DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : Smt M. L . Kameshwari
Designation : Senior Lecturer in CCP
Institute : Govt. Polytechnic for women,
Bheempunipatnam
Semester : VI Semester
Subject : Banking—II
Sub-Code : CCP-604(B)
Topic : Role of Non –Banking,
Financial Institution (15 to16/18)
Duration : 50 minutes
Sub Topic : Contribution to Indian Banking
Industry
Teaching Aids : PPT
CCP604(B). 71 to 72 1
Objectives

On completion of this period you

would be able to :

 Explain the contribution of NBFCs to Indian

Banking industry

CCP604(B). 71 to 72 2
Recap:

On completion of this period you

would be able to :

 The present position of NBFC

 Features of Financial Company
Regulation Act 2000

CCP604(B). 71 to 72 3
Contribution to Banking industry:

 Banking sector covers wide areas

 Yet some remote areas and some sections of
people are left without any financial
assistance due to several reasons
 NBFCs cater to the needs of those who are
neglected by banking institutions

CCP604(B). 71 to 72 4
NBFC contribution to the banking sector

 They cover the areas untouched by

regular banks
 They cover the sections of people left out
by regular banks like street vendors,
vegetable vendors, people with small
income etc.,

CCP604(B). 71 to 72 5
NBFC contribution to the banking sector

 They provide customised services

depending on the persons and localities
 They provide highly liberated services not
possible in highly regulated banking sector

CCP604(B). 71 to 72 6
NBFC contribution to the banking sector
 They mobilize even extremely small
savings on day to day basic
 They provide services at door step
 They deposit their funds in banks and
thus are a dependable source of funds
 They take greater risk and provide funds
to small business operators which are
very large in numbers

CCP604(B). 71 to 72 7
NBFC contribution to the banking
sector  As NBFC gain in confidence and
fidelity they can be transformed into
regular banks
 RBI has issued certain guide lines
for their transformation into regular
banks
 The guidelines issued by the RBI on
January 3,2001 to establish banks in
private sector are also applicable to
NBFC subject to some creditors

CCP604(B). 71 to 72 8
The creditors are:
 The minimum net worth of a NBFC as per
balance sheet is Rs.200 crore
 When it becomes a bank, the minimum
net worth shall increase to Rs.300 crore
within 3years
 It shall not be one started by big industrial
unit, Central or State Governments and
Municipalities shall not own them

CCP604(B). 71 to 72 9
The creditors are:
 If must have obtained AAA credit rating
in the previous year
 If must have followed the RBI directives
in repaying deposits
 NPA shall not exceed 5% of total
assets
 Capital Adequacy shall not be shall
12%
 NBFC which obtains a license can act
as insurance agent
CCP604(B). 71 to 72 10
Summary:
We have discussed about:
 The construction of NBFC to the Indian
Banking industry
 The conditions to transform into
banking companies

CCP604(B). 71 to 72 11
Frequently Asked Question:
1. What is the meaning of NBFC
2. List the various categories of NBFC
3. State the features of NBFC
4. What are the functions of NBFC
5. Explain the procedure for formation of NBFC
6. State the present status of NBFC and explain
the reasons for success and growth of NBFC
7. Explain the services provided by NBFCs

CCP604(B). 71 to 72 12