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2010

Live Project Report

@

IMANTEC

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Gr u

Intr ducti n

JESH J UT (38) - I Y D T OLLE TIO

EH BHOL (44) - SE VEY QUESTIO Y

I J S D (48) - ESE T TIO

IVEDIT H TE JEE (5 ) - IS

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Non Banking Financial Inclusions

WH T IS NBFS?

DIFF ENCE BETWEEN NBFC ND B NK

IT IS NESSES Y TH T LL NBFC SHOULD EGISTE ED

WITH BI

DIFFE ENT TY E OF NBFC EGISTE ED WITH BI

DOCU ENTS EQU IED FO EGIST TION

ME IT ND DEME ITS OF NBFCS

IMPACT IN FINANCIAL INCLUSION

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Meaning

�Non-bank financial companies (NBFCs) are

financial institutions that provide banking

services without meeting the legal definitionof a bank, i.e. one that does not hold a

banking license.

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Diff erence Between NBFCs and BANK

(i) A NBFC cannot accept demand deposits (demand

deposits are funds deposited at a depository institution

that are payable on demand -- immediately or within a

very short period -- like your current or savings accounts.

(ii) it is not a part of the payment and settlement system

and as such cannot issue cheques to its customers.

(iii) deposit insurance facility of DICGC is not available f orNBFC depositors unlike in case of banks.

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Necessary egistered with BIs

In terms of Section 45-IA of the BI Act, 934, it is mandatorythat every NBFC should be registered with BI to commence or

carry on any business of non-banking financial institution as

defined in clause (a) of Section 45 I of the BI Act, 934.

However, to obviate dual regulation, certain category of NBFCs

which are regulated by other regulators are exempted from the

requirement of registration with BI viz. venture capital

fund/merchant banking companies/stock broking companies

registered with Sebi, insurance company holding a valid

certificate of registration issued by I DA,companies as notified under Section 6 A of the Companies

Act, 956, chit companies as defined in clause (b) of Section of

the Chit Funds Act, 98 or housing finance companies

regulated by National Housing Bank.

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Diff erent type of NBFCs egistered with BI

The NBFCs that are registered with BI are:

(i) equipment leasing company;

(ii) hire-purchase company;

(iii) loan company;

(iv) investment company.

With eff ect from December 6, 6 the above NBFCs

registered with BI have been reclassified as

(i) Asset Finance Company (AFC)

(ii) Investment Company (IC)(iii) Loan Company (LC)

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Documents required f or egistration

A company incorporated under the Companies Act, 956 and

desirous of commencing business of non-banking financial

institution as defined under Section 45 I(a) of the BI Act,

934 should have a minimum net owned fund of s 5 lakh

(raised to s crore from April , 999).

The company is required to submit its application f or

registration in the prescribed f ormat along with necessary

documents f or bank's consideration. The bank issues

certificate of registration after satisfying itself that the conditions as enumerated in Section 45-IA of the BI Act, 934

are satisfied.

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Merits of NBFCs

Suppliers of loans and credit facilities.

Supporting investment in properties.

Funding private education.

Wealth management such as managing portf olios of

stocks and shares.

Advice companies in mergers and acquisitions.

Discounting services e.g. discounting of instruments.

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Underwrite stocks and shares, TFCs and other

obligations.

etirement planning.

Trading money market instruments. Prepare f easibility, market or industry studies f or

companies.

Cont

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Demerits of NBFCs

An NBFC cannot accept demand deposits.

An NBFC is not a part of the payment and settlement

system and as such an NBFC cannot issue cheques on itself.

Deposit insurance facility of DEPOSIT INSU ANCE AND

CREDIT GUARANTEE CORPORATION is not available f or

NBFC depositors unlike in case of banks.

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Financial Inclusions

Financial inclusion is the delivery of financial

services at aff ordable costs to vast sections of disadvantaged and low income groups.

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Concept of Financial Inclusions

Financial inclusion is the availability of banking services at an

aff ordable cost to disadvantaged and low-income groups. In

India the basic concept of financial inclusion is having a

saving or current account with any bank. In reality it includes

loans, insurance services and much more These accountseither have a low , minimum or nil balance with some

restriction in transactions. The individual bank has the

authority to decide whether the account should have zero or

minimum balance. Financial inclusion mainly f ocuses on the

poor who do not have f ormal financial institutional supportand getting them out of the clutches of local money lenders.

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Shortcomings of financial Inclusions

The interaction with the NGOs and the SHGs brought to light

underpinning problems of financial inclusion, which are briefly

stated as under :

Poverty: being on a low income, especially out of work and on

benefits.

Ignorance: low levels of awareness and understanding of

products caused by lack of appropriate marketing or low levels of financial literacy.

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Environment: lack of access to financial services caused

by several factors, including:geographic access to bank

branches or remote banking facilities; aff ordability of

products such as insurance, where premiums often price

out those living in the most deprived and risky areas;suitability of products like current accounts, which off er an

overdraft and an easy route to debt.

Cultural and psychological barriers , such as language,

perceived / actual racism and suspicion or f ear of financial

institutions.

Cont

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Role in Economic Development

Financial inclusion is an essential pre-condition to building

unif orm economic development, both spatially and temporally,

and ushering in greater economic and social equity. There are

several government and non-government programmes aimed

at reducing poverty and bringing greater equity in the country.But f ew have proved to be inherently productive and

sustainable. Financial inclusion can transf orm them into

productive and self-sustainable pro jects . The micro-credit

programme launched through numerous Non Government

Organizations has f ound fancy with the banking industry and

can prove to be an excellent tool to bring in greater equity

through financial inclusion.

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Cont..

No-frills account when promoted extensively plough backs

the returns from these pro jects into bank coff ers, thusencouraging the savings habit and ensuring that banks act as a

repository of savings and sources of credit. This will make

banking, enter into the daily routine of a common man.

Besides nurturing the habit of saving among the masses, it will

remove the apprehensions and f ear from their mind towards

the financial products and services.

In a way provision of easy credit will encourage the first

generation entrepreneurs to initiate new venture; aggravatethe capital f ormation in the society; create new employment

opportunities and thus will help in escalating the economic

development of the country. This also will automatically lower

the increasing crime rates in the society.

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To Recapitulate

1.This institutions are mainly built f or poor level people but in

this according to our survey we conclude that poor family are not aware f or this , but middle family pref er this and higher

family is also not pref er this ; but some time or some people

pref er this.

.The analysis and reallocation of workload responsibilities; the

assurance of fair treatment; equal access to resources; and the

implementation of existing policies and the initiation of new

policies

and procedures.

3. Needed is someone who will enf orce the policies that exist.

There is just so much disregard of the current policies. That has

a way of checking on whether things are being enf orced.

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Our Learning

�GOT TO KNOW ABOUT NBFCS

�ABOUT FINANACIAL INCLUSION

�

HOW NBFCS WORK�DIFFRENCE BETWEEN NBFCS AND BANK

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Resources to report

WWW.REDIFF.COM

WWW.RBI.ORG.IN

WWW.WIKIPEDIA.COMWWW.BUSINESSWORLD.COM

VISITING MOOTHOOR FINANCE

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Doubts & solutions

This is the question and answers slide.

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THANK

YOU

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