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Number of NBFCs declines, but assets rise marginally

Non-banking finance companies (NBFCs) are witnessing a period of consolidation

Non-banking finance companies (NBFCs) are witnessing a period of consolidation, with the number of firms registered with the Reserve Bank of India (RBI) declining marginally to 12,225 at end of June 2013, said a report by the RBI.

According to the RBI?s annual report on Trend and Progress of Banking in India, the decline was mainly due to cancellation of certificates of registration and migration of non-banking finance companies that accept public deposits (NBFC-D) to the non-deposit-taking category.

The RBI classifies NBFCs in two categories based on their liabilities. The first category of companies is NBFCs-D, which accepts public deposits and the second category is NBFCs not raising public deposits or NBFCs-ND.

Though the number of NBFCs in business declined, these companies increased their total assets and net owned funds marginally.

During 2012-13, the consolidated balance sheet of NBFCs-D expanded marginally by 2.2%. On the liability side, borrowings from banks declined though they were still the biggest source of funding for NBFCs-D followed by debentures and public deposits.

?Among NBFCs-D, while the balance sheet of asset finance companies grew, that of loan companies shrunk,? the report noted.

Meanwhile, profitability for NBFCs improved during the year with net profit of NBFCs-D showing marginal improvement to R3,400 crore compared to last year?s figure of R3,300 crore. However, asset quality deteriorated with gross non-performing assets (NPAs) increasing to 2.4% of total advances from 2.2% last year.

?A bulk of the NPAs of NBFCs-D was concentrated in asset finance companies. During 2012-13, the gross NPAs pertaining to asset finance companies increased by R7 billion (R700 crore) whereas for loan companies it went up only by R1 billion (R100 crore),? the report said.

While deposit-taking NBFCs saw muted growth, the subset of systemically important non-deposit-taking NBFCs (NBFC-NDs) saw an expansion of 19.5% in their consolidated balance sheets during 2012-13. Borrowings increased significantly by 22.5% with these companies borrowing mainly via debentures, bank loans, commercial papers and inter-corporate borrowings.

On the asset side, the position of NBFCs-ND strengthened further during the year with loans and advances increasing 22%. Net profit for these companies grew 29.82% compared to the previous year to R22,200 crore at the end of March 2013.

Despite the rapid growth, asset quality held steady with gross NPAs increasing marginally to 2.2% of total advances from 2.12% from last year.

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First published on: 23-11-2013 at 04:44 IST
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