Dissertation Proposal

On
“Business loan provided by banks vs business loan provided by NBFC”

Submitted to IILM University

For
The award of

Masters of Business Administration Degree

Sourabh G (M4237) & Saurabh Tiwari (M4152)

Under the Guidance of

Prof-Charu Bansal

IILM UNIVERSITY, GURUGRAM

2021
 IILM UNIVERSITY CERTIFICATE

Research Proposal entitled “Business loan provided by banks vs business loan

provided by NBFC” being submitted by Mr Sourabh G (M4237) and Saurabh
Tiwari (M4152) to the IILM University, Gurugram for the MBA Dissertation under the
Faculty of Management has been prepared as per the guidelines given the Research
Dean.

Signed by Student
Sourabh G
Saurabh Tiwari

Signed by Research Supervisor

Name and Designation

Date:
Place: _
 Introduction

Banking in India in progressively contemporary terms was started in the late eighteenth century
with Bank of Hindustan, 1770, and The General Bank of India, 1786.

The most seasoned bank and the biggest in activities and as yet working despite everything is the
State Bank of India, which started in the Bank of Calcutta in June 1806, which in the end turned
into the Bank of Bengal. There were three administration banks built up under sanctions from the
British East India Company: Bank of Bengal, Bank of Bombay and Bank of Madras. The three
banks converged to shape the Imperial Bank of India, which in the long run, upon India's autonomy,
turned into the State Bank of India in 1955. The administration banks kept going about as semi-
national banks for a considerable length of time to come, as did their replacements until the Reserve
Bank of India was built up in 1935. (Santeshkumar)Reserve Bank of India stepped up to the plate
and bring Non-Banking Financial Companies in the economy which was remembered for Chapter
3B allocating constrained specialists to Banks for the guideline of the store taking organizations. In
January 1997, the economy saw uncommon changes in 1934, in the Chapters 3-B, 3-C and 5 of the
RBI Act with the indispensable rationale to have an administrative structure that was acquainted
with direct the insurance of interests of contributors while remembering the successful working of
NBFCs.

Post the change of Act in 1997, the period saw the generous development of Non-Banking money
related organizations in the zones of tasks, the scope of market items and instrument offers, the
modernity of innovation, and some more. Besides, the fundamental noteworthiness of NBFCs in
expanding the money related segment of the nation produces essential enthusiasm of specialists and
academicians to inspect profound into the beginning, development, and execution

Non-Banking Finance Institutions is a constituent of the institutional structure of the composed

money related framework in India and is basically the wellspring of giving assets to a specific
movement. Giving or making sure about the fund is free usefulness of NBFCs bringing about
Financial Management Services and Institutions. The Financial System of any nation
 Background and overview

NBFCs: Banking in new areas

Banking in India has seen many significant improvements in the previous scarcely any years
and NBFC have clearly had an effect on the present framework and our tirelessly making shifts in
turning out to be budgetary grocery stores. They are approaching with a variety of administrations
concentrated all around the individual needs and have step by step stretched out their item portfolio
to incorporate resource the board organizations (AMCs), lodging fund firms.

In Spite of the developing rivalry from the built-up banks and other money-related
foundations, the NBFCs' are expanding their lines of business with an increasingly changeless and
genuine height. Of late, the conventional limits between various classifications of Financial
delegates and organizations have disappeared and in this way, the NBFCs needed to go head-on
with the banks to vie for advertising space.

A Non-Banking Financial Company

NBFC) is an organization enlisted under the Companies Act, 1956 occupied with the matter of
credits and advances, procurement of offers/stocks/securities/debentures/protections gave by
Government or neighborhood authority or other attractive protections of a like sort, renting, employ
buy, protection business, chit business yet does exclude any establishment whose essential business
is that of agribusiness action, modern movement, buy or offer of any merchandise (other than
protections) or offering any types of assistance and deal/buy/development of the resolute property.

