excess of 10 per cent of its total assets. Given
the functional hardship faced by the MFI sector
following the Andhra Pradesh Micro Finance
Institutions (Regulations of Money Lending)
Ordinance, 2010 and to give reprieve to the
sector, the Reserve Bank modified the regulatory
framework for MFIs to allow for time for
compliance to regulations and allow them to
register with the Bank as NBFC-MFI early.
Considering the importance of this sector for the
development and regulation of micro-finance
institutions to promote financial inclusion, the
Micro-Finance Institutions (Development and
Regulation) Bill, 2012 was introduced in the Lok
Sabha on May 22, 2012 (Box VI.1).
6.17 The ownership pattern of NBFCs-ND-SI as
well as deposit-taking NBFCs as at end-March
2012, suggested that government owned companies
have a share of below 3 per cent (Table VI.14).
Profile of NBFCs (including RNBCs)
Non-Banking financial companies’ segment is
witnessing consolidation
6.18 The total number of NBFCs registered with
the Reserve Bank declined marginally to 12,385
as at end-June 2012 (Chart VI.1). A similar trend
was observed in the case of deposit-taking NBFCs
(NBFCs-D) during 2011-12, mainly due to the
cancellation of Certificates of Registration (COR)
and their exit from deposit-taking activities.
6.19 Despite the decline in the number of
NBFCs, their total assets as well as net owned
funds registered an increase during 2011-12,
while public deposits recorded a decline. The
share of Residuary Non-Banking Companies
(RNBCs) in the total assets of NBFCs showed a
decline. The net owned funds of RNBCs have however remained at more or less same level
during 2011-12 (Table VI.15).
Box VI.1:Micro Finance Institutions (Development and Regulation) Bill, 2012 and
its Impact on the Microfinance Sector
The Micro Finance Institutions (Development and
Regulation) Bill, 2012 aims at providing a framework for the
development and regulation of micro-finance institutions.
The Bill defines a micro-finance institution (MFI) as an
organisation, other than a bank, providing micro-finance
services as micro credit facilities not exceeding `5 lakh in
aggregate, or with the Reserve Bank’s specification of `10
lakh per individual. Subsidiary services like collection of
thrift, pension or insurance services and remittance of
funds to individuals within India also come under these
services. The Bill allows the Central Government to create
a Micro-Finance Development Council (MFDC) that will
advise on policies and measures for the development of
MFIs. Besides, the Bill allows the Central Government to
form State Micro-Finance Councils (SMFC), which will
be responsible for co-ordinating the activities of District
Micro-Finance Committees in the respective states.
District Micro-Finance Committees (DMFC) can be
appointed by the Reserve Bank. The Bill requires all MFIs
to obtain a certificate of registration from the Reserve
Bank. The applicant needs to have a net owned fund (the
aggregate of paid-up equity capital and free reserves on the
balance sheet) of at least `5 lakh. The Reserve Bank should
also be satisfied with the general character or management
of the institution.
Every MFI will have to create a reserve fund and the
Reserve Bank may specify a percentage of net profit to be
added annually to this fund. There can be no appropriation
from this fund unless specified by the Reserve Bank. At the
end of every financial year, MFIs are required to provide
an annual balance sheet and profit and loss account for
audit to the Reserve Bank. They will also have to provide
a return, detailing their activities within 90 days of the
Bill being passed. Any change in the corporate structure
of a MFI, such as shut-down, amalgamation, takeover or
restructuring can only take place with approval from the
Reserve Bank.
The Bill has entrusted the Reserve Bank with the power to
issue directions to all MFIs. This could include directions
on the extent of assets deployed in providing micro-finance
services, ceilings on loans or raising capital. The RBI has the authority to set the ceiling on the rate of interest
charged and the margin by MFIs. Margin is defined as the
difference between the lending rate and the cost of funds (in
percentage per annum).
The Reserve Bank shall create the Micro-Finance
Development Fund (MFDF). The sums are raised from
donors, institutions and the public along with the
outstanding balance from the existing Micro-Finance
Development and Equity Fund. The central government,
after due appropriation from Parliament, may grant money
to this fund. The fund can provide loans, grants and other
micro-credit facilities to any MFIs.
The Reserve Bank is responsible for redressal of grievances
for beneficiaries of micro-finance services. The Reserve
Bank is empowered to impose a monetary penalty of up
to `5 lakh for any contravention of the Bill’s provisions.
No civil court will have jurisdiction against any MFI over
any penalty imposed by the Reserve Bank. The Bill gives
the Central Government the authority to delegate certain
powers to the National Bank for Agriculture and Rural
Development (NABARD) or any other Central Government
agency. However, the Central Government has the power to
exempt certain MFIs from the provisions of the Bill.
The Bill and its likely Impact on the Microfinance Sector
The Bill envisages that the Reserve Bank would be the
overall regulator of the MFI sector, regardless of legal
structure. The Reserve Bank has provided the views on the
Bill to the Government of India. The aims of the Bill are to
regulate the sector in the customers’ interest and to avoid
a multitude of microfinance legislation in different states.
The proper balancing of the resources at the Reserve Bank
to supervise these additional sets of institutions besides the
existing regulated institutions could be an important issue.
Requiring all MFIs to register is a critical and necessary step
towards effective regulation. The proposal for appointment
of an Ombudsman will boost the banking industry’s own
efforts to handle grievances better. Compulsory registration
of the MFIs would bring the erstwhile money-lenders into
the fold of organised financial services in the hinterland
who had been acting as MFIs hitherto.
6.20 The ratio of public deposits of NBFCs to
aggregate deposits of Scheduled Commercial Banks (SCBs) in 2011-12 indicates a decline. The
ratio of deposits of NBFCs to the broad liquidity
aggregate of L31 also declined during the year
(Chart VI.2).
Table VI.14: Ownership Pattern of NBFCs
|
(As on March 31, 2012) |
(Number of Companies) |
Ownership |
NBFCs-ND-SI |
Deposit-taking NBFCs |
1 |
2 |
3 |
A. Government Companies |
9 |
7 |
(2.4) |
(2.6) |
B. Non-Government Companies |
366 |
266 |
(97.6) |
(97.4) |
1. Public Ltd Companies |
198 |
263 |
(52.8) |
(96.3) |
2. Private Ltd Companies |
168 |
3 |
(44.8) |
(1.1) |
Total No. of Companies (A)+(B) |
375 |
273 |
(100.0) |
(100.0) |
Note: Figures in parentheses are percentages to total number of NBFCs. |
Operations of NBFCs-D (excluding RNBCs)
Financial performance of deposit-taking Non-
Bank Financial Companies (NBFCs-D) showed
improvement
6.21 The balance sheet size of NBFCs-D
expanded at the rate of 10.8 per cent in 2011-12
(Table VI.16). The borrowings constituted around
two-third of the total liabilities of NBFCs-D. The
public deposits of NBFCs-D, which are subject to
credit ratings, continued to show an increasing
trend during 2011-12. On the assets side, loans
and advances remained the most important category for NBFCs-D, constituting about three-fourth
of their total assets. The investment
constituted the second most important category,
which witnessed subdued growth during 2011-12
mainly due to a decline in non-SLR investments.
6.22 Asset Finance Companies (AFCs) held the
largest share in the total assets of NBFCs-D at
end-March 2012 (Table VI.17).
