EXECUTIVE SUMMARY

The study presents a comparative study of NBFCs in India. There are almost 13000
registered NBFCs in India. The study is aimed to provide an holistic view of the NBFC
Industry. NBFC fulfills the financial gap by providing loan at a lower rate of interest. The
major players of each field
1) Housing Finance Industry: LIC Housing Finance.
2) Infrastructure Finance Industry: IDFC
3) Asset Financing: Shriram Transport Finance
4) Composite: Reliance Capital
The study also compared the Indian Banks v/s NBFC. It was found that at even at the
time of the economic slowdown NBFC was more profitable. Porters Five forces was also
used to analyse the industry and to find the competitiveness in the industry. The industry
is not tightly regulated as there are many regulatory bodies. Hence, there was an
important need to study the NBFC as the industry plays an important role in the financial
Services market of INDIA.

It is encouraging that the NBFC sectors 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.

CHAPTER-1

INTRODUCTION

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).
NBFCs are doing functions akin to that of banks; however there are a few differences:
(i)an NBFC cannot accept demand deposits; (ii) an NBFC is not a part of the payment
and settlement system and as such an NBFC cannot issue cheques drawn on itself; and
(iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation
is not available for NBFC depositors unlike in case of banks.

1.1 TYPES OF NBFCS

Originally, NBFCs registered with RBI were classified as: (i)equipment leasing
company; (ii) hire-purchase company; (iii) loan company; (iv) investment company.
However, with effect from December 6, 2006 the above NBFCs registered with RBI
have been reclassified as (i) Asset Finance Company (AFC) (ii) Investment Company
(IC) (iii) Loan Company (LC)

1.2 REGULATIONS OF NBFCS

In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every
NBFC should be registered with RBI to commence or carry on any business of
non-banking financial institution as defined in clause (a) of Section 45 I of the

RBI Act, 1934. However, to obviate dual regulation, certain categories of

NBFCs which are regulated by other regulators are exempted from the
requirement of registration with RBI viz. Venture Capital Fund/Merchant
Banking companies/Stock broking companies registered with SEBI, Insurance
Company holding a valid Certificate of Registration issued by IRDA, Nidhi
companies as notified under Section 620A of the Companies Act, 1956, Chit
companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or
Housing Finance Companies regulated by National Housing Bank.
A company incorporated under the Companies Act, 1956 and desirous of
commencing business of non-banking financial institution as defined under
Section 45 I(a) of the RBI Act, 1934 should have a minimum net owned fund of
Rs 25 lakh (raised to Rs 200 lakh w.e.f April 21, 1999). The company is
required to submit its application online by accessing RBIs secured website
https://secweb.rbi.org.in/COSMOS/rbilogin.do (the applicant companies do not
need to log on to the COSMOS application and hence user ids for these
companies are not required). The company has to click on CLICK for
Company Registration on the login page. A window showing the Excel
application forms available for download would be displayed. The company
can then download suitable application form (i.e. NBFC or SC/RC) from the
above website, key in the data and upload the application form. The company
may note to indicate the name of the correct Regional Office in the field C-8
of the Annx-Identification Particulars worksheet of the Excel application
form. The company would then get a Company Application Reference Number
for the CoR application filed on-line. Thereafter, the company has to submit the
hard copy of the application form (indicating the Company Application
Reference Number of its on-line application), along with the supporting
documents, to the concerned Regional Office. The company can then check the

status of the application based on the acknowledgement number. The Bank

would issue Certificate of Registration after satisfying itself that the conditions
as enumerated in Section 45-IA of the RBI Act, 1934 are satisfied.

1.3 GUIDELINES FOR NEW DEPOSITS

Customer identification: 'Know The Customer' (KYC) should be the key guiding

principle for identification of an individual / corporate customer (depositor or

borrower).
Accordingly, the KYC framework should have two-fold objective, (i) to ensure
customer identification and verifying his identity and residential address; and (ii) to
monitor transactions of a suspicious nature.
NBFCs should ensure that the identity of the customer, including beneficial owner

is done based on disclosures by customers themselves.

Typically easy means of establishing identity would be documents such as

Permanent Account Number (PAN), ration card, driving licence, Election

Commission's identity card, passport, et cetera in case of individuals and registration
certificate, partnership deed/agreement, et cetera and other reliable documents in
respect of companies, firms and other bodies.
Verification through such documents should be in addition to the introduction by a

person known to the NBFC.

Procedures for existing customers
In respect of existing customers, NBFCs should ensure that gaps and missing

information in compliance of KYC guidelines on customer identification procedure is

filled up and completed before June 30, 2004.