Non-Banking Financial Company (NBFC) in India made an unassuming start in 1960 to serve the
need of the saver and speculator whose money related need was not satisfactorily secured by the
then existing financial framework in India. Non-bank money related organizations (NBFCs) are
budgetary establishments that give banking administrations without meeting the lawful meaning of
a bank and are ordinarily limited from taking stores from the general population under certain cases
however activities of these foundations are secured under nations banking guidelines.
 Figure 1 Credit Growth of NBFCs as a % of Total Credit

25.00%

20.90%

20.00% 19.00%
17.09% 18.20%
17.30%
15.70% 15.90%
14.90%
14%14.40%
15.00% 7% CAGR
13.013%.00%
10% CAGR

10.00%

5.00%

0.00%
2015 2016 2017 2018E 2019E 2020E

Source: Reserve Bank of India

NBFCs are different from Banks are as follows:-

 NBFCs can't acknowledge request stores ( Demand stores are reserves saved in an
organization, that are payable promptly on request e.g.: Savings account, Current record and
so on)
 An NBFC can't give checks, to their clients and isn't a piece of the installment and settlement
framework
 Deposit protection office of Deposit Insurance Credit Guarantee Corporation (DICGC) isn't
accessible for NBFC contributors
 They are permitted to acknowledge/restore open stores for a base time of a year and most
extreme time of 60 months.
 They can't offer loan costs higher than the roof rate endorsed by RBI now and again. (As of
now the roof rate is 12.5%)
 They can't offer blessings/motivators or some other extra advantage to the contributors.
 They ought to have the least speculation grade FICO score, from the FICO assessment
organizations
 Review of Literature
the present situation the Non-Banking Financial Companies which have added in general
profundity to the money related division and saw fundamental essentialness in the creating
economy. It has featured the development example of the non-banking budgetary organizations and
their arrangement dependent on the administrations they give. To assess the monetary presentation
of chose NBFCs , three proportions are determined that are a) Net Sales/Net Revenue from
Operations; b) Profit/Loss Before Tax and c) Profit After Tax/Profit or Loss for the period and
afterward F test is applied for the further investigation (Buddhosev Sinha)

It is appropriately said that for driving the nation's economy to the cutting edge time, it is
required to have the legitimate working of a budgetary framework (Kroszner, 2010). In each
propelled economy, effective monetary structure conveys the assortment of budgetary
administrations and other instruments and go about as critical base in commitment to dependability
of macroeconomic front and continued development of the economy. In addition, in the created
money related structure, there is an activation of reserve funds which offers speculators and savers
a more extensive selection of instruments and with development of the Non-Banking Financial
Companies in the monetary framework, the speculators could now settle on compelling decisions
by stopping their assets at the progressively worthwhile instrument in contrast with the stores of
banks.

In the kindness of NBFCs, Greenspan (1999) cited 'improve the strength of the monetary
framework to monetary stuns by giving it a powerful ''save tire'' in the midst of hardship' While the
need of transient advances by specific enterprises and agribusiness are satisfied by banks, different
types of administrations and instruments which are required by businesses and various sections of
the economy are offered by the Non-Banking Financial Companies.

In The Sustainability Dimension: A Study of Selected NBFCs distributed by The

organization of Company Secretaries of India, the paper has considered chosen NBFCs which are
recorded in BSE and making their solid effect as far as execution dependent on key parameters
that are Reported Net Profit After Tax (PAT), Earnings Before Interest and Tax (EBIT), Loans and
Advances. The paper is made to find out that if there is a critical contrast or not between the chose
NBFCs dependent on PAT and EBIT. Moreover, the development capability of advances and
advances of Non-Banking Financial Companies is additionally analyzed. To break down the
supportability of chose Non-Banking Financial Companies, Business valuation technique was
applied.

Vadde (2011) concentrated on the execution of Non-Banking Financial Companies in India

and its assessment by looking at the money related structure of non-government budgetary and
speculation organizations for the period April 2008 to March 2009 based on Annual Accounts of
12115 Non-Banking Financial Companies. The information for the investigation is auxiliary
gathered from different issues of RBI Bulletin. The examination presumed that pay and
consumption development decelerated during the period however this deceleration was
increasingly seen in salary development.