Table VI.15: Profile of NBFCs |
(Amount in ` billion) |
Item |
As at end-March |
2011 |
2012P |
NBFCs |
of which: RNBCs |
NBFCs |
of which: RNBC |
1 |
2 |
3 |
4 |
5 |
Total Assets |
1,169 |
115 |
1,244 |
76 |
|
|
(9.8) |
|
(6.1) |
Public Deposits |
120 |
79 |
101 |
43 |
|
|
(66.0) |
|
(42.2) |
Net Owned Funds |
180 |
30 |
225 |
31 |
|
|
(16.6) |
|
(13.7) |
P: Provisional
Note: 1. NBFCs comprise NBFCs-D and RNBCs.
2. Figures in parentheses are percentage shares in respective
total.
3. Of the 273 deposit-taking NBFCs, 196 NBFCs filed Annual
Returns for the year ended March 2012 by the cut-off date,
September 8, 2012.
Source: Annual/Quarterly Returns. |
|
|
Table VI.16.Consolidated Balance Sheet of NBFCs-D |
(Amount in ` billion) |
Item |
As at end-March |
Variation |
2010-11 |
2011-12 P |
2011 |
2012P |
Absolute |
Per Cent |
Absolute |
Per Cent |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
Paid-Up Capital |
36 |
32 |
-3 |
-6.4 |
-4 |
-11.5 |
|
(3.5) |
(2.8) |
|
|
|
|
Reserves Surplus |
135 |
162 |
13 |
10.9 |
27 |
20.2 |
|
(12.8) |
(13.9) |
|
|
|
|
Public Deposits |
41 |
58 |
12 |
43.5 |
18 |
43.8 |
|
(3.9) |
(5.0) |
|
|
|
|
Borrowings |
698 |
809 |
57 |
9.0 |
111 |
15.9 |
|
(66.2) |
(69.2) |
|
|
|
|
Other Liabilities |
144 |
107 |
32 |
28.3 |
-37 |
-25.9 |
|
(13.7) |
(9.1) |
|
|
|
|
Total Liabilities/ Assets |
1,054 |
1,169 |
112 |
11.9 |
114 |
10.8 |
|
(100.0) |
(100.0) |
|
|
|
|
Investments |
211 |
159 |
26 |
14.1 |
-52 |
-24.8 |
(i) SLR Investments@ |
135 |
134 |
39 |
40.0 |
-1.0 |
-0.7 |
|
(12.8) |
(11.5) |
|
|
|
|
(ii) Non-SLR Investments |
76 |
25 |
-12 |
-14.1 |
-51 |
-67.6 |
|
(7.2) |
(2.1) |
|
|
|
|
Loans and Advances |
780 |
874 |
68 |
9.6 |
94 |
12.1 |
|
(74.0) |
(74.8) |
|
|
|
|
Other Assets |
63 |
103 |
18 |
39.3 |
40 |
62.3 |
|
(6.0) |
(8.8) |
|
|
|
|
P: Provisional
@ SLR investments comprise 'approved Securities' and 'unencumbered term deposits' in Scheduled Commercial Banks; Loans & advances include Hire
Purchase and Lease Assets.
Notes: 1. Figures in parentheses are percentages to respective total.
Source: Annual/Quarterly Returns. |
Size-wise Classification of Deposits of NBFCs-D
Larger NBFCs are more successful in raising
public deposits
6.23 A sharp increase was discernible in the
share of NBFCs-D with a deposit size of ` 500
million and above, accounting for about 93.2 per cent of total deposits at end-March 2012.
However, only 7 NBFCs-D belonged to this
category, constituting about 3.6 per cent of the
total number of NBFCs-D. It indicates that only
relatively larger NBFCs-D were able to raise
resources through deposits (Table VI.18 and Chart VI.3).
Table VI.17: Major Components of Liabilities of NBFCs-D by Classification of NBFCs
|
(As at end-March) |
(Amount in ` billion) |
Classification of NBFCs |
No. of Companies |
Deposits |
Borrowings |
Liabilities |
2011 |
2012P |
2011 |
2012P |
2011 |
2012P |
2011 |
2012P |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Asset Finance Companies |
174 |
160 |
36 |
45 |
490 |
581 |
740 |
856 |
|
|
|
(89.4) |
(76.9) |
(70.2) |
(71.8) |
(70.2) |
(73.2) |
Loan Companies |
43 |
36 |
4 |
13 |
208 |
228 |
314 |
313 |
|
|
|
(10.6) |
(23.1) |
(29.8) |
(28.2) |
(29.8) |
(26.8) |
Total |
217 |
196 |
40 |
58 |
698 |
809 |
1,054 |
1,169 |
P: Provisional.
Note: Figures in parentheses are percentage share to total. |
Table VI.18: Public Deposits held by NBFCs-D
by Deposit Range |
(Amount in ` million) |
Deposit Range |
As at end-March |
No. of NBFCs |
Amount of deposit |
2011 |
2012 P |
2011 |
2012 P |
1 |
2 |
3 |
4 |
5 |
1. Less than `5 million |
134 |
117 |
194 |
138 |
2. More than `5 million and upto `20 million |
38 |
34 |
442 |
377 |
3. More than `20 million and upto ` 100 million |
28 |
27 |
1,287 |
1,131 |
4. More than ` 100 million and upto ` 200 million |
7 |
7 |
1,084 |
1,092 |
5. More than ` 200 million and upto ` 500 million |
2 |
4 |
807 |
1,201 |
6. ` 500 million and above |
8 |
7 |
36,809 |
54,467 |
Total |
217 |
196 |
40,623 |
58,406 |
P: Provisional
Source: Annual/Quarterly Returns. |
Region-wise Composition of Deposits held by
NBFCs
6.24 Among metropolitan cities, New Delhi
accounted for the largest number of NBFCs-D,
while Chennai held the largest share of 69.7 per
cent in total public deposits of NBFCs-D (Table
VI.19 and Chart VI.4).
Table VI.19: Public Deposits held by
NBFCs-D - Region-wise |
(Amount in ` million) |
Region |
As at end-March |
2011 |
2012 P |
Number of
NBFCs-D |
Public
Deposits |
Number of
NBFCs-D |
Public
Deposits |
1 |
2 |
3 |
4 |
5 |
North |
144 |
1,882 |
125 |
3,285 |
East |
8 |
39 |
5 |
39 |
West |
20 |
9,286 |
17 |
14,880 |
South |
45 |
29,416 |
49 |
40,206 |
Total |
217 |
40,623 |
196 |
58,410 |
Metropolitan cities: |
|
|
|
|
Kolkata |
5 |
39 |
3 |
39 |
Chennai |
26 |
28,638 |
30 |
39,338 |
Mumbai |
6 |
9,074 |
5 |
14,682 |
New Delhi |
50 |
976 |
43 |
2,390 |
Total |
87 |
38,728 |
81 |
56,450 |
P: Provisional
Source: Annual Returns. |
Interest Rate on Public Deposits with NBFCs
NBFCs-ND-SI segment continues to rely heavily
on bank finance
6.25 There was an increase in the share of
public deposits in the interest rate range of 10 per
cent to 12 per cent during 2011-12 (Table VI.20 and Chart VI.5).
Table VI.20: Public Deposits held by NBFCs-D –
Interest Rate Range-wise |
(Amount in ` million) |
Interest Rate Range |
As at end-March |
2011 |
2012 P |
1 |
2 |
3 |
Up to 10 per cent |
29,963 |
32,460 |
|
(73.8) |
(55.6) |
More than 10 per cent and up to 12 per cent |
9,454 |
24,870 |
|
(23.3) |
(42.6) |
12 per cent and above |
1,206 |
1,080 |
|
(3.0) |
(1.8) |
Total |
40,623 |
58,410 |
|
(100.0) |
(100.0) |
P: Provisional
Note: 1. The rate of interest on public deposits cannot exceed 12.5
per cent.
