Non Banking Finance in India Regulatory Challenges Concerns 2 4

Journal of International Money and Finance, 2013

We study the determinants of the growth of those non-deposit taking nonbank financial corporations (NBFCs) which are regarded by the Reserve Bank of India as being systemically important and have grown substantially in India over the past decade. We document that bank lending to these NBFCs forms a significant proportion of their liabilities, and fluctuates in line with bank allocation to priority lending sectors. Bank lending to these NBFCs also appears to be greater for banks that have lower branching in semi-urban areas relative to metropolitan areas. However, bank lending to these NBFCs is virtually non-existent for the largest stateowned bank, State Bank of India (SBI), and its affiliates. Starting with the financial crisis of Fall 2008, bank lending to these NBFCs experienced a permanent contraction shock that is related to the shift of term deposits towards SBI away from other banks. These bank-NBFC linkages are present primarily for those NBFCs that do loans or asset financing and not for investment companies, and also affect the credit growth of these NBFCs. Overall, the findings suggest that NBFCs represent a completeness of credit allocation in non-metropolitan areas of the Indian economy by banks with less than fully-developed branching networks, but that this role has been potentially constrained by distortions in bank deposit base arising from a lack of level-playing field in the perceived government support of different banking groups. 1 Companies registered under Companies Act of India and notified as Nidhi companies by the Indian Central Government under Section 620-A of Companies Act of India. They are non-bank finance companies that collect funds from and lend to its members or shareholders. 2 Same as Nidhis, except that their members or shareholders are individuals only. 3 Stock Trade Financiers 4

2001

Abstract: During the 1990s, the Indian banking sector witnessed more reforms than most other sectors of the Indian economy. Interest rates have been deregulated, and entry into the banking sector has been liberalized. The cash reserve ratio and the statutory liquidity ratio are at their historic lows, thereby granting the banks control over a greater share of their deposit base. Banks are now allowed to invest in hithertofore contraband assets like equity.

Globally shadow banking has increased significantly in the recent years. Although in the developed economies such as the US, shadow banks are quite complex and play a bigger role, it is increasing rapidly in the emerging economies as well. There are now increasing concerns on the rise of shadow banking, especially in China and India. In this study we attempt to understand the differences in trends in two major emerging economies, China and India, and also look at the reasons behind its rise in the two countries. Our findings show financial exclusion is one of the major reasons for the rise of shadow banking in the two countries. Among differences are financially repressive policies in China in contrast to financial reforms in India leading to the rise of shadow banking. Recent rapid rise of NBFCs in India, which are dependent on short term borrowings including bank borrowings, is a cause of concern as despite heightened regulatory measures, they are still not at par with banks' supervision and regulations.

Indian Financial System in a nut shell

2018

Banking regulation in India shifted from prescriptive mode to prudential mode in 1990s, which implied a shift in balance away from regulation and towards corporate governance. Banks are accorded greater freedom and flexibility to draw up their own business plans and implementation strategies consistent with their comparative advantage. Recognising that ownership of banks by one or few individuals could be detrimental to the public interest, especially, depositors’ interests, it is stipulated that, in India, banks should have a diversified ownership model. To ensure that ownership and control of banks are well diversified, guidelines on ownership and governance in private sector banks were issued by the Reserve Bank in February 2005.

Indian Muslims have always been trying to manage their economic affairs within the framework of Shariah. This paper aims to highlight the attempts made by Indian Muslims in this regard and how some of the later developments since mid eighties affected their functioning. The paper focuses on how the period of late 1980s and early 1990s saw the proliferation of Non Banking Finance Companies (NBFCs) in India and the subsequent failures of a large number of finance companies caused by the depressed economic scenario in early 1990s and the highly changing regulatory environment in the late 1990s. Some prominent Islamic NBFCs of India are taken for detailed case studies.