Sornaganesh and NavisSoris (2013) examined on the point, "A Fundamental Analysis of
NBFC in India" to dissect the productivity position of 5 examples NBFC organizations, for
example, STF, SF, BF, and M&MF for the period from April 2008 to March 2012, utilizing Ratio
Analysis of gathering information from the Annual Reports and Balance Sheets of the example
organizations. The investigation uncovered that SF has performed better as far as Earnings Per
Share (EPS) trailed by STF, BF, CF, and M&MF yet STF and M&MF were seen as far superior to
other in NPM (Net Profit Margin).

Perumal and Santheskumar (2013) studied the topic “Non-Banking Financial Companies”
analyzing the Balance Sheets and Income Statements of two sample companies, i.e., Sundaram
Finance Limited and Lakshmi General Finance Limited for the period 2007-2012 using primary
and secondary data. The study was conducted using various statistical tools like, average, standard
deviation, coefficient of variation, trend analysis, index number, etc. and concluded that the
contribution of NBFCs to economic development is highly significant and there is need to
integrate it with the mainstream financial system and RBI should be vested with more power to
monitor NBFCs in an effective manner.

Kaur and Tanghi (2013) explored the theme "Non-Banking Financial Companies, Role, and
Future Prospects" with a concentration to break down the job and significance of NBFCs in India.
The paper inferred that NBFCs need to focus more on their center qualities and should continually
attempt to chase for new items and administrations so as to endure and develop continually.
 Arun Kumar (2014) has made an endeavor on the theme "Non-Banking Monetary
Organizations: An Audit" and in the wake of watching twelve investigations of various creators,
he inferred that because of the guidelines of the Save Bank of India, still the NBFCs are not
foraying into more credit and proposed in the NBFC credit approach for the decrease of financing
costs. The examination watched an exploration hole which is, assessment of the presentation of
NBFCs in India.
Usha Thorat (2010) states that non-banking substances can be either non-banking non-
money related elements or non-banking budgetary elements. On account of non-banking monetary
elements, their horse store taking and non-store taking budgetary organizations are there.
Considering the troubles in guaranteeing the compelling oversight of countless little store taking
elements, new endorsements to NBFCs for tolerating stores are not thought of.

Statement of Problem

Since the two of them hold a key situation in the budgetary framework and as referenced assuming
a significant job in the monetary improvement by extending their wings through propelling credit
to practically all the segments of the economy and different echelons of populace it is very basic
that these money related organizations ought to be economical as their monetary breakdown may
potentially trigger wild monetary upheaval.

The point of this investigation is to fathom the similar development capability of NBFCs and
Banks and to have correlation of their exhibitions based on key budgetary parameters that is
benefit, influence and liquidity proportions. This examination is directed to have better
comprehension of budgetary foundations and their essentialness in the money related structure of
the nation.
 Research Gap

Developing examination work and writing is coming up as the present NBFC emergency as a
progression of situations is getting developed, taking another turn each day. There is basically no
work done on the in regards to controllers' activity in taking care of the emergency for the
2018/2019 emergency. Henceforth, this paper endeavors to add to our assemblage of information
on the point

Research Question

 What is relationship between loan provided by BANK vs NBFCs

 What can be possible outcome if we examine the comparative performance of Banks and
Non-Banking Financial Companies in order to have clear picture of their contribution to the
Financial Economy by evaluating their performances.

 How can be said better is be growth potential of NBFCs and Banks on the basis of
profitability, leverage and liquidity ratios

Objective of the Study

• To look at the Business credits gave by banks v NBFCs

• To look at the similar presentation of Banks and Non-Banking Financial Companies so as

to have an away from of their commitment to the Financial Economy by assessing their
exhibitions.

• To grasp the near development capability of NBFCs and Banks and to think about their
exhibitions based on key money related parameters that is benefit, influence, and liquidity
proportions.
 RESEARCH METHODOLOGY

. For the current examination auxiliary information is gathered from different issues of RBI
Bulletin with respect to Financial and Investment organizations and for Banks, it is gathered from
articles of Business of Commercial Banks in India of RBI.

The investigation presents an examination of the presentation of Non-Government Non-

Banking Financial and Investment (barring protection and banking organizations) for the fifteen-
year time frame.