2. Figures in parentheses are percentages to total.
Source: Annual Returns. |
Maturity Profile of Public Deposits
6.26 The largest proportion of public deposits
raised by NBFCs-D belonged to the short to
medium end of the maturity spectrum. In 2011-
12, there was an increase in the shares of deposits
for more than 2 years (Table VI.21 and Chart VI.6).
6.27 Banks and financial institutions were the
major providers of funds for NBFCs-D, constituting
about 50 per cent during 2011-12. This share has
come down marginally. Others (which include,
inter alia, money borrowed from other companies, commercial paper, borrowings from mutual funds
and any other types of funds that were not treated
as public deposits) also registered a declining
trend (Table VI.22).
Table VI.21: Maturity Pattern of Public Deposits held by NBFCs-D |
(Amount in ` million) |
Maturity Period |
As at end-March |
2011 |
2012P |
1 |
2 |
3 |
1. Less than 1 year |
9,816 |
11,720 |
|
(24.2) |
(20.1) |
2. More than 1 and up to 2 years |
7,942 |
15,530 |
|
(19.6) |
(26.6) |
3. More than 2 and up to 3 years |
19,877 |
24,980 |
|
(48.9) |
(42.8) |
4. More than 3 and up to 5 years |
2,221 |
6,170 |
|
(5.5) |
(10.6) |
5. 5 years and above@ |
769 |
10 |
|
(1.9) |
(0.0) |
Total |
40,624 |
58,410 |
|
(100.0) |
(100.0) |
P: Provisional
@ includes unclaimed public deposits.
Note: Figures in parentheses are percentages to respective total.
Source: Annual Returns. |
Assets of NBFCs
Expansion in assets of AFCs was noticeable
6.28 The total assets of NBFCs-D sector
registered a moderate growth during 2011-12
mainly due to an increase in the assets of asset finance companies (Table VI.23). As at end-March
2012, more than two-third of the total assets of
the NBFCs-D sector was held by asset finance
companies. Component-wise, advances accounted
for the predominant share of total assets, followed
by investment.
|
Table VI.22: Sources of Borrowings by NBFCs-D by Classification of NBFCs |
(Amount in ` billion) |
Classification |
As at end-March |
Government |
Banks and Financial Institutions |
Debentures |
Others |
Total Borrowings |
2011 |
2012P |
2011 |
2012P |
2011 |
2012P |
2011 |
2012P |
2011 |
2012P |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
11 |
Asset Finance |
0.0 |
0.0 |
283 |
300 |
123 |
198 |
84 |
83 |
490 |
581 |
|
(0.0) |
(0.0) |
(80.2) |
(74.9) |
(85.7) |
(83.3) |
(59.0) |
(71.2) |
(70.2) |
(71.8) |
Loan Companies |
59 |
54 |
70 |
101 |
20 |
40 |
59 |
33 |
208 |
228 |
|
(100.0) |
(100.0) |
(19.8) |
(25.1) |
(14.3) |
(16.7) |
(41.0) |
(28.8) |
(29.8) |
(28.2) |
Total |
59 |
54 |
353.2 |
401 |
143 |
238 |
143 |
116 |
698 |
809 |
P: Provisional
Note: Figures in parentheses are percentage to respective total.
Source: Annual Returns. |
Distribution of NBFCs-D According to Asset
Size
6.29 At end-March 2012, only 6 per cent of
NBFCs-D had an asset size of more than ` 5,000
million, which had a share of 97 per cent in the
total assets of all NBFCs-D (Table VI.24).
Distribution of Assets of NBFCs – Type of
Activity
6.30 During 2011-12, assets held in the form
of loans and advances of NBFCs-D witnessed significant growth, whereas investment declined.
These two categories of activities constituted over
90 per cent share in total assets of the NBFCs-D
sector (Table VI.25).
Table VI.23: Major Components of Assets of
NBFCs-D by Classification of NBFCs |
(Amount in ` billion) |
Classification |
As at end-March |
Assets |
Advances |
Investments |
2011 |
2012P |
2011 |
2012P |
2011 |
2012P |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
Asset Finance Companies |
740 |
856 |
557 |
656 |
126 |
180 |
|
(70.2) |
(73.2) |
(71.5) |
(75.0) |
(59.9) |
(94.1) |
Loan Companies |
314 |
313 |
222 |
218 |
85 |
11 |
|
(29.8) |
(26.8) |
(28.5) |
(25.0) |
(40.1) |
(5.9) |
Total |
1,054 |
1,169 |
779 |
874 |
211 |
191 |
P: Provisional
Note: Figures in parentheses are percentage to respective total.
Source: Annual Returns. |
Financial Performance of NBFCs-D
Fund-based income of the NBFCs-D segment
has increased
6.31 The financial performance of NBFCs-D
witnessed improvement as reflected in the increase in their operating profits during 2011-12.
This increase in profit was mainly on account of
growth in fund-based income (Table VI.26).
Expenditure as a percentage to average total assets
witnessed a marginal increase during 2011-12.
The same trend is seen in terms of income as a
percentage to average total assets of NBFCs-D
(Chart VI.7).
Table VI.24: Assets of NBFCs-D by Asset-Size Ranges
|
(As at end-March) |
(Amount in ` million) |
Asset Range |
No. of
Companies |
Assets |
2011 |
2012P |
2011 |
2012P |
1 |
2 |
3 |
4 |
5 |
1. Less than `2.5 million |
2 |
0 |
2 |
0.0 |
2. More than `2.5 million and up to` 5.0 million |
9 |
11 |
35 |
45 |
3. More than `5.0 million and up to `20 million |
70 |
55 |
804 |
691 |
4. More than `20 million and up to `100 million |
73 |
65 |
3,471 |
2,917 |
5. More than `100 million and up to `500 million |
34 |
34 |
8,224 |
7,147 |
6. More than `500 million and up to `1,000 million |
8 |
11 |
5,079 |
6,910 |
7. More than `1,000 million and up to `5,000 million |
6 |
8 |
8,309 |
19,052 |
8. Above `5,000 million |
15 |
12 |
1,028,388 |
1,131,913 |
Total |
217 |
196 |
1,054,312 |
1,168,676 |
P: Provisional
Source: Annual Returns. |
Table VI.25: Break-up of Assets of NBFCs-D by Activity |
(Amount in ` billion) |
Activity |
As at end-March |
Percentage Growth |
2011 |
2012P |
2011-12P |
1 |
2 |
3 |
4 |
Loans and Advances |
779 |
874 |
12.2 |
|
(73.9) |
(74.8) |
|
Investments |
211 |
192 |
-9.2 |
|
(20.0) |
(16.4) |
|
Other assets |
64 |
103 |
60.0 |
|
(6.1) |
(8.8) |
|
Total |
1,054 |
1,169 |
10.8 |
P: Provisional
Note: Figures in parentheses are percentages to respective total.