Ceiling and monitoring of cash transactions

NBFCs would normally not have large cash withdrawals and deposits.
However, wherever transactions of Rs 10 lakh (Rs 1 million) and above are

undertaken, they should keep record of these transactions in a separate register

maintained at branch, as well as at Registered Office.
Such information should be made available to regulatory and investigating

authorities, when demanded.

Guidelines and monitoring procedures
The board of directors of NBFCs should formulate policies and procedures to

operationalise the guidelines and put in place an effective monitoring system to ensure
compliance by their branches.
Early computerisation of branch/office reporting will facilitate prompt generation

of such reports and monitoring.

Internal control systems

Duties and responsibilities should be explicitly allocated among the staff for

ensuring that policies and procedures are managed effectively and that there is full
commitment and compliance to an effective KYC programme in respect of both
existing and prospective customers/clients.
Internal audit/inspection
Internal auditors must specifically scrutinise and comment on the effectiveness of

the measures taken by branches / offices of NBFC in adoption of KYC norms and
steps towards prevention of money laundering.

 Specific cases of violation should be immediately brought to the notice of head /

controlling / registered office.

Record keeping
NBFCs should prepare and maintain proper documentation on their customer

relationships and cash transactions of Rs 10 lakh and above.

The records of all such transactions should be retained for at least ten years after

the transaction has taken place and should be available for perusal and scrutiny by
audit functionaries as well as regulators and law enforcement authorities; as and when
required, at the branch as well as at registered office.
Training of staff and management
It is important that all the operating and management staff is made fully aware of

the implications and understand the need for strict adherence to KYC norms.
NBFCs may take suitable steps to impart training to their operational staff on anti-

money laundering measures.

1.4 RESPONSIBILITIES
The NBFCs accepting public deposits should furnish to RBI
i. Audited balance sheet of each financial year and an audited profit and loss account
in respect of that year as passed in the annual general meeting together with a copy of
the report of the Board of Directors and a copy of the report and the notes on accounts
furnished by its Auditors;
ii. Statutory Annual Return on deposits - NBS 1;
iii. Certificate from the Auditors that the company is in a position to repay the deposits
as and when the claims arise;

iv. Quarterly Return on liquid assets;

v. Half-yearly Return on prudential norms;
vi. Half-yearly ALM Returns by companies having public deposits of Rs. 20 crore and
above or with assets of Rs. 100 crore and above irrespective of the size of deposits ;
vii. Monthly return on exposure to capital market by companies having public
deposits of Rs. 50 crore and above; and
viii. A copy of the Credit Rating obtained once a year along with one of the Halfyearly Returns on prudential norms as at (v) above.

1.5 CURRENT SCENARIO

Nearly 11 years after the last of the two banking licences were issued by RBI to
private sector entities, the government has again started the process of allowing the

better-managed non-banking finance companies (NBFCs) to graduate to full-fledged

banks. FM Pranab Mukherjees Budget proposal on Friday was the first step towards
the same. The second step will be enacted on Tuesday morning. A select group of
officials from top NBFCs, under the aegis of the Finance Industry Development
Council (FIDC), the trade body for NBFCs in India, are meeting R Gopalan, the
banking secretary in the finance ministry, to present a case for select NBFCs to be
converted into full-fledged banks, sources said. About 12-15 NBFCs and corporate
houses having presence in the financial sector are expected to join the race to float a
bank.
The finance minister is convinced that there is a huge need for low-cost financing at
the semi-urban and rural areas in India, said a industry source. The financial services
industry believes the Budget proposal was a reflection of the same. In the finance
ministry things are moving in the right direction and the banking secretarys meeting
proves the same, said the source. FIDC office bearers could not be contacted during
the extended weekend.
In the last Union Budget, the FM had announced that RBI is considering giving
additional banking licences to private sector players, including NBFCs. This was
ostensibly to further financial inclusion and also to improve the size and sophistication
of the Indian banking system. The announcement set the financial markets on fire with
a lot of conjecturing as to who would be the lucky few. The access to low-cost current
account and savings accounts and the ability to offer all financial products under one
roof were cited as major attractions for NBFCs to rush to seek banking licences. It
was also expected that RBI would give new licences to private players very soon. But,
an analysis reveals a different picture. Neither is RBI in a hurry to issue fresh licences
nor are many NBFCs keen to get into commercial banking.
The reasons for this are manifold. RBI rules are stringent for commercial banks as
they are the visible face of the Indian financial system and commercial banks are

