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The financial sector in any economy consists of several intermediaries. Apart from banking entities, there are investment intermediaries (such as mutual funds, hedge funds, pension funds, and so on), risk transfer entities (such as insurance companies), information and analysis providers (such as rating agencies, financial advisers, etc), investment banks, portfolio managers and son.
All such entities that offer financial services other than banking, may be broadly called non-banking financial institutions. What is banking? Banking is commonly understood to mean taking of deposits withdrawable on demand or notice – that is, banks can hold people’s deposits and promise to pay them on demand. There are variety of other entities that may accept deposits – hence, acceptance of deposits is not the essence of banking.
In India, the term “non-banking financial companies” acquires a new meaning, and a huge significance. The meaning of the term is such entities which are not banks, and yet carry lending activities almost at par with banks. They may also accept deposits – however, these deposits are term deposits and not call deposits.
The significance of non-banking financial companies in India lies in the massive capabilities of NBFCs – short of acceptance of call deposits and remittance function, NBFCs can virtually do everything that a bank can. Compared to this disability, the ease of entry and lightness of regulation applicable to NBFCs makes it a tremendous focus of interest, particularly for foreign investors wanting to enter India’s financial sector.
For instance, it is possible to hold 100% foreign ownership of NBFCs, while in case of banks, there are serious caps.
It is possible to either start an NBFC or buy one of the 17000-odd companies many of which are formed for sale. On the other hand, getting a banking license requires a real penance.
2. Assisting is setting up the business – preparation of SOP, Credit Underwriting Mechanism etc.
3. Business strategic advisory
4. Product based advisory
5. Legal, regulatory, accounting and taxation advisory
6. Company secretarial assistance
7. Structuring of financial instruments
8. Drafting of business documents
9. Entity due diligence
10. Training and capacity building
Our Past Experience
Vinod Kothari Consultants, in the past 30 years, has been well connected with the financial sector in India. With the wide range of services it has to offer to this sector, it has worked with some prominent names in the industry like SREI Group, Tata Capital, Indian Railways Finance Corporation, Aditya Birla Finance, Siemens Financial Services, Magma Group, Reliance Capital, Shriram Group, Fullerton Group, India Infoline Group, Rabo Finance etc.
Core investment companies – Vinod Kothari’s article appeared in Chartered Secretary, Feb 2011 issue. The article discusses the exemption from registration requirements given to core investment companies.