Source: Annual Returns. |
Table VI.26: Financial Performance of NBFCs-D |
(Amount in ` billion) |
Item |
As at end-March |
2011 |
2012P |
1 |
2 |
3 |
A. Income (i+ii) |
152 |
181 |
(i) Fund-Based |
151 |
180 |
|
(99.2) |
(99.3) |
(ii) Fee-Based |
1 |
1 |
|
(0.8) |
(0.7) |
B. Expenditure (i+ii+iii) |
109 |
133 |
(i) Financial |
68 |
81 |
|
(62.3) |
(60.9) |
of which Interest Payment |
9 |
8 |
|
(8.2) |
(6.0) |
(ii) Operating |
30 |
35 |
|
(27.1) |
(26.4) |
(iii) Others |
11 |
17 |
|
(10.5) |
(12.8) |
C. Tax Provisions |
14 |
16 |
D. Operating Profit (PBT) |
43 |
48 |
E. Net Profit (PAT) |
29 |
33 |
F. Total Assets |
1,054 |
1,169 |
G. Financial Ratios (as % to Total Assets) |
|
|
i) Income |
14.4 |
15.5 |
ii) Fund Income |
14.3 |
15.4 |
iii) Fee Income |
0.0 |
0.1 |
iv) Expenditure |
10.4 |
11.4 |
v) Financial Expenditure |
0.1 |
6.9 |
vi) Operating Expenditure |
2.8 |
3.0 |
vii) Tax Provision |
1.3 |
1.3 |
viii) Net Profit |
2.7 |
2.8 |
H. Cost to Income Ratio |
72.0 |
73.3 |
P: Provisional
Note: 1. Figures in parentheses are percentages to respective total.
2. Percentage variation could be slightly different because
absolute numbers have been rounded off to ` billion.
Source: Annual Returns. |
|
Soundness Indicators: Asset Quality of NBFCs-D
Deterioration in asset quality of NBFCs-D
segment
6.32 During 2011-12, there was a significant
increase in the gross NPAs to total advances of
NBFCs-D, which is a deviation from recent trends.
Net NPAs which remained negative till 2011 from
2008, with provisions exceeding NPAs registered
an increase of 0.5 per cent of total net advances
as on March 31, 2012 (Table VI.27).
6.33 There was deterioration in the asset quality
of asset finance and loan companies during 2011-12 as evident from an increase in the gross NPAs
to gross advances ratio for these companies
(Table VI.28).
In order to improve transparency and
understanding by borrowers, the Reserve Bank
has issued a revised fair practices code (Box VI.2).
Table VI.27: NPA Ratios of NBFCs-D |
(per cent) |
As at end-March |
Gross NPAs to Total Advances |
Net NPAs to Net Advances |
1 |
2 |
3 |
2002 |
10.6 |
3.9 |
2003 |
8.8 |
2.7 |
2004 |
8.2 |
2.4 |
2005 |
5.7 |
2.5 |
2006 |
3.6 |
0.5 |
2007 |
2.2 |
0.2 |
2008 |
2.1 |
# |
2009 |
2.0 |
# |
2010 |
1.3 |
# |
2011 |
0.7 |
# |
2012 P |
2.1 |
0.5 |
P: Provisional. # Provision exceeds NPA
Source: Half-Yearly returns on NBFCs-D. |
Table VI.28: NPAs of NBFCs-D by Classification of NBFCs |
(Amount in ` billion) |
Classification/End-March |
Gross Advances |
Gross NPAs |
Net Advances |
Net NPAs |
Amount |
% to Gross Advances |
Amount |
% to Net Advances |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
Asset Finance |
|
|
|
|
|
|
2010-11 |
517 |
3 |
0.5 |
508 |
-7 |
-1.4 |
2011-12 P |
663 |
16 |
2.3 |
651 |
3 |
0.5 |
Loan Companies |
|
|
|
|
|
|
2010-11 |
183 |
2 |
1.3 |
181 |
-0.1 |
0.0 |
2011-12 P |
208 |
3 |
1.6 |
206 |
2 |
0.8 |
All Companies |
|
|
|
|
|
|
2010-11 |
700 |
5 |
0.7 |
689 |
-7 |
-1.0 |
2011-12 P |
871 |
19 |
2.1 |
857 |
5 |
0.5 |
P: Provisional
Source: Half-Yearly returns on NBFCs-D. |
Box VI.2: Guidelines on Fair Practices Code for NBFCs
The Reserve Bank has revised the guidelines on Fair Practices Code
(FPC) for all NBFCs issued on September 28, 2006 in the light of
the recent developments in the NBFC sector. The salient features of
the revised circular dated March 26, 2012 are as follows:
General
(a) All communications to the borrower shall be in the vernacular
language or a language as understood by the borrower.
(b) Loan application forms should include necessary information
that affects the interests of the borrower.
(c) Loan agreement should contain all details.
(d) NBFCs should refrain from interference in the affairs of the
borrower except for the purposes provided in the terms and
conditions of the loan agreement.
(e) In the matter of recovery of loans, the NBFCs should not resort
to undue harassment and ensure that the staffs are adequately
trained to deal with customers.
(f) The Board of Directors of NBFCs should also lay down the
appropriate grievance redressal mechanism within the
organisation.
(g) The Fair Practices Code should be put in place by all NBFCs
with the approval of their Boards. The same should be put up
on their website.
(h) Boards of NBFCs should lay out appropriate internal principles
and procedures to determine interest rates and processing
and other charges.
(i) The Board of each NBFC shall adopt an interest rate model
taking into account relevant factors, such as cost of funds,
margins and risk premium.
(j) NBFCs must have a built-in re-possession clause in the
contract/loan agreement with the borrower which must be
legally enforceable.
(k) To ensure transparency, the terms and conditions of the
contract/loan agreement should also contain provisions
regarding: (a) notice period before taking possession; (b)
circumstances under which the notice period can be waived;
(c) the procedure for taking possession of the security; (d) a
provision regarding final chance to be given to the borrower for
repayment of loan before the sale / auction of the property; (e)
the procedure for giving repossession to the borrower and (f)
the procedure for sale/ auction of the property.
NBFC-MFIs
In addition to the general principles above, NBFC-MFIs are required
to adopt the following fair practices that are specific to their lending
business and regulatory framework.
(a) A statement shall be made in vernacular language and
displayed by NBFC-MFIs in their premises and in loan cards
articulating their commitment to transparency and fair lending
practices;
(b) Field staff should be trained to make necessary enquiries with
regard to existing debt of the borrowers, and training, if any,
offered to the borrowers shall be free of cost.
(c) The effective rate of interest charged and the grievance redressal
mechanism set up by the NBFC-MFIs should be prominently
displayed in all its offices;
(d) A declaration that the MFI will be accountable for preventing
inappropriate staff behaviour and timely grievance redressal
shall be made in the loan agreement;
(e) All sanctioning and disbursement of loans should be done only
at a central location and more than one individual should be
involved in this function;
(f) All NBFC-MFIs shall have a Board-approved standard form of
loan agreement, preferably in the vernacular language;
(g) The loan card should reflect the details, including the effective
rate of interest charged;
(h) Non-credit products issued shall be with the full consent of
borrowers and the fee structure shall be communicated in the
loan card itself;
(i) Recovery should normally be made only at a central designated
place;
(j) NBFC-MFIs shall ensure that a Board-approved policy is in
place with regard to Code of Conduct by field staff.
Lending against collateral of gold jewellery
(a) Adequate steps to ensure that the KYC guidelines stipulated
by the RBI are complied with and to ensure that adequate due
diligence is carried out on the customer before extending any
loan.
(b) Proper assaying procedure for the jewellery received.
(c) Internal systems to satisfy ownership of the gold jewellery.
(d) The policy shall also cover putting in place adequate systems
for storing the jewellery in safe custody, reviewing the systems
on an on-going basis, training the concerned staff and periodic
inspection by internal auditors to ensure that the procedures
are strictly adhered to.
(e) Loans against the collateral of gold should not be extended by
branches that do not have appropriate facility for storage of the
jewellery.
(f) The jewellery accepted as collateral should be appropriately
insured.
(g) The Board-approved policy with regard to auction of jewellery
in case of non-repayment shall be transparent and adequate
prior notice to the borrower should be given before the auction
date.
(h) The auction should be announced to the public by issue of
advertisements in at least 2 newspapers, one in vernacular
language and another in national daily newspaper.