primarily the custodians of public money. RBI places restrictions on commercial

banks in their lending operations. Out of Rs 100 taken in as deposits, approximately
Rs 30 has to be set apart as statutory requirements towards CRR and SLR. This leaves
the banks with Rs 70 to lend. Out of this, 40% has to be statutorily lent towards the
priority sector as defined by RBI. This leaves banks with approximately Rs 42 to lend
at their own discretion. Many NBFCs would definitely find this as restrictive to say
the least.
As per the guidelines of 2001, NBFCs seeking a banking licence should have a
minimum paid-up capital of Rs 200 crore, which must be increased to Rs 300 crore
within 3 years of conversion into a bank. Further, banks have to invest large funds in
fixed assets and information technology primarily to facilitate financial inclusion, risk
management, anti money laundering, etc. These huge capital expenditures increase the
payback period for the investments made. Also, banking-as-a-business model is far
more people-, process- and product-driven than a simple NBFC model. For example,
in order to adopt universal banking, the staff needs to be multi-skilled in banking
functions. So, the operating expenses will be substantially higher, which, in turn,
would reduce the profitability of operations. Also, there are restrictions on ownership
and voting rights. Current stipulations cap voting rights at 10%; higher rights require
the specific approval of...

Chapter-2

Literature review

2.1 IMPORTANCE OF NBFCS

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 survery 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 rerating 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 Indias (RBI) definition of
reporting NBFCs 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

2.2 ROLE OF NBFCS

According to EPW Research Foundation (EPWRFThe 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.

2.3 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-3

RESEARCH
METHODOLOGY

3.1 RESEARCH DESIGN

Since the research is for industry analysis and it is structured for NBFCS. The
research uses secondary data for analysIs and interpretation.

3.2 OBJECTIVE
The confined objectives of the present study are:
To analyze the market of NBFCs in India
To study the financials of NBFCs

3.3 SCOPE OF THE STUDY

The study was limited to the Financial Service market of India which included
NBFCs mainly from the . The study was completed within the time frame of 60
days(2 months) starting from 1st April, 2010 and ending on 1st June, 2010. The target
group of the study were the NBFCs

3.4 DATA COLLECTION

There are two methods of data collection that can be considered when collecting data
for research purpose. These data collection types include the following :
1. Primary data
2. Secondary data
Both the secondary and primary data collection methods were used in the study.

3.4.1 PRIMARY DATA

The primary data required for this study was collected by visiting the financial
services and analysing the information provided by them.

3.4.2 SECONDARY DATA

The secondary data for the research was collected from journals, research articles,
books and internet websites, annual reports etc whose details and references has been
given in Chapter-2 and in References. The source of the secondary data was
British Library, NBFCs and Internet.
Secondary data was the main source in formulating the constructs of A
comparative study of NBFCs in India

3.5 FIELD WORK PLAN

The study was conducted in New Delhi (NCR and Bangalore visiting different
institutions and analyzing the different NBFCs work.

CHAPTER-4
MAJOR PLAYERS AND
SELECTED COMPANY
FOR STUDY

4.1 LIC HOUSING FINANCE

4.1.1 Housing Finance Industry
Indias housing finance industry comprises of banks and housing finance companies.
They have contributed to new residential home loans at a compounded annual growth
rate (CAGR) of more than 30 percent during the period 2002-2007. This has been due
to the combined effect of a booming economy and low interest rates.
Further, steady prices and continuation of tax concessions to self-occupied residential
home borrowers are contributors to the growth of the industry. The average age of
borrowers has declined over the years, while the number of double income households
has grown significantly enabling them to borrow higher loan amount due to higher
repaying capacity.
The scenario of unprecedented growth in housing finance, driven by low interest rates,
increasing purchasing power and attraction of the yield in this sector has begun to
show signs of change last year. There has been a decrease in demand during the last
one year. Earlier to that i.e., during 2006 to 2007 home prices increased at a CAGR of
30 to 40 percent against a 20 percent increment in salaries witnessed in metros and
large cities. This had affected the buyers affordability.
As the borrowing cost for banks and housing finance companies steadily increased in
line with rising interest rates in the economy in the past two years up to Q3 of 200809, banks and housing finance companies resorted to hike in interest rates so as to
maintain their interest spreads. Interest rates on new home loan originations have
increased significantly by 200 basis points during April2008 to September October
2008. As a result a higher proportion of monthly income was being paid out as home
loan equated monthly installments (EMI). The combined effect of an increase in
property prices and interest rates has meant that home loan buyers, who would have
had to borrow less at an interest rate of 8.75 percent a year ago, now have to borrow
more to buy the same property due to higher property prices at higher interest rates of

