Non Banking Financing Companies in India
Ever since India has embarked on the Economic Reforms and Banking Sector Reforms in 1991/1998 (thanks to Mr Narasimham, ex-Governor of RBI who headed two important Committees), there have been encouraging news in the media about working of banks and improvement of health of the financial system. Inspite of several changes in Governments / Political Parties in Power, introduction of several reforms in various fields simultaneous with removal of licence-raj scenario, Banks and Non-Banking Financial Companies (NBFCs) have been facing the brunt. Much can be said about the phenomenal changes in the working of banking system - be it in Balance Sheet Management, Technology like ATMs, e-Banking, Dematerialisation, Core Banking Solution, SWIFT, Asset Liability Management (ALM) or Risk Management, Prudential Norms (like changes in CRR, SLR, introduction of CAR) and so on.
The country cousin of banks (Public, Private - Old & New, Foreign, Cooperative, Regional Rural and Local Area Banks) are the Non Banking Financing Companies (NBFCs) popularly known as private finance companies. No doubt they are ancient and have been playing a very responsible role in the Financial System by offering para-banking facilities. Unfortunately, during the period when Commercial Banks were undergoing health-check up, there was an unhealthy mushrooming of NBFCs in early nineties. These could be listed as Companies engaged in Chit Funds, Nidhis, Investment, Leasing, Hire Purchase, Housing Finance, Credit Cards, Locker Facilities, Mutual Funds and Asset Management, Venture Capital and Private Equity, Merchant or Investment Banking, Asset Reconstruction, Credit Rating, Credit Information Bureaus and so on.
But, for some interesting reasons and thanks to the Grand Scam by Mr CR Bhansali in late nineties, RBI and Government of India had appointed Vasudev Committee to enquire into their working and streamline the system to clean up the mess. Around that time NBFC became a dirty word. A clear picture emerged then as to registration, credit rating and regulation of NBFCs by RBI and SEBI. Prudential Norms and guidelines similar to Commercial Banks were also prescribed for NBFCs. With such a move, the large number of over 45,000 NBFCs got checked both by RBI and SEBI in respective zones of control and the number now is around one thousand. Of course, lakhs of gullible and innocent investors got cheated in the decade of nineties by investing their hard-earned savings in high-interest bearing fixed deposits or pseudo or junk-stocks. It is interesting to read in the news that RBI has withdrawn licences to 5 NBFCs in Bangalore, Chennai and Mumbai. Investing public should note these developments and be cautioned to deal with them.
Showing posts with label Reforms in India. Show all posts
Showing posts with label Reforms in India. Show all posts
Thursday, May 6, 2010
Foreign Banks in China - 2010
Foreign Banks in China : 2010
Five Years back, in 2005, I did work on a Paper to study "Functioing of Foreign Banks in India" which was presented at a National Conference on WTO held by the Mangalore University. It was a great learning about these banks present in India during British period for over a hundred years. It was a fulfilling task.
During the same year, RBI and Government of India, announced a policy to invite more and more foreign banks to introduce a highly competitive and level playing scenario. I wrote another Research Paper on "Sustainability of Foreign Banks in India" in December 2005 and presented the same at an International Conference on Banking and Finance organised by ICFAI, Hyderabad. It was a revealing experience to me and and my co-author Dr K S Srinivasa Rao that over the years, several Foreign Banks have been appearing and withdrawing from the Indian scene. The above policy of RBI / GOI was not all that encouraging because these banks were required to meet Capital Adequacy Standards, comply with Branch Licencing policy as also to lend at least 32 per cent of its credit portfolio (as against 40% for Indian Banks) to the Priority Sector lending. My research findings dealt with their sustainability and their frequency of entering and leaving the Indian banking scenario.
Indian Financial Sector Reforms started in June 1991. Several policy measures were taken by RBI / GOI on the advice of Narasimham Committee Recommendations then. Some New Generation Banks like HDFC, UTI (now Axis), ICICI, IDBI, IndusInd, Kotak Mahindra, YES Banks were permitted to start. There have been several mergers and reverse mergers among these new generation banks too. Times, Global Trust, Bank of Punjab and Centurian Bank were merged with their private or public sector counter-parts.
Today, almost all the Public and Private Sector banks have become modern, price and customer conscious and have turned out to be productive and profitable. Simultaneously, Foreign Banks also have been asked to comply with several prudential norms. Interesting fact is that while India took up reforms in 1991, China was already on the path of reforms right from 1978. Several India-China studies were commissioned to compare their respective performances in post-reforms era. Dr Manmohan Singh and other reformers have been endeavouring at making Mumbai an International Financial Centre on the lines of Shanghai, but there have been several obstacles in this task.
Today, I learnt that from the year 2005, PriceWaterhouse Coopers, China has been studying the working of Foreign Banks in China. Recently they have released their fifth edition of the same. Please click on the above link.
Five Years back, in 2005, I did work on a Paper to study "Functioing of Foreign Banks in India" which was presented at a National Conference on WTO held by the Mangalore University. It was a great learning about these banks present in India during British period for over a hundred years. It was a fulfilling task.
During the same year, RBI and Government of India, announced a policy to invite more and more foreign banks to introduce a highly competitive and level playing scenario. I wrote another Research Paper on "Sustainability of Foreign Banks in India" in December 2005 and presented the same at an International Conference on Banking and Finance organised by ICFAI, Hyderabad. It was a revealing experience to me and and my co-author Dr K S Srinivasa Rao that over the years, several Foreign Banks have been appearing and withdrawing from the Indian scene. The above policy of RBI / GOI was not all that encouraging because these banks were required to meet Capital Adequacy Standards, comply with Branch Licencing policy as also to lend at least 32 per cent of its credit portfolio (as against 40% for Indian Banks) to the Priority Sector lending. My research findings dealt with their sustainability and their frequency of entering and leaving the Indian banking scenario.
Indian Financial Sector Reforms started in June 1991. Several policy measures were taken by RBI / GOI on the advice of Narasimham Committee Recommendations then. Some New Generation Banks like HDFC, UTI (now Axis), ICICI, IDBI, IndusInd, Kotak Mahindra, YES Banks were permitted to start. There have been several mergers and reverse mergers among these new generation banks too. Times, Global Trust, Bank of Punjab and Centurian Bank were merged with their private or public sector counter-parts.
Today, almost all the Public and Private Sector banks have become modern, price and customer conscious and have turned out to be productive and profitable. Simultaneously, Foreign Banks also have been asked to comply with several prudential norms. Interesting fact is that while India took up reforms in 1991, China was already on the path of reforms right from 1978. Several India-China studies were commissioned to compare their respective performances in post-reforms era. Dr Manmohan Singh and other reformers have been endeavouring at making Mumbai an International Financial Centre on the lines of Shanghai, but there have been several obstacles in this task.
Today, I learnt that from the year 2005, PriceWaterhouse Coopers, China has been studying the working of Foreign Banks in China. Recently they have released their fifth edition of the same. Please click on the above link.
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