(i) As a policy the NBFCs themselves shall not participate in the
auctions held.
(j) Gold pledged will be auctioned only through auctioneers
approved by the Board.
(k) The policy shall also cover systems and procedures to be put
in place for dealing with fraud, including separation of duties
of mobilisation, execution and approval.
6.34 There was an increase in the shares of all
three NPA categories of sub-standard, doubtful
and loss assets of all companies in 2011-12, underlining the marginal deterioration in asset
quality of these institutions. This mainly emanated
from asset finance companies (Table VI.29).
6.35 At end-March 2012, of 190 reporting
NBFCs, 187 had CRAR of more than 15 per cent
(Table VI.30). This could be an indication that the
NBFC sector is undergoing a consolidation
process in the past few years, wherein weaker
NBFCs are gradually exiting and paving the way
for stronger ones. The ratio of public deposits to
Net Owned Funds (NOF) of NBFCs taken together
has more or less remained same as at end-March
2012 (Table VI.31). There was a significant
increase in NOF and public deposits of NBFCs-D
during 2011-12. The increase in NOF was mainly concentrated in the category of `5,000 million and
above (Table VI.32).
Table VI.29: Classification of Assets of NBFCs-D by Category of NBFCs |
(Amount in ` billion) |
|
Standard Assets |
Sub-standard Assets |
Doubtful Assets |
Loss Assets |
Gross NPAs |
Gross Advances |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
Asset Finance Companies |
|
|
|
|
|
|
2010-11 |
515 |
2.1 |
0.3 |
0.1 |
2.5 |
517 |
|
(99.5) |
(0.4) |
(0.1) |
(0.0) |
(0.5) |
(100.0) |
2011-12P |
648 |
10 |
4 |
2 |
15 |
663 |
|
(97.7) |
(1.5) |
(0.5) |
(0.3) |
(2.3) |
(100.0) |
Loan Companies |
|
|
|
|
|
|
2010-11 |
180 |
1 |
2 |
0 |
2 |
183 |
|
(98.7) |
(0.6) |
(0.4) |
(0.0) |
(1.3) |
(100.0) |
2011-12P |
205 |
2 |
1 |
0.4 |
3 |
208 |
|
(98.4) |
(1.0) |
(0.4) |
(0.2) |
(1.6) |
(100.0) |
All Companies |
|
|
|
|
|
|
2010-11 |
695 |
3 |
2 |
0.1 |
5 |
700 |
|
(99.3) |
(0.5) |
(0.1) |
(0.0) |
(0.7) |
(100.0) |
2011-12P |
852 |
12 |
4 |
2 |
19 |
871 |
|
(97.8) |
(1.4) |
(0.5) |
(0.3) |
(2.2) |
(100.0) |
P: Provisional
Note: Figures in parentheses are per cent to total credit exposures.
Source: Half Yearly returns on NBFCs-D. |
Table VI.30: Capital Adequacy Ratio of NBFCs-D |
(Number of companies) |
CRAR Range |
2010-11 |
2011-12P |
AFC |
LC |
Total |
AFC |
LC |
Total |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
1) Less than 12 per cent |
1 |
1 |
2 |
1 |
1 |
2 |
a) Less than 9 per cent |
1 |
1 |
2 |
1 |
1 |
2 |
b) More than 9 per cent and up to 12 per cent |
0 |
0 |
0 |
0 |
0 |
0 |
2) More than 12 per cent and up to 15 per cent |
1 |
2 |
3 |
1 |
0 |
1 |
3) More than 15 per cent and up to 20 per cent |
5 |
3 |
8 |
8 |
3 |
11 |
4) More than 20 per cent and up to 30 per cent |
19 |
3 |
22 |
16 |
2 |
18 |
5) Above 30 per cent |
142 |
27 |
169 |
131 |
27 |
158 |
Total |
168 |
36 |
204 |
157 |
33 |
190 |
P: Provisional
Note: AFC-Asset Finance Companies; LC-Loan Companies
Source: Half-yearly returns. |
Table VI.31: Net Owned Fund vis-à-vis
Public Deposits of NBFCs-D
by Classification |
(Amount in ` billion) |
Classification |
Net Owned Fund |
Public Deposits |
2010-11 |
2011-12P |
2010-11 |
2011-12P |
1 |
2 |
3 |
4 |
5 |
Asset Finance Companies |
108 |
139 |
36 |
45 |
|
|
|
(0.3) |
(0.3) |
Loan Companies |
42 |
56 |
4 |
13 |
|
|
|
(0.1) |
(0.2) |
Total |
150 |
195 |
41 |
58 |
|
|
|
(0.3) |
(0.3) |
P: Provisional.
Note: Figures in parentheses are ratio of public deposits to net owned
funds.
Source: Annual Returns. |
Residuary Non-Banking Companies (RNBCs)
RNBCs are in the process of migrating to other
business models
6.36 The assets of RNBCs declined by 34 per
cent during the year ended March 2012. The
assets mainly consist of investments in
unencumbered approved securities, bonds/
debentures and fixed deposits/certificates of
deposit of SCBs. The NOF of RNBCs has also
registered a decline of 52.2 per cent in 2011-12
(Table VI.33). The decline in the expenditure of
RNBCs during 2011-12 was more than the decline in income, as a result of which the operating
profits of RNBCs increased during the year. As a
result of decline in the provision for taxation, the
net profits of RNBCs increased sharply during
2011-12.
Table VI.32: Range of Net Owned Funds vis-à-vis Public Deposits of NBFCs-D |
(Amount in ` million) |
Range of NoF |
2010-11 |
2011-12P |
No. of
Companies |
Net Owned
Fund |
Public
Deposits |
No. of
Companies |
Net Owned
Fund |
Public
Deposits |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
Up to `2.5 million |
2 |
-2,003 |
324 |
1 |
-1 |
1.2 |
More than `2.5 million and up to `20 million |
113 |
838 |
320 |
89 |
750 |
242 |
More than `20 million and up to `100 million |
65 |
2,662 |
1,359 |
67 |
2,894 |
1,271 |
More than `100 million and up to `500 million |
20 |
4,529 |
1,133 |
21 |
4,468 |
1,252 |
More than `500 million and up to `1000 million |
2 |
1,204 |
1,038 |
4 |
2,869 |
817 |
More than `1000 million and up to `5000 million |
7 |
17,118 |
4,526 |
7 |
13,876 |
15,612 |
Above `5000 million |
8 |
1,25,527 |
31,923 |
7 |
1,69,792 |
39,212 |
Total |
217 |
1,49,874 |
40,623 |
196 |
1,94,648 |
58,406 |
P: Provisional
Note: Figures in parentheses are public deposits as ratio of respective net owned fund.
Source: Annual returns |
Table VI.33: Profile of RNBCs |
(Amount in ` million) |
Item |
2010-11 |
2011-12P |
Percentage
Variation |
2010-11 |
2011-12P |
1 |
2 |
3 |
4 |
5 |
A. |
Assets (i to v) |
1,14,670 |
75,430 |
-26.6 |
-34.2 |
|
(i) Investment in Unencumbered Approved Securities |
13,080 |
8,380 |
-47.0 |
-36.0 |
|
(ii) Investment in
Fixed Deposits
/ Certificate
of Deposits
of Scheduled
Comm. Banks/
Public Financial
Institutions |
26,520 |
13,900 |
-45.4 |
-47.6 |
|
(iii) Debentures/Bonds/
Commercial
Papers of Govt.