10.5 to 11 percent. This trend has resulted in both lower affordability i.e., an average
home at a higher multiple of annual income, and higher debt burden (meaning that a
larger proportion of income gets spent as home loan EMI). Further, the increase in
interest rates on fresh loans to 10.5 to 11 percent from 8.75 percent meant increase in
debt burden i.e., higher installment to income ratio. Along with, the economic down
turn and consequential apprehensions of job insecurity and income reduction led to
slump in the market. However, the scenario has taken the reverse turn in the last
quarter of the financial year 2008-09, which was evident from the higher booking of
flats, and sharp increase in the disbursements. Real estate developers have taken
sensible decision in reducing or slashing rates in major centres specially Mumbai,
Thane, Navi Mumbai, Delhi NCR and Bangalore to encash on the existing demand in
the real estate market. The good deals might be offered for a few weeks or for the first
ten properties or for a killer deal for a time-bound two days or similar schemes but
yes, the writing is clear on the wall that the willingness to connect with the real
pricing has dawned on the developers to sell at reduced prices to encourage more and
more sales. The sales teams in the builder/ developer offices are at their all-time
creative best with sales tactics. They now understand clearly that with buyers
unwilling to relent on unrealistic pricing, there is an even greater need to price
competitively, maybe with a lower profit margin, than holding on to the price and
project as the interest meter runs. These proactive steps should ensure renewed
demands and increased volumes during the current year.
The Indian economy, which was on a robust growth path up to 2007-08, averaging at
8.9 per cent during the period 2003-04 to 2007-08, witnessed moderation in 2008-09,
with the deceleration turning out to be somewhat sharper in the third quarter.
Industrial growth experienced a significant downturn and the loss of growth
momentum was evident in all categories, viz., the basic, capital, intermediate and
consumer goods.

However, the fiscal stimulus packages of the Government and the monetary easing of
the Reserve Bank will, however, arrest the moderation in growth and revive
consumption and investment demand, though with some lag, in the months ahead.
Furthermore, prospects of the agricultural sector also remain bright, and this will
continue to support the rural demand. Finally, in the wake of expected improvement in
agricultural production as well as low international commodity prices, inflationary
pressures are also anticipated to remain at a low level through the greater part of the
2009-10.
4.1.2 Indian Housing Finance scenario
Indias housing finance industry comprises of banks and housing finance companies.
They have contributed to new residential home loans at a compounded annual growth
rate (CAGR) of more than 30 percent during the period 2002-2007. The scenario of
unprecedented growth in housing finance, driven by low interest rates and booming
economy, has begun to show signs of change last year. There has been a decrease in
home prices during the last one year.
Earlier to that i.e., 2006 to 2008 home prices increased at a CAGR of 30 to 40 percent
against a 20 percent increment in salariee witnessed in metros and larger cities. This
had affected the buyers affordability. The average home buyer spent around 4 times
his net annual income for purchasing a new residential home in the 3-4 years till
March 2005. (source CRISIL report 19th February, 2009) As the borrowing cost for
banks and housing finance companies steadily increased in line with rising interest
rates in the economy in the past two years upto September 2008, banks and housing
finance companies resorted to hike in interest rates so as to maintain their interest
spreads. Interest rates on new home loan originations had increased significantly by
200 basis points during April 2008 to August September 2008. As a result a higher
proportion of monthly incomes was paid as home loan equated monthly instalments
(EMI). But, the scenario has taken the reverse turn in the last quarter of the financial

year 2008-09 which was evident from the higher booking of flats and sharp increase
in the disbursements. As interest rates are heading southward, public sector banks
have set the pace. Housing finance companies would follow the suit. It may be
mentioned here that with the decline ininterest rates, LIC Housing Finance has passed
on 150 basis points rate cut to the customers i.e. 75 basis points each on 1st January,
2009 and 1st April, 2009. Our interest rates are among the lowest in the industry. This
has helped our company in retaining customers and maintaining high growth rates
even in tough conditions. And interest rate is just one of the factors. Transparency,
hassle-free services, property prices and buyers repayment capacity are equally
important. The customer would not arrive at a decision solely based on the reduction
in interest rates for one year. LIC Housing Finance is one of the best players in the
industry in terms of EMI as our company has no hidden costs.
4.1.3 LIC Housing Finance
LIC Housing Finance Ltd. is one of the largest Housing Finance Company in India.
Incorporated on 19th June 1989 under the Companies Act, 1956, the company was
promoted by LIC of India and went public in the year 1994. The Company launched
its maiden GDR issue in 2004. The Authorized Capital of the Company is Rs.1500
Million (Rs.150 Crores) and its paid up Capital is Rs.850 Millions (Rs.85 Crores).
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.
The main objective of the Company is providing long term finance to individuals for
purchase / construction / repair and renovation of new / existing flats / houses. The
Company also provides finance on existing property for business / personal needs and

gives loans to professionals for purchase / construction of Clinics / Nursing Homes /