Further, to dissect if there is a huge contrast between the exhibition of NBFCs and Scheduled
Commercial Banks, Analysis of Variance (ANOVA) is applied to every proportion. This
measurable instrument will help with checking the budgetary exhibition of NBFCs and Scheduled
Commercial Banks which have been chosen for the examination for the fifteen-year time frame

RESEARCH APPROCH

DESCRIPTIVE RESEARCH / QUANTITATIVE RESEARCH

Unmistakable research is an investigation intended to delineate the members in an exact

manner. All the more basically, enlightening examination is tied in with portraying individuals
who participate in the investigation.

The path through which an analyst can approach doing a clear research venture is-

Survey

It is defined as a brief interview or discussion with an individual about a specific topic. The
more accurate way is to conduct an Online Survey.
 SAMPLE SAMPLING TECHNIQUE

1. Primary Data

In this research paper, the primary data is collected through survey method. Data used in
research originally obtain through the direct efforts of the researcher through surveys,
interviews and direct observation. These are the latest data and are hence reliable.
a) Tools and Technique used
 Online Survey

2. Secondary Data

The data in the research paper which has already being collected by different research papers
and has been passed through the statistical process and which is applicable or usable in the
study researcher has presently undertaken.
a) Tools and Technique used
 Research Paper
 Website Article
 Industry Reports and market insights

DATA COLLECTION TOOL

Considering the importance of objective of study and also the importance of decision area it was
decided to take an exploratory first.
The main purpose of this survey was to get information about topic.

SAMPLING TYPE
 Sample size – 500(approx.)
 Sample unit – Individual
 Sample area – Open survey Method
 Data collection time – One month (approx.)
 Statistical Tool – Chi- Square Test, Hypothesis testing, Anova Test, T-test etc.
 Research design – Descriptive Research/Quantitative Research
 Collection of data – Online Survey
 Expected Finding/Result/Data Analysis

The normal outcome from the perception we have made may shift yet the theoretical circumstance
may happen from the perception. In this regard, we have mentioned the accompanying objective
facts from the target we have made.

To break down the near presentation of the Financial Part and NBFCs, we will accept the theory as

H0: There is no noteworthy contrast between the presentation of Banks and Non-bank money
related organizations.

H1: There is a noteworthy contrast between the presentation Banks and Non-bank money related
organizations.

H0: There is no noteworthy contrast between the presentation of Banks and Non-bank money
related organizations.

H1: There is a noteworthy contrast between the presentation Banks and Non-bank money related
organization
 Scope and Limitation

On looking at the exhibitions of two significant money related organizations that are Banks and
NBFC's we comprehend that in productivity proportions, banks have high ground, On Influence
proportion, they stand equivalent and Liquidity proportion NBFCs perform better.

This relative examination of bookkeeping proportions shows that there isn't a lot of noteworthy
distinction in the presentation of both the organizations. The significant distinction between the two
lies on the Guideline body under which they work, Banks under RBI guidelines and NBFC's under
Organizations Act. There may be a few contrasts in the region of enthusiasm for the venture. They
may focus on various areas and Venture Sum.

In any case, the two of them assume a significant job in the general development of the economy.
Banks for the most part money Huge foundations and Corporate while NBFC's objective for the
retail division.

Rating is another key distinction between banks and NBFCs. For instance, the stores of NBFCs are
appraised, while the stores of banks are definitely not. The last is viewed as exceptionally protected,
while the previous isn't.

Since the two of them hold a key situation in the monetary framework and as referenced assuming a
significant job in the financial advancement by growing their wings through propelling credit to
practically all the divisions of the economy and different echelons of the populace it is very
fundamental that these budgetary establishments ought to be manageable as their money related
breakdown may potentially trigger wild money related calamity.

Further research I might want to propose that increasingly money related proportions will be
considered with regards to Capital, Resources Under Administration and Effectiveness, and for a
more drawn out timeframe.
 SCHEDULE OF PROPOSED WORK

Table 1. Schedule of Proposed Research Work

Phas Description Time Frame

e
I Literature survey Continuous
II Developing experimental set up/ Pilot 05-2020 to 06-2020
study
III Actual experimentation/ Data collection 06-2020 to 08-2020
IV Data analyses 08-2020 to 10-2020
VI Development of final model 10-2020 to 12-2020
VII Thesis writing and submission 12-2020 to 01-2020
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