Companies/Public
Sector Banks/
Public Financial
Institution/
Corporation |
28,760 |
7,510 |
-45.6 |
-73.9 |
|
(iv) Other Investments |
490 |
4,330 |
-96.2 |
784.3 |
|
(v) Other Assets |
45,820 |
41,310 |
166.6 |
-9.8 |
B. |
Net Owned Fund |
29,880 |
14,270 |
2.3 |
-52.2 |
C. |
Total Income (i+ii) |
11,590 |
3,320 |
-40.4 |
-71.3 |
|
(i) Fund Income |
11,280 |
2,940 |
-41.3 |
-73.9 |
|
(ii) Fee Income |
310 |
380 |
19.2 |
24.1 |
D. |
Total Expenses (i+ii+iii) |
10,060 |
1,660 |
-28.1 |
-83.5 |
|
(i) Financial Cost |
6,310 |
460 |
-35.2 |
-92.7 |
|
(ii) Operating Cost |
3,680 |
520 |
7.3 |
-85.9 |
|
(iii) Other Cost |
70 |
680 |
-91.6 |
876.9 |
E. |
Taxation |
620 |
570 |
-62.2 |
-8.1 |
F. |
Operating Profit (PBT) |
1,530 |
1,670 |
-72.0 |
8.9 |
G. |
Net Profit (PAT) |
910 |
1,100 |
-76.2 |
20.5 |
P: Provisional. PBT: Profit Before Tax. PAT: Profit After Tax.
Source: Annual returns |
Regional Pattern of Deposits of RNBCs
6.37 At end-March 2012, there were two RNBCs,
registered with the Reserve Bank. One each is
located in central and eastern regions. Both the
RNBCs are in the process of migrating to other
business models and have been directed to reduce
their deposit liabilities to ‘nil’ by 2015. Public
deposits held by the two RNBCs registered a significant decline in 2011-12, mainly due to a
substantial decline in the deposits held by SIFCL
(Table VI.34).
Investment Pattern of RNBCs
6.38 Following the decline in deposits, there was
a decline in the investments of RNBCs in 2011-12.
The decline was noticeable in all segments of
investment (Table VI.35).
Table VI.34: Public Deposits Held by RNBCs – Region-wise |
(Amount in ` billion) |
Item |
2010-11 |
2011-12P |
No. of RNBCs |
Public Deposits |
No. of RNBCs |
Public Deposits |
1 |
2 |
3 |
4 |
5 |
Central |
1 |
53 |
1 |
21 |
|
|
(66.9) |
|
(50.0) |
Eastern |
1 |
26 |
1 |
21 |
|
|
(33.1) |
|
(50.0) |
Total |
2 |
79 |
2 |
42 |
Metropolitan Cities |
|
|
|
|
Kolkata |
1 |
26 |
1 |
21 |
Total |
1 |
26 |
1 |
21 |
P: Provisional
Note: Figures in parentheses are percentages to respective totals.
Source: Annual returns. |
NBFCs-ND-SI
Though borrowing from banks is sizable, a
substantial increase in borrowings by way of
debentures was witnessed
6.39 The assets of NBFCs-ND-SI for the year
ended March 2012 showed an increase of 21 percent. Total borrowings (secured and unsecured)
by NBFCs-ND-SI showed a significant increase of
23.6 per cent, constituting more than two-third
of the total liabilities (Table VI.36). Secured
borrowings constituted the largest source of funds
for NBFCs-ND-SI, followed by unsecured
borrowings, reserves and surplus.
6.40 The NBFCs-ND-SI segments is growing
rapidly. Borrowings comprise their largest source
of funds, mostly sourced from banks and financial
institutions. To the extent that they rely on bank
financing, there is an indirect exposure to
depositors. While the concentration of funding has
risks, the caps on bank lending to NBFCs may
constrain their growth. However, the leverage ratio
of the NBFCs-ND-SI sector remains the same as
in the previous year.
Table VI.35. Investment Pattern of RNBCs |
(Amount in ` million) |
Item |
2010-11 |
2011-12P |
1 |
2 |
3 |
Aggregate Liabilities to the Depositors (ALD) |
79,020 |
42,650 |
(i) Unencumbered approved securities |
13,080 |
8,380 |
|
(16.6) |
(19.6) |
(ii) Fixed Deposits with banks |
26,520 |
13,900 |
|
(33.6) |
(32.6) |
(iii) Bonds or debentures or commercial papers of a Govt. Company / public sector bank/ public financial Institution / corporations |
28,760 |
7,510 |
|
(36.4) |
(17.6) |
(iv) Other Investments |
490 |
4,330 |
|
(0.6) |
(10.2) |
P: Provisional
Note: Figures in parentheses as percentages to ALDs.
Source: Annual returns. |
Table VI.36: Consolidated Balance Sheet of
NBFCs-ND-SI |
(Amount in ` billion) |
Item |
2010-11 |
2011-12 |
Variation (Per cent) |
1 |
2 |
3 |
4 |
1. Share Capital |
382 |
505 |
32.1 |
2. Reserves & Surplus |
1,599 |
1,901 |
18.9 |
3. Total Borrowings |
5,175 |
6,398 |
23.6 |
A. Secured Borrowings |
2,915 |
3,770 |
29.3 |
A.1. Debentures |
984 |
1,732 |
76.0 |
A.2. Borrowings from Banks |
1,006 |
1,441 |
43.2 |
A.3. Borrowings from FIs |
103 |
90 |
-12.7 |
A.4. Interest Accrued |
52 |
63 |
22.9 |
A.5. Others |
770 |
444 |
-42.3 |
B. Un-Secured Borrowings |
2,260 |
2,628 |
16.3 |
B.1. Debentures |
753 |
1,218 |
61.7 |
B.2. Borrowings from Banks |
461 |
436 |
-5.3 |
B.3. Borrowings from FIs |
31 |
53 |
74.0 |
B.4. Borrowings from Relatives |
13 |
12 |
-9.5 |
B.5. Inter-Corporate Borrowings |
242 |
278 |
14.5 |
B.6. Commercial Paper |
314 |
306 |
-2.8 |
B.7. Interest Accrued |
44 |
69 |
59.0 |
B.8. Others |
401 |
256 |
-36.3 |
4. Current Liabilities & Provisions |
457 |
409 |
-10.6 |
Total Liabilities/ Total Assets Assets |
7,613 |
9,213 |
21.0 |
1. Loans & Advances |
4,709 |
5,900 |
25.3 |
1.1. Secured |
3,406 |
4,486 |
31.7 |
1.2. Un-Secured |
1,304 |
1,414 |
8.5 |
2. Hire Purchase Assets |
502 |
635 |
26.5 |
3. Investments |
1,507 |
1,595 |
5.9 |
3.1. Long-Term Investments |
1,089 |
1,227 |
12.6 |
3.2. Current Investments |
417 |
368 |
-11.7 |
4. Cash & Bank Balances |
313 |
357 |
14.0 |
5. Other Current Assets |
437 |
553 |
26.5 |
6. Other Assets |
144 |
173 |
19.9 |
Memo Items |
|
|
|
1. Capital Market Exposure |
822 |
799 |
-2.8 |
Of which: Equity Shares |
347 |
253 |
-27.0 |
2. CME as per cent to Total Assets |
10.8 |
8.7 |
|
3. Leverage Ratio |
2.84 |
2.83 |
2.95 |
Notes: Percentage variation could be slightly different because absolute
numbers have been rounded off to ` billion.
Source: Monthly returns on ND-SI (`1 billion and above). |
Borrowings of NBFCs-ND-SI by Region
Northern Region continued to be main source of funds
6.41 Analysis of region-wise borrowings of the
NBFCs-ND-SI reveals the dominance of northern
and western regions; together they constitute more
than 70 per cent of the total borrowings during
the year ended March 2012. The same trend
continued during the quarter ended June 2012.