Diagnostic Centres / Office Space and also for purchase of equipments.
The Company possesses one of the industry's most extensive marketing network in
India : Registered and Corporate Office at Mumbai, 6 Regional Offices, 13 Back
Offices and 158 marketing units across India. In addition the company has appointed
over 1352 Direct Sales Agents (DSAs), 7085 Home Loan Agents (HLAs) and 777
Customer Relationship Associates (CRAs) to extend its marketing reach. Back Offices
spread across the country conduct the credit appraisal and administrative functions.
The Company 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. Today the Company has a proud group of over 10,00,000 prudent
house owners who have enjoyed the Company's financial assistance.
Profile & Progress
Provides loans for homes, construction activities, and corporate housing schemes.
Around 91% of the loan portfolio derived from the retail segment and the rest from
large corporate clients
Formed three new wholly owned subsidiaries in 2007-08 to promote marketing of
financial products and venture capital fund.
Rated AAA by CRISIL for the 8th consecutive time in 2008-09; maiden Fixed
Deposit
program received an FAAA/stable rating by CRISIL.
An offshoot of Life Insurance Corporation of India (LIC), incorporate in 1989.
Registered & Corporate Office at Mumbai with 6 regional offices, 13 Back Offices
and 130 marketing units across the country .

 1352 Direct Sales Agents (DSAs), 7085 Home Loan Agents (HLAs) and 777
Customer
Relationship Associates (CRAs) comprise its pan-Indian marketing network.
Representative overseas presence in Dubai and Kuwait.

4.1.4 Financial Performance

Interest income from housing loans increased 34.90 percent from Rs. 2036.79 crore in
2007- 08 to Rs. 2747.65 crore in 2008-09. The net interest income grew by 31.97
percent from Rs. 553.94 crore in 2007-08 to Rs. 731.04 crore in 2008-09. Profit after
tax surged 37.30 percent from Rs. 387.19 crore in 2007-08 to Rs. 531.62 crore in
2008-09.

Operations:
Funds mobilized grew 49.38 percent from Rs. 7489.70 crore in 2007-08 to Rs.
11,188.33 crore in 2008-09.
Sanctions (Ind.+Proj.) increased 26.46 percent from Rs. 8617.88 crore in 2007-08
to Rs. 10898.47 crore in 2008-09.
Disbursements (Ind.+Proj.) grew 23.90 percent from Rs. 7071.48 crore in 2007-08
to Rs. 8762.01 crore in 2008-09.
Loan portfolio grew 26.18 percent from Rs. 21936.41 crore in 2007-08 to Rs.
27679.28 crore in 2008-09.
Margins:
Net interest margin improved by 10 basis points from 2.85 percent in 2007-08 to
2.95 percent in 2008-09.
Return on equity grew by 267 basis points from 21.13 percent in 2007-08 to 23.80
percent in 2008-09.
Net profit margin improved by 49 basis points from 17.82 percent in 2007-08 to
18.31 percent in 2008-09.
Asset Quality: Gross NPA declined by 63 basis points from 1.70 percent in 200708 to 1.07 percent in 2008-09.Net NPA levels declined 43 basis points from 0.64
percent in 2007-08 to 0.21 percent in 2008-09.
On funds
On the performance of the Company : In the turbulent times when Housing sector
was passing through rough patch, LIC Housing Finance largely could manage the
environment well, inspite of various global as well as domestic economic challenges

and was successful in producing good business growth by its inherent strength in
meeting difficult challenges through unceasing and untiring efforts. The Company has
not only ensured consolidation of the gains achieved in the past years, but also
ensured further growth and increased profitability. The year 2008-09 has been a year
of further containment of defaults and NPA levels when compared to previous years.
Lending operations
The main thrust continues on individual loans with a growth of 25 percent as against
20 percent in the previous year. However, project loans were also given due weightage
resulting in a modest growth of 20 percent over previous year. During the year, the
Company sanctioned 67,886 individual loans for Rs. 8,186.02 crore and disbursed
67,237 loans for Rs. 7,351.09 crore during 2008-09. Individual retail loans constitute
75.11 percent of the total sanctions and 83.94 percent of the total disbursements for
the year 2008-09 compared to the last years figure of 75.84 percent and 83.47 percent
respectively. The retail (individual) loan portfolio grew by over 22 percent from Rs.
20,618.78 crore as on 31st March, 2008 to Rs. 25,252.87 crore as on 31st March,
2009. The cumulative sanctions and disbursements since the incorporation, in respect
of individual oans are: Amount sanctioned : Rs. 45,624.24 crore Amount disbursed :
Rs. 42,993.98 crore.

