NBFCS CRISIS

PRESENTED BY:-
PRIYA KUMARI
SAMRAT SAHA
 NBFCS
• A Non Banking Financial Company(nbfc) Is A Company Registered
Under The Companies Act, 1956 Of India Engaged In The Business Of
Loans And Advances, Acquisition Of Shares, Stocks, Bonds Hire
Purchase Insurance But Does Not Include Any Institution Engaged
Agriculture, Industrial Activity Or The Sale, Purchase Or Construction
Of Immovable Property . Nbfcs Provide Certain Types Of Banking
Services Such As Loans And Credit Facilities , M & A, Underwriting,
But Do Not Hold A Banking License. Due To The Nature Of Services
Provided By These Institutions The Term Shadow Banking Was Coined
By Paul Mcculley In 2007 For Non Banking
TYPE OF NBFCS
NON BANKING FINANCIAL COMPANY OFFERS FOLLOWING
SERVICES:
• FUNDING FOR COMMERCIAL VEHICLES
• FUNDING FOR INFRASTRUCTURE
• VENTURE FINANCE
• PROJECT FINANCE
• LOAN AGAINST SHARES
• RETAIL FINANCING
• FUNDING OF PLANT AND MACHINERY
• EQUIPMENT LEASE FINANCE
• HOUSING LOANS
STRUCTURE OF NBFC
EXAMPLES OF NBFCS IN INDIA
• Power Finance Corporation Limited
• Bajaj Finance Limited
• Indian Railway Finance Corporation Limited
• HDB Financial Services Limited
• Muthoot Finance Limited
• Capital First Limited
• IL&FS Limited
• SREI Infrastructure Finance Limited
• India Bulls Commercial Credit Limited
IMPORTANCE OF NBFCS IN INDIA
Nbfcs Aid Economic Development In The Following Ways
• Mobilization Of Resources - It Converts Savings Into Investments
• Capital Formation - Aids To Increase Capital Stock Of A Company
• Provision Of Long-term Credit And Specialised Credit
• Aid In Employment Generation
• Help In Development Of Financial Markets
• Helps In Attracting Foreign Grants
• Helps In Breaking Vicious Circle Of Poverty By Serving As
Government's Instrument
IL&FS
Infrastructure Leasing & Finance Services Is A Core Investment
Company And Serves As The Holding Company Of The IL&FS
Group, With Expertise Across Infrastructure, Finance And Social
And Environmental Services. It Was Founded By MJ Pherwani,
IL&FS Was Founded In 1987 With Equity From Central Bank Of
India, Unit Trust Of India And Housing Development Corporation
To Fund Infrastructure Projects.
SOME IMPORTANT PROJECTS UNDERTAKEN BY IL&FS :

• Nolda Toll Bridge(delhi)

• Patratu Dam Road(ranchi)
• Chenani Nashri Tunnel(j&k)
• Baleshwar Kharagpur Expressway
• Tripura Power Project
• Gujrat International Finance Tec-city(gift)
SHAREHOLDING PATTERN OF IL&FS
 WHAT HAPPENED ?
• IL&FS Defaulted On A Series Of Loans And Failed To Service Its Commercial
Papers(cp) On Its Due Date-which Means The Company Has Run Out Of Cash
Or It Is Facing Liquidity Crisis.
• Il&fs Financial Services Has About $500 Million Repayments Which Were Due
In The Second Half Of The Financial Year.
• Il&fs Group Is Struggling To Service Around Its Rs 91000 Crore Debt Out Of
Which Rs 60000 Crore Of Its Debt Is At Project Level, Including Power, Road
Projects.
REASONS FOR FAILURE OF ILFS
 IMPACT OF IL&FS CRISIS ON INDIAN ECONOMY

• LossOf Confidence Of Investors-the Default And Further Fear Of

Default Is Contagious To All Financial Markets Which Resulted In
Loss Of Money For Many Investors During Last Few Months.
• Prolonged Liquidity Distress Will Significantly Erode Nbfc’s Credit
Standing And Prove Negative For Broader Economy.
• Slowdown In Credit Growth Provided By Nbfc Will Dampen Overall
Consumption And Economic Growth.
• Massive Sell Off In Shares Of Non-banking Financial Companies.
WHY IS THE RESCUE IMPORTANT ?
• IL&FS May Constitute A Small Portion Of Overall Debt
Assets Of Mutual Funds, But A Default A Ripple Effect For
All Nbfcs As Cost Of Funds Goes Up With Mutual Funds
Becoming Wary Of Buying Such Securities.
• Nbfcs Have Already Seen Cost Of Funds Going By 20-30
Basis Points.
 OUR FINDINGS
• Fast Tracking Land Acquisition And Environment Clearances.
• Board Of Directors Should Be Held Accountable For Such Major Defaults
And Should Be Brought Under Regular Audit Mechanism.
• Making Stringent Laws To Deal With Lack Of Transparency In Both
Companies Structure And Finances As Well As Rating Agencies.
• Fresh Infusion From Rbi & Diis.
• Restructure Some Of Its Liabilities.
• Measured Asset Sales.
• Strengthening Regulatory Framework To Avoid Asset Liability Mismatch.