All regions registered growth during both the year
ended March 2012 and quarter ended June 2012
(Table VI.37).
Financial Performance
NBFCs-ND-SI showed deterioration in financial
performance and increase in NPAs
6.42 The financial performance of the NBFCs-
ND-SI sector deteriorated marginally as reflected
in the decline in net profit during 2011-12 (Table
VI.38). Both Gross and Net NPAs to total asset of
the NBFCs-ND-SI sector increased during the year.
The same trend continued as on June 2012
(Table VI.39).
Table VI.37: Borrowings of NBFCs-ND-SI
Sector by Region |
(Amount in ` billion) |
Region |
As at end |
March 2011 |
March 2012P |
June 2012P |
1 |
2 |
3 |
4 |
North |
2,707 |
3,431 |
3,502 |
East |
231 |
329 |
368 |
West |
1,383 |
1,512 |
1,594 |
South |
854 |
1,127 |
1,193 |
Total Borrowings |
5,175 |
6,398 |
6,657s |
P: Provisional
Source: Monthly returns on NBFCs-ND-SI. |
Table VI.38: Financial Performance of
NBFCs-ND-SI Sector |
(Amount in ` billion) |
Item |
As at end |
March
2011 |
March
2012 |
June
2012 |
1 |
2 |
3 |
4 |
1. Total Income |
752 |
948 |
263 |
2. Total Expenditure |
529 |
740 |
192 |
3. Net Profit |
160 |
139 |
51 |
4. Total Assets |
7,613 |
9,213 |
9,608 |
Financial Ratios |
|
|
|
(i) Income to Total Assets (per cent) |
9.9 |
10.3 |
2.7 |
(ii) Expenditure to Total Assets (per cent) |
6.9 |
8.0 |
1.9 |
(iii) Net Profit to Total Income (per cent) |
21.3 |
14.6 |
19.4 |
(iv) Net Profit to Total Assets (per cent) |
2.1 |
1.5 |
0.5 |
Source: Monthly returns on ND-SI (`1 billion and above). |
6.43 As on March 31, 2012, the majority of the
reporting companies maintained the stipulated
minimum norm of 15 per cent capital adequacy
as measured by CRAR. Only 10 per cent of the
total reporting companies have a CRAR of less than 15 per cent (Table VI.40). These companies
were also largely dependent on nationalised banks
for their term loans, working capital loans and
debentures/CPs. New private sector banks have
emerged as a second major bank group for these
companies to raise term loans and working capital
loans (Table VI.41).
Table VI.39: NPA Ratios of NBFCs-ND-SI Sector |
(per cent) |
Item |
As at end |
March 2011 |
March 2012 |
June 2012 |
1 |
2 |
3 |
4 |
(i) Gross NPAs to Gross Advances |
1.72 |
2.08 |
2.26 |
(ii) Net NPAs to Net Advances |
0.69 |
1.25 |
1.37 |
(iii) Gross NPAs to Total Assets |
1.28 |
1.48 |
1.61 |
(iv) Net NPAs to Total Assets |
0.51 |
0.88 |
0.97 |
Source: Monthly returns on ND-SI (` 1 billion and above). |
Table VI.40: Capital Adequacy Ratio of
NBFCs-ND-SI - By Type of NBFC |
(Number of companies) |
CRAR Range |
AFC |
IFC |
IC |
LC |
Total |
1 |
2 |
3 |
4 |
5 |
6 |
Less than 15 per cent |
0 |
0 |
21 |
15 |
36 |
15 per cent to 20 per cent |
5 |
1 |
8 |
20 |
34 |
20 per cent to 25 per cent |
2 |
2 |
5 |
14 |
23 |
25 per cent to 30 per cent |
3 |
0 |
6 |
4 |
13 |
Above 30 per cent |
8 |
1 |
171 |
79 |
259 |
Total |
18 |
4 |
211 |
132 |
365 |
Note: AFC - Asset Finance Companies; IFC - Infrastructure Finance
Companies; IC - Investment Companies; LC - Loan Companies
Source: Quarterly Returns on NBFCs-ND-SI. |
4. Primary Dealers
6.44 There were 21 Primary Dealers (PDs)
operating in the financial markets as on June 30,
2012. Of them, 13 were run by banks as a
department called Bank-PDs, and the remaining
8 were non-bank entities known as standalone
PDs registered as NBFCs under Section 45 IA of
the RBI Act, 1934.
Operations and Performance of PDs
6.45 During 2011-12, the bid to cover ratio of
PDs in both dated Government of India securities
(G-Sec) and Treasury Bills (T-Bills) was marginally lower than in the previous year. PDs were required
to achieve a minimum success ratio (bids accepted
to the bidding commitment) of 40 per cent for
T-Bills and Cash Management Bills (CMBs) put
together, usually reviewed on a half-yearly basis.
All the PDs achieved the stipulated minimum
success ratio in both the first and second half of
2011-12. The success ratio in T-Bill auctions,
however, was marginally lower during the year.
6.46 During 2011-12, all the dated G-Secs were
fully underwritten. In the auctions of dated
securities, the share of the PDs (bids accepted to
the securities issued) decreased marginally (Table
VI.42). Partial devolvement on the PDs took place
on 14 instances.
Table VI.41: Bank Exposure of NBFCs-ND-SI Sector |
(As at end-March 2012) |
(Amount in ` billion) |
Bank Group |
Term Loans |
Working Capital Loans |
Debentures |
Commercial Paper |
Others |
Total |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
A. Nationalised Banks |
959 |
282 |
81 |
18 |
73 |
1,412 |
B. State Bank Group |
102 |
97 |
21 |
0.3 |
27 |
247 |
C. Old Private Banks |
38 |
27 |
10 |
2 |
2 |
79 |
D. New Private Banks |
140 |
53 |
53 |
11 |
11 |
268 |
E. Foreign Banks |
72 |
34 |
9 |
3 |
5 |
123 |
All Banks |
1,310 |
492 |
175 |
35 |
117 |
2,130 |
Source: Monthly Returns on ND-SIs (`1 billion and above). |
Performance of Standalone PDs
6.47 In the secondary market, PDs have
individually achieved a minimum annual total
turnover ratio2 (outright and repo transactions)
of 5 times in dated G-Sec and 10 times in T-Bills
during 2011-12. PDs had also achieved the
minimum annual outright turnover ratio of 3 times
in dated G-Sec and 6 times in T-Bills (Table VI.43).
Table VI.42: Performance of the PDs
in the Primary Market |
(As at end-March) |
(Amount in ` billion) |
Item |
2011 |
2012 |
1 |
2 |
3 |
Treasury Bills & CMBs |
|
|
Bidding Commitment |
3,808 |
7,296 |
Actual Bids Submitted |
7,260 |
13,505 |
Bid to Cover Ratio |
2.3 |
2.2 |
Bids Accepted |
2,353 |
4,271 |
Success Ratio (in per cent) |
61.8 |
58.6 |
Central Govt. Securities |
|
|
Notified Amount |
4,370 |
5,100 |
Actual Bids submitted |
6,239 |
6,932 |
Bid to Cover Ratio |
1.4 |
1.3 |
Bids of PDs Accepted |
2,165 |
2,432 |
Share of PDs (in per cent) |
49.6 |
47.7 |
Note: Percentage variation could be slightly different because absolute
numbers have been rounded off to ` billion. |
Table VI.43: Performance of Standalone
PDs in the Secondary Market
|
(As at end-March) |
(Amount in ` billion) |
Item |
2011 |
2012 |
1 |
2 |
3 |
Outright |
|
|
Turnover of standalone PDs |
10,900 |
18,381 |
Turnover of market participants |
57,419 |
69,764 |
Share of PDs (in per cent) |
19.0 |
26.3 |
Repo |
|
|
Turnover of standalone PDs |
11,460 |
15,245 |
Turnover of market participants |
81,986 |
75,278 |
Share of PDs (in per cent) |
14.0 |
20.3 |
Total |
|
|
Turnover of standalone PDs |
22,359 |
33,625 |
Turnover of market participants |
1,39,405 |
1,45,042 |
Share of PDs (in per cent) |
16.0 |
23.2 |
Notes: 1. Percentage variation could be slightly different because
absolute numbers have been rounded off to ` billion.