Non-Performing Assets and provisions:

The amount of gross Non-Performing Assets (NPA) as on 31st March, 2009 was Rs.
297 crores, which is equivalent to 1.07 percent of the housing loan portfolio of the
Company, as against Rs. 372.92 crore i.e., 1.70 percent of the housing loan portfolio
as on 31st March, 2008. The net NPA as on 31 st March, 2009 is reduced to Rs. 57
crore i.e. 0.21 percent of the housing loan portfolio vis--vis Rs. 140.90 crore i.e.,
0.64 percent of the housing loan portfolio as on 31st March, 2008. The total
cumulative provision towards housing loan as on 31st March, 2009 is Rs. 240.25
crore. During the year, the Company has written off Rs. 5.40 crore of housing loan
portfolio as against Rs. 38.99 crore during the previous year.
Fund raising The Company raised funds aggregating to Rs. 11,188.33 crore through
term loans from banks, Non-Convertible Debenture (NCD), sub-ordinate debts,
commercial paper, Public Deposit and others which were used for fresh disbursements
as well as repayments/prepayments of past borrowings. The Companys NCD issue
was rated AAA and Public Deposit was rated as FAAA/STABLE by CRISIL.

4.1.5 Macro Economic Analysis

Competition
The Housing Finance Industry is one of the most keenly competitive segments of the
Economy, with the Banking sector having a significant presence. However, Housing
Finance Companies with a dedicated focus on the industry and better understanding of
the underlying real estate markets stand on a better footing when it comes to
understanding the needs and requirement of the customers as also assessing the risks
in the industry. It may be mentioned here that with the decline in interest rates, LIC
Housing Finance has passed on 150 basis points rate cut to the customers during the
calendar year 2009 so far 75 basis points each on 1st January, 2009 and 1st April,
2009. Our interest rates are among the lowest in the industry. This has helped our
company in retaining customers and maintaining high growth rates even in tough
conditions. And interest rate is just one of the factors. Transparency, hassle-free
services, property prices and customer affordability are equally important. NHB has
lowered its interest rates on refinance to housing finance companies. Refinance for
rural housing at concessional rate of 8 percent per annum for seven years has also
been provided. Its PLR has been reduced to 10.75 percent per annum. The refinance
facility of Rs. 4,000 crore extended by RBI to NHB will be on-lent by NHB to
housing finance companies with a cap of Rs. 400 crore per housing finance company
with the condition that the refinance would be available at an interest of 8 percent,
only for loans below Rs. 20 lakh. Housing Finance, the Company, through its
competitive pricing, transparency in operations, wide distribution network and good
customer service, has not only been able to show a good growth in new business, but
has shown an improved retention rate, which is reflected in high growth of loan book.

Opportunities

There are many unique characteristics of housing distinguishing it from other goods.
It is a universal necessity. Home ownership is a social goal, bringing social status to
the buyer. Housing is also a relatively expensive asset, often soaking up a lifetimes
savings. Housing properties have a downward sloping demand curve, which means
that less people would effectively buy when prices are high and vice versa. At high
prices, buyers postpone their buying decisions and opt for rented accommodation. At
low prices, people often purchase more than one house. Disposable incomes
determine purchasing power. Government policies relating to interest rates, mortgage
subsidies, tax rebate and other taxes like stamp duty etc. also impact the housing
property market. The housing sector is marked by a variety of taxes and regulations.
These are meant to ensure the safety of houses for occupation and to confer rights of
ownership to enable further transactions. Given that building or acquisition of a house
usually involves several intermediary agents (either statutory like registration of
various title documents or facilitating agents such as brokers, builders or financiers),
the final cost of acquisition includes not just the price of the property that is paid to
the seller (in case the property is purchased) but also all the intervening transaction
costs. As for the housing property market in India, the residential housing property
segment constitutes about 75 percent of the real estate market in terms of value. Real
estate development activity has shifted from metros to their suburbs and tier-two
cities. A gradual shift to tier-three cities and rural areas is taking place. Easy
availability of finance from the housing finance companies and commercial banks at
lower interest rates, increased salaries and availability of fiscal and tax benefits are
propelling the demand for housing properties. The growth of the Information
Technology Enabled Services (ITES), industry has been a significant contributor of
housing property demand in recent years. ITES firms are moving from traditional
centres like Mumbai, Delhi, Bangalore, Hyderabad and Chennai to the National
Capital Region, Pune, Chandigarh, Jaipur, etc. in order to be cost effective. This is
resulting in not only the boom in residential property markets but also in the

