UNIVERSITY OF MUMBAI

PROJECT

ON

STUDY OF NON- BANKING FINANCIAL CORPORATION

SUBMITTED BY

ARJUN SINGH NENSINGH BHATI

THE AWARD OF THE DEGREE OF

BACHELOR OF BANKING AND INSURANCE (BBI):SEM. V

EXAMNO.1295615

ACADEMIC YEAR 2016-17

GUIDED BY

Ms. Urvi Gada

PADMASHRI ANNASAHEB JADHAV BHARATIYA SAMAJ UNNATI MANDALS

B.N.N. COLLEGE, BHIWANDI

DIST. THANE 421305

 DECLARATION

I Mr. ARJUN SINGH NENSINGH BHATI, ExamNo.1295615 student of B.N.N College, Bhiwandi of
T.Y. B.com {Banking & Insurance}, Semester V, hereby declare that I have completed project on
STUDY OF NON-BANKING FINANCIAL CORPORATION is a record of independent research
work carried by me during the academic year 2016-2017 under the guidance of Ms.Urvi Gada. The
information submitted is true and original to the best of my knowledge.

BHATI ARJUN SINGH

_
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in the completion
of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this project.

I would like to thank my Principal, Dr Ashok D. Wagh for providing the necessary facilities required for
completion of this project.

I take this opportunity to thank our Coordinator Dr. Suvarna T. Rawal, for her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide Ms. Urvi Gada whose guidance and
care made the project successful.

I would like to thank my College Nirlon Library, for having provided various reference books and magazines
related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of
the project especially my Parents and Peers who supported me throughout my project.
 Executive summary

A NonBanking 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, hirepurchase,
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.

Non-Banking Finance Companies (NBFC) are here to stay between 2005 and 2015 their share of credit in India
went up from 10% to 13%. The share growth is not only observed in traditional NBFC domains like commercial
vehicle (cv) finance but also in products like mortgages in where commercial banks are very active. Success of
NBFCs is attributed to very sharp focus on product lines leading to better cost control, bad debt control, better
customer service and consequently faster growth at higher profitability as compared to banks. NBFCs credit
penetration in GDP of India at 13% is well behind economies like Thailand and Malaysia at 33% and 25%
respectively. We expect the growth in NBFC credit to further accelerate over the next 5-10 years.

The promise of accelerated growth is predicted on NBFC sector transforming itself to serve the latent credit
needs of emerging India. Both consumption as well as commercial credit demand are characterized by lack of
income proof documents owing to large scale self- employment in the country. Lack of documents can now be
compensated by huge amount of surrogate data available in digital ecosystems. NBFCs should find a way to use
the digital surrogate data to make better credit decisions. Indian consumers and businesses are adopting digital
at rapid pace. NBFCs should embrace digital to dramatically enhance internal productivity (sales operations and
pricing) and to reimagine the end to end customer experience.

The recent introduction of payment banks, small finance, and proposed bill payment service providers will
deconstruct the banking value chain in India. This opens up strategic opportunities for NBFCs to partner with
asset management companies and payment banks to create complete financial offering for customers including
savings, investments, transactions and borrowings. This best of breed banking model could be better than the
bundled offer of the traditional banks. NBFCs will need to take the initiative to put the coalitions together.
Objective of the Study:

1. To study the impact of prudential norms of income recognition on the profitability and the business of NBFCs
in general.

2. To study the growth prospects of NBFCs in the country in general.

3. To study the problems being faced by the NBFCs in general.

4. To study the impact of control regime on the business prospects of NBFCs.

5. To study the impact of NBFCs on Indian Economy.

 INDEX

CONTENTS PAGE

NO.
1 Introduction to NBFC 1

Need 3

History 3

Classification 5

Capital Adequacy Requirement 9

Issues & Challenges 10

12
Benefits
2 Categories of NBFCs 14
3 Regulatory framework 17

Exemptions 21

Penalties 22

Pre-requisites 24
4 Credit Rating 27
5 Impact on Indian economy 29

Impact 29

Future 31
6 Conclusion 32