2. Components may not add up to the whole due to rounding off.
Source: Clearing Corporation of India Limited. |
Sources and Application of Funds of
Standalone PDs
Investment by PDs in corporate bond market
has decreased
6.48 The net owned fund (NOF) of the PDs has
increased marginally. Reserves and surplus of the
PDs had increased significantly. Both the secured
and unsecured loans of the PDs also increased
significantly during 2011-12. Investments in
corporate bonds decreased marginally during the
year (Table VI.44).
Financial Performance of Standalone PDs
Sharp increase in expenses led to reduction in
profit
6.49 The net profit of the PDs reduced
marginally during 2011-12. The total income of
the PDs increased significantly. However, the PDs
reported a sharp increase in their interest
expenses mainly due to the increased cost of
borrowings (Table VI.45). As a result, the cost-income
ratio (i.e., operating expenses to net total income) increased during the year. The return on
net worth (RONW) and return on average assets
(ROAA) for the year ended March 2012 were down marginally (Table VI 46). The CRAR of the PDs
increased from 46.2 per cent to 53.8 per cent
during the year as against a minimum prescribed
requirement of 15 per cent (Table VI 47).
Table VI.44: Sources and Applications of Funds of Standalone Primary Dealers |
(Amount in ` million) |
Item |
As at end-March |
Percentage Variation |
2010 |
2011$ |
2012 |
2011 |
2012 |
1 |
2 |
3 |
4 |
5 |
6 |
Sources of Funds |
1,03,080 |
130,320 |
2,03,810 |
26.4 |
56.4 |
1 |
Capital |
15,410 |
15,210 |
15,080 |
-1.3 |
-0.8 |
2 |
Reserves and Surplus |
19,250 |
18,890 |
20,490 |
-1.9 |
8.4 |
3 |
Loans (a + b) |
68,420 |
96,220 |
168,240 |
40.7 |
74.9 |
|
a) Secured |
25,220 |
63,520 |
113,970 |
151.9 |
79.4 |
|
b) Unsecured |
43,200 |
32,700 |
54,260 |
-24.3 |
66.0 |
Application of Funds |
1,03,080 |
1,30,320 |
2,03,810 |
26.4 |
56.4 |
1 |
Fixed Assets |
140 |
380 |
370 |
171.4 |
-2.6 |
2 |
Investments (a + b + c) |
72,800 |
98,520 |
1,45,080 |
35.3 |
47.3 |
|
a) Government Securities |
62,518 |
86,430 |
1,33,320 |
38.1 |
54.2 |
|
b) Commercial Papers |
1,420 |
100 |
250 |
-92.9 |
149.4 |
|
c) Corporate Bonds |
8,800 |
11,990 |
11,510 |
36.2 |
-4.0 |
3 |
Loans and Advances |
7,410 |
4,260 |
19,380 |
-42.5 |
354.9 |
4 |
Non-current Assets |
0 |
0 |
2,970 |
- |
- |
5 |
Equity, Mutual Funds, etc. |
680 |
250 |
160 |
-63.2 |
-36.0 |
6 |
Others* |
22,050 |
26,910 |
35,850 |
22.0 |
33.2 |
* Others include cash + certificate of deposits + bank balances + accrued interest + deferred tax assets – current liabilities and provisions.
$: Except Morgan Stanley Deutsche Sec and IDBI Gilts.
Notes: 1. Percentage variation could be slightly different because of rounding off.
2. Components may not add up to the whole due to rounding off.
Source: Annual Reports of PDs. |
Table VI.45: Financial Performance of
Standalone Primary Dealers |
(Amount in ` million) |
Item |
2010-11 |
2011-12 |
Variation |
Amount |
Percentage |
1 |
2 |
3 |
4 |
5 |
A. Income (i to iii) |
10,790 |
15,470 |
4,680 |
43.4 |
i) Interest and
discount |
9,700 |
13,820 |
4,120 |
42.5 |
ii) Trading Profit |
580 |
640 |
60 |
10.3 |
iii) Other income |
510 |
1,010 |
500 |
98.0 |
B. Expenses (i+ii) |
8,070 |
13,070 |
4,560 |
62.0 |
i) Interest |
6,530 |
11,180 |
4,650 |
71.2 |
ii) Other expenses including Establishment and Administrative Costs |
1,540 |
1,890 |
350 |
22.7 |
Profit Before Tax |
2,720 |
2,400 |
-320 |
-11.8 |
Profit After Tax |
1,780 |
1,540 |
-240 |
-13.5 |
Notes: 1. Percentage variation could be slightly different because
absolute numbers have been rounded off to ` billion.
2. Components may not add up to the whole due to rounding off.
Source: Returns submitted by PDs. |
Table VI.46: Financial Indicators of
Standalone PDs |
(Amount in ` million) |
Indicator |
2010-11 |
2011-12 |
1 |
2 |
3 |
i) |
Net profit |
1,780 |
1,540 |
ii) |
Average Assets |
1,66,970 |
1,97,460 |
iii) |
Return on Average Assets (in per cent) |
1.1 |
0.8 |
iv) |
Return on Net Worth (in per cent) |
5.1 |
4.4 |
Table VI.47: CRAR of the standalone PDs
|
(As at end-March) |
(Amount in ` million) |
Particulars |
2011 |
2012 |
1 |
2 |
3 |
1. Total Net Capital Funds |
36,260 |
39,290 |
2. Total Risk Weighted Assets |
78,580 |
72,980 |
a) Credit Risk |
33,500 |
37,420 |
b) Market Risk |
45,080 |
35,560 |
3. CRAR (in percent) |
46.2 |
53.8 |
5. Overall Assessments
6.50 There were signs of a consolidation
process in the NBFC sector in terms of number
of NBFCs. The balance sheets of NBFCs have,
however, showed substantial expansion and
similar expansion was observed in respect of FIs
and PDs. The financial performance of the
NBFCs-D segment has witnessed improvement
as reflected in the increase in their operating
profits mainly emanating from fund-based
income. However, the financial performance of
the NBFCs-ND-SI segment has deteriorated
marginally, though the sector is growing faster.
Borrowings constitute the largest source of funds
mostly sourced from banks and financial
institutions for NBFCs. Thus, the heavy reliance
on bank financing needs to be monitored closely. In this context, the recent regulatory measures
leading to tightening of norms with respect to
raising of resources from banks is expected to
bring down the NBFC sector’s reliance on the
banking sector and to look for alternate sources
of funds.
6.51 In terms of NPAs, there was a significant
increase in the gross NPAs to total advances of
NBFCs. Similarly, FIs have registered an increase
in NPAs. The NBFIs as a segment continue to be
better placed in terms of capital adequacy with
high CRAR than the minimum regulatory
requirement. In respect of primary dealers, while
their interest income increased, expenses
enhanced at a faster pace due to the increased
cost of borrowings, leading to reduced profit and
lower RoA.
|