institutional property markets in these cities. There is great demand for modern office
buildings and commercial spaces in India.
Threats (bottlenecks)
Impact of legal charges and documentation fees
There are taxes / duties / fees payable to the state at the construction stage. There are
two aspects of the cost namely:
i) monetary cost and;
ii) cost in terms of time devoted in obtaining various permissions and clearances.
The number of permissions and documentation required can be quite large. Further,
permissions have to be taken from different departments and that too sequentially.
This delays the process of housing construction and occupation. The actual fees
imposed by the government are not necessarily high but the time taken to obtain
requisite permissions is very long, procedures cumbersome and sometimes involves
extra payments to facilitate the movement of files and getting the transaction through,
is significant vis--vis the statutory fees. The delays highlight the sluggishness of the
market by increasing the gap between change in demand and the market response to
it.
Future Outlook:
It is estimated that the housing finance industry will be able to maintain a higher
growth in fresh origination of residential home loans over next three to five years
mainly due to increased affordability of the borrower i.e. ratio of average property
price to average annual income, on account of the falling loan interest rates and
decrease in property prices. The average age of borrowers has declined over the years,
while the number of double-income households has grown significantly thereby

enabling them to borrow higher loan quantum due to increased affordability and
repayment capacity. The growth drivers will continue to increase demand for selfoccupied residential housing; Revival of economy will certainly lead to a steady
increase in monthly incomes across key sectors. Rising proportion of double income
households, renewed confidence in higher income generation, reassurance of job
security and availability of variety of financing options should stimulate growth of the
housing sector. All these factors will further boost the impact of increased
affordability, leading to the sectors steady and comfortable growth. Looking forward,
LIC Housing Finance would like to remain focused in end-user segment for growth
and increased profitability and wish to make the coming year, a year of further
consolidation and progress by crossing greater milestones.

CHAPTER-5

INDIAN BANKS V/S

NBFCS

2008-09 was a difficult year, especially for the financial segment across the globe.
However, Indias strong macro-economic fundamentals and financial policies have
shielded it from the turmoil.. The study considered those banks that have announced
their results between 15th April -20th May 2008- 09 posted on the website of Bombay
Stock Exchange. The have analyzed in total 29 banks (both public & private sector)
and 7 NBFCs The) study has examined and compared the profitability of banks with
NBFCs during the financial year 2008-09. Simple average and profitability ratio of
the two segments have been studied. Methodology - The AFP analysis of the Indian
commercial banks & NBFCs profitability is calculated using two broad parameters
including net profit and total income. Profitability Ratio is a class of financial metrics
that is used to assess a business's ability to generate earnings as compared to its
expenses and other relevant costs incurred during a specific period of time.
Profitability is calculated as:
(Net Profit/Total income)*100
NBFCs more profitable than commercial banks despite slowdown Even as the world
wide financial crisis and slowdown in key sectors of the Indian economy led the Non
Banking Financial Companies to face severe cash shortage during the financial year
2008-09, the overall profitability of NBFCs has remained higher than the scheduled
commercial banks. During the financial year 2008-09, Non- Banking Financial
Companies (NBFCs) average profitability stood higher at 18.90 per cent as compared
to the banks with 10.08 per cent. The NBFCs generally operates on the model of
lending to riskier projects with interest rates higher than offered by the banking
institutions. As the financial markets faced the heat of global crisis during the
financial year 2008-09, most of the NBFCs faced problems in fund raising. Among
the seven NBFCs, in 2008-09 the highest profitability was reported by Infrastructure
Development Finance Company Limited at 20.89 per cent, with total income stood at
Rs.3626.38 crore and net profit at Rs.757.73 crore. It was followed by Housing
Development Finance Companies Limited (HDFC) andPower Finance Companies

Limited (PFCL) at 20.76 per cent and 20.67 per cent respectively. The Reserve
Bank of India (RBI) monetary measures by cutting interest rates during 2008-09 has
benefited the NBFCs since many of them finance their operations through market
borrowings said Mr. Sajjan Jindal President.
Aggregate net profit to total income ratio of 17 public sector banks and 12 private
sector banks reported to be 10.08 per cent during 2008-09.
5.1 Top 5 Banks and NBFCs with highest profitability

Among the 17 public sector banks, the highest profitability was reported by Indian
Bank and Bank of India at 15.83 per cent and 15.50 per cent respectively. Out of the
private sector banks the top positions were occupied by Axis Bank and Yes Bank at
13.22 per cent and 12.46 per cent respectively, among others. The 7 NBFCs,
aggregate total income grew by a whooping 57.3 per cent to Rs.28,208.72 crore in
FY09 from Rs.17,906.84 crore in the previous fiscal. However, the aggregate total
income of 29 banks have increased by 25.3 per cent from Rs 2,69,055 crore in 200708 to Rs 3,37,206.9 crore in 2008-09. Year-on-year performance of the 29 banks

regarding net profit to total income ratio at the aggregate level showed a marginal
decline during FY09 with 10.08 per cent as against FY08 recorded at 10.52 per cent,
while in the case of 7 major NBFCs, the ratio declined during 2008-09 at 18.90 per
cent as against 21.80 per cent in FY08.

