 NBFC consist mainly of finance companies which carry on hire purchase finance, housing finance, investment, loan, equipment leasing or mutual benefits.  Reserve Bank(Amendment Act) 1997:- NBFC means 1. A Financial institute which is a company. 2. NBFC has it’s principal business as receiving of deposits under any Scheme or arrangement or lending in any manner.

1. 2. 3. 4. 5. Brokers of loanable funds. Mobilization Of Savings. Channelization of fund into Investment. Stabilize the capital market. Provide Liquidity.

Housing Finance Services. Asset Management Company. 2. 4.TYPES OF SERVICES PROVIDED BY NBFCS 1. Hire Purchase Services. Leasing Services. 3. 5. Venture Capital Companies. .

Flexibility in tapping resources. 3. Retail Services to small and medium business. . Greater Reach.IMPORTANCE OF NBFC 1. 2. Important Components of Financial Market. 4.


Lines of Credit. rediscounting . redeemable capital. 2 years of profitable operations 2. foreign debentures.RAISING FUNDS 1. Annual credit rating exceeds minimum Inv. Grade 4. Certificate of Deposits A. NBFC/directors lawful conduct 3. NBFC Criteria 1. Disclosure statement to accompany application for permission • • Credit rating to be published in all ads No CoD if credit rating falls below criterion 2 Commercial paper.


Discounted for yr 1. Revaluation every 10 years by independent valuer 7. 50% & 100% No provisioning for Govt. 2 & thereafter as 80%. Credit Card 180 days) 2. 50%. Time based Classification into: a) Substandard(90 days). 6.PROVISIONING 1. 5. 100% of NPL) Quarterly list of delinquent / rescheduled accounts to SEC . 9. 10. Revaluation every 3 years by independent valuer b) In case of HFS i. and c) Loss (1 yr. 8. 70% & 50% ii. guaranteed exposure Additional subjective evaluation Declassification of rescheduled loans FSV ( other than realizable assets) a) In case of leasing & IFS: i. Types of charges Quarterly credit review by NBFCs. TBs 180 days. 4. 3. Discounting @ 70% ii. annual by Auditors Reversal of provision Cash receipt> 20%. Provisioning @ 25%. b) doubtful(180 days).


• An NBFC engaged in Leasing shall meet the following conditions: Assets invested > 70% of total assets < 50% equity of NBFC Investment in Shares Investment in shares Of one company < Lease period • 10% equity of NBFC/Co 3 years > May not engage in land / residential building leases .


Scope of work includes: a. 10% of above) 2. Project financing activities. Capital market activities (including managing client portfolios) c.e. LIMITS 1. General activities < < < < < %age of NBFC equity < 100 10 100 10 250 25 (i. Corporate finance services e. b.SCOPE OF WORK AND INV. Investment limits Shares Shares of1 company Equity futures Single future Reverse Repo & CFS Single CFS security . & d. Money market activities.

defined BoD policy Underwriting commitments fully backed 4. . 3. Margin Loans Total < 50 To 1 client < 10 (Margin shall be at least 30% of loan) Margin loans approved according to pre.CONTINUE….


Additional functions w. Appoint Lawyer. valuer 3.t property: a) Mortgage finance to purchase/construct/alter property b) Surveys and valuation c) Arrange insurance d) Manage mortgage investments Investment in: Limit HFS > 70% total assets Shares < 50% NBFC equity Shares of 1 co < 10% -doFinancing: One party < Rs 20 million Total Monthly Installments –Consumer loan < 60% NDI DE ratio < 85:15 Period of Mortgage loan < 20 years 2.1.r. Review market every quarter .


Venture Capital Company 1. engaged solely in VPs with equity of Rs 50 m & managed by VCC 2.A Company.000 5.Exposure to one person/grp of Cos. Can lead to cancellation . Exposure by NBFC to one person/group of Cos.Each investor to invest at least Rs 1.000.Registration can be suspended by SEC for 60 days.Exposure to director < 10% of total exposure 4. < 40% of equity 2. < 40% of equity 3. Raise funds by: shares issue and private placement for VP Venture Capital Fund 1.



