GROWTH & CHANGING

STRUCTURE OF NON-
BANKING FINANCIAL
INSTITUTIONS
Introduction

All the institutions and organizations, other

than commercial banks engaged in the
transferring of funds from savers to
investors, are known as Non Banking
Financial Institutions.
According to RBI Amendment Act, 1997
A NBFI / NBFC means:
A financial institution which is a
company;
Its principal business, the receiving of
deposits under any scheme / in any
other manner / lending in any manner;
Such other Non Banking Institutions or
class of institutions as banks may, with
the previous approval of the
government, specify.
Functions of NBFI

Brokers of the Loan able funds.

Mobilization of savings.
Channelization of Funds into
Investment.
Stabilize the Capital Market.
Provide Liquidity
Types of NBFI

The Life Insurance Companies

General Insurance Companies
The Unit Trust
Mutual Funds
Post Offices
LIC
Established in 1956
Objectives:
To carry life insurance business in India.
It aims in promoting savings.
To invest profitably the savings collected in the
form of payment received from life insurers.
Special attention to cover the economically
weaker sections of the society .
Aggregate Business:
upto 1999: Rs. 4,10,907 crore.
2003-04: Rs. 1,98,274 crore.
GIC
Established in 1973.
Four subsidiaries of GIC
National Insurance Company
New India Assurance Company Ltd.
Oriental Fire and General Insurance
Company Ltd.
United India Insurance Company Limited
UTI
Established in1964.
Objectives:
To mobilise the savings of the community
and channeling them into productive
investment.
To enable the unit holders to share benefits
and prosperity of rapidly growing
industrialisation in the country.
Was promoted as the first private bank
after the commencement of policy of
liberalisation.
Now known as Axis Bank
Mutual Funds
Was set up in 1964. PSB and financial
institutions established Mutual funds in
1987. Private Banks started in 1993.
36 mutual funds, having 200 schemes
and posses an asset of Rs. 81,000
Crores.
Other Types of NBFIs:

Investment Companies
Loan Companies
The Hire-Purchase Companies
Chit Funds
Equipment Leasing Companies (SBI &
ICICI)
Housing Finance Companies (HUDCO)
 Can all NBFC accept Public
Deposits
NO!!!!!!
SO WHAT ARE THE REQUIREMENTS FOR
ACCEPTING ?
 Holding a valid certificate of
registration with authorization to
accept it.
 Should have minimum stipulated net
owned fund.
 Comply with the directions issued by
the bank
Rate of interest and period of
deposit
Maximum rate of interest a NBFC can
offer is 11%
The interest may be paid or
compounded at rest not shorter than
monthly rest
Minimum period of time 12 months
Maximum period of 60 months
Significance/Role of NBFIs:

A source of help to other sectors.

Benefit to the economy.
Development of sectors like transport
and infrastructure
Substantial employment generation
Help and increase wealth generation
Irreplaceable supplement to bank
credit in rural segment
Major thrust on semi-urban , rural
area and first time buyers/users
To finance economically weaker
sections
Huge contribution to the state
exchequer