5.3 Banking versus NBFC regulatory arbitrage in India

Chapter-6

Porters five forces

PORTERS FIVE FORCES MODEL OF COMPETITION

The nature of competition in the industry in large part determines the content of
strategy, especially business level strategy .based it is on the fundamental economics
of the industry, the very profit potential of an industry is determine by competition
interaction. Where these interactions are intense, profittends to be whittled away by
the activities of competing.
Porters model is based on the insight that a corporate strategy shouldmeet the
opportunities and threats in the organizations external environment.Especially,
competitive strategy should base on and understanding of industrystructures and the
way they change. Porter has identified five competitive forces that shape every
industry and every market. These forces determine the intensity of competition and
hence the profitability and attractiveness of an industry. The objective of corporate
strategy should be to modify these competitive forces in away that improve the
position of the organization. Porters model supports analysis of the driving forces in
an industry. Based on the information derived from the Five Forces Analysis,
management can decide how to influence or to exploit particular characteristics of
their industry.
Barriers to entry
Product differentiation is very difficult: As most of the NBFCs offer similar types
of loans which caters to same market. Innovation of a product plays a very important
role in the market.
Licensing requirement: There are already 13000 registered NBFC . So, the
licensing requirement is also low. The regulations are not that stringent as that of a
Bank.

Threat of substitute:
Banks: Banks are important substitutes. As they are leaders in the markets. They
have a quite strong brand presence and a good credit appraisal method also.
Money Lenders: Small NBFCs cater to the rural areas where there is already a
very strong presence. They dominate the market in the rural areas and its mostly the
unorganised market they tap in.
Bargaining Power of suppliers
Many alternatives: The suppliers in this case are the depositors or the NBFCs
funds. Suppliers have lots of alternatives to put their money. With the risk they can
invest their money. E.g. Low Risks: Banks, Bonds etc. High Risk: Stocks, Investment
RBI rules and regulations: RBI rules and regulations are not as stringent as of
Banks. NBFCs are governed by many bodies. E.g. RBI, FIDC, NHB etc
Bargaining power of consumer very high
Large no. of alternatives
Low switching costs
Undifferentiated services
Full information about the market
Threat of competitors
Large no of NBFCs
High market growth rate
Low switching costs
Undifferentiated services

 High fixed cost

High exit barriers
Rivalry among competitors is very fierce in Indian Non Banking Financial
Industry.
The services NBFCs offer is more of homogeneous which makes the Company to
offer the same service at a lower rate and eat their competitor markets share. Market
Players use all sorts of aggressive selling strategies and activities from intensive
advertisement campaigns to promotional stuff. Even consumer switch from one bank
to another, if there is a wide spread in the interest. Hence the intensity of rivalry is
very high. The no of factors has contributed to increase rivalry those are.
A large no of NBFC serving similar loan products: There is so many NBFCs and
non financial institution fighting for same pie, which has intensified competition.
High market growth rate: India is seen as one of the biggest market place and
growth rate in Indian financial industry is also very high. This has ignited the
competition.
Homogeneous product and services: The services banks offer is more of
homogeneous which makes the company to offer the same service at a lower rate and
eat their competitor markets share.
Undifferentiated services: Almost every NBFC provides similar services. Every
bank tries to copy each other services and technology which increase level of
competition.
High exit barriers: High exit barriers humiliate banks to earn profit and retain
customers by providing world class services.

CHAPTER-7

FINDINGS &
MANAGERIAL
IMPLICATIONS

7.1 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.
7.1.1 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.
7.1.2 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 9.510.0% 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.
7.1.3 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. NBFCs
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.

CHAPTER-8

RECOMMENDATIONS
AND CONCUSION

8.1 Recommendation:
Domestic Financial markets can be integrated by making NBFCs 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:
NBFCs are organized players. Regulatory body needs to educate people about NBFC.
To reduce in interest cost and hence benefit the ultimate consumer.
8.2 Conclusion
It is encouraging that the NBFC sectors 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 was 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 (NBFCNDSI)

REFERENCES
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) IDFC
3) Reliance Capital
4) Shriram Transport Finance
Research Papers:
India Vantage by KPMG
Indian Banks v/s NBFCs
NBFC Research by CARE