Chief Investment Officer other Key Personnel of AMC 2. Reportable to CEO 3. Quorum for investment decisions is 2/3 4. B.TERMS AND CONDITIONS A. AMC to fulfill SEC conditions for managing multiple CIS Shari’a appointed for Islamic CIS . Designation of qualified fund manager to manage upto 3 CIS At least 1 investment Committee. D. Comprise fund manager. formed by BoD 1.ASSET MANAGEMENT SERVICES. Ensure compliance with constitutive documents/policies C.

Will be independent of the AMC . May retire or be removed by the NBFC 5. a/c for loss of property of scheme 4. Obliged to take custody of.TRUSTEE OF A SCHEME 1. Appointed with SEC approval for each open and closed end scheme 2. Trustee to be a a) b) c) d) e) f) a) b) c) d) Scheduled bank Trust company Foreign bank CDC NBFC engaged in IFS Other SEC approved trustee Issue trustee report to form part of annual report Ensure AMC/ IA has arranged for a diverse panel of brokers Ensure units of open end scheme \issued after sub money received Review adequacy of AMC/IA unit value calculation 3. manage.

ASSET MANAGEMENT COMPANIESRESTRICTIONS & OBLIGATIONS • Restrictions: 1. 4. invest in CIS except as allowed . Acquiring control of an investee through CIS Transaction with 1 broker>10% annual brokerage exp Accepting deposits from CIS Loans from CIS assets Undertake brokerage services Enter underwriting contracts. 6. 3. 2. 5.

OPEN & CLOSED END SCHEMES 1. Registration as a notified entity a) Application to be accompanied also by undertaking of AMC guaranteeing investment 2. 3 months notice for winding up by AMC / Cancellation by SEC 3. Closed end schemes: securities offered at par if investment is arranged by IA and the offer is underwritten 6. 5. Offering document / prospectus to include investment policy. type of securities it will invest in and the risk associated. Ads to be approved by SEC & circulated within 60 days of approval 4. Open end schemes: a) Investment made after conclusion of issue of units b) 4 regular dealings per week c) Offer price and redemption price d) Redemption to be completed in 6 working days .

1. holders not in favor can sell @ discount<3% of NAV d) Approval of SEC . Conversion of closed end fund to open end scheme: a) By Special resolution of certificate holders b) 5 years after fund launch c) Cert. Discretionary and non discretionary a/cs: a) Notice to SEC b) Due diligence c) Separate management & disclosure 2.CONTINUE….


External auditorSEC panel Investment company (closed end fund) Investment Advisor Custodian Discretionary Client Portfolio Non discretionary portfolio .

for a period of upto 10 years b) Change of IA requires prior approval of SEC 5. Custodian: a) Appointed with SEC approval b) scheme of custody of assets settled with IC c) Custodian not to be AMC or IA d) Custodian to be independent of IC and IA 6. IC to report annually and qtrly to shareholders and SEC. Application for registration can be cancelled if operations don’t start in 6 months 4. Auditor a) Appointed from the SEC approved list b) Auditor rotation after 5 years c) Auditor of IC different from auditor or custodian or IA . Registered as a Notified Entity 2.INVESTMENT COMPANIES 1. a) The P&L of the IC will include that of the IA 7. A public co with Rs 250m equity & directors of integrity 3. Investment Advisor a) Appointed with SEC approval.

EXPOSURE LIMITS FOR CIS Limit By CIS to1 person of person < 10% Net Assets of scheme/ 10% of issued capital By all CIS to 1 person < By CIS in 1 sector By CIS in one group By CIS in listed group Cos. Of AMC < < < 49% of issued capital of the person 25% of net asset value of scheme 35% of net assets of CIS 10% of net assets of CIS Invested by equity based CIS in non listed securities < 0% (Pre-IPO 15%) .

lend/ borrow.SEC& self regulatory association 14 days of month end Discretionary and non discretionary a/cs: DESCRIPTION BY AMC remuneration Annual fee Dividend CIS TO AMC AMOUNT 5yrs: 3% of Avg. delisting without SEC approval. forward purchase contracts. real estate dealing. No transactions by AMC of scheme with connected persons Direct transactions b/w CIS of 1AMC notified to SEC in 2 days IA(AMC) to bear all inc. 2% 0.1% of AANA AMC AMC SEC Shareholders of 90% income CIS . Of closed (open) end scheme NAV notified to SE. exp.CONTINUE…… • • • • • • Limitations on AMC of scheme include short selling. annual net assets of CIS Afterwards.

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