CHAPTER VII

SUMMARY, FINDINGS AND SUGGESTIONS

SYNOPTIC VIEW

A Non-Banking Financial Company (NBFC) is a company registered under the

Companies Act, 1956 and is engaged in the business of loans and advances,

acquisition of shares/ stock/ bonds/ debentures/ securities issued by Government

or local authority or other securities of like marketable nature, leasing, hire-

purchase, insurance business, chit business but does not include any institution

whose principal business is that of agriculture activity, industrial activity,

sale/purchase/construction of immovable property.

Indeed it is evident in India that with the development of the NBFCs

segment within the overall financial system, it challenged the other segments,

viz., banks to innovate, to improve quality and efficiency, and deliver at flexible

timings and at competitive prices. In fact, in a number of un-trodden paths,

NBFCs were the ones to enter first to try the market and develop before banks

entered the field. In India, for instance, the loans against gold jewelleries were

introduced by the NBFCs much before the nationalised banks entered this

market. Similarly, lending to small traders and small transport operators, used-

commercial vehicle financing, in particular, were initiated by the NBFCs.

Practically, many specialised financial services, such as the factoring, lease

finance, venture capital finance, financing road transport, etc., were pioneered

by the NBFCs. NBFCs have also played a leading role in the business of

securities-based lending such as Loan against Shares (LAS), Margin Funding,

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Initial Public Offering (IPO) Financing, Promoter Funding, etc. These

customized credit products have added liquidity and encouraged retail

participation in public issues in particular and equity markets in general,

resulting in better price discovery according to a report by the Task Force

appointed by FICCI. Even housing finance was taken to newer heights by the

NBFCs. In the recent years, NBFCs also played important role in wider reach of

microfinance. Moreover, development of such alternative financing vehicles

adds to the liquidity and diversity of the financial system, thereby increasing its

effectiveness as an engine for economic growth and enhancing the financial

system‟s capacity to absorb shocks (Carmichael et al, 2002).

By now it is well established, with the experience, that the robust

growth and effective functioning of a financial system is vital for economic

development. There is universal agreement that a well functioning financial

system is necessary for a thriving modern economy (Kroszner, 2010). In all

advanced economies, for example, sophisticated financial systems efficiently

deliver a broad range of financial services and act as a critical pillar in

contributing to macroeconomic stability and sustained economic growth and

prosperity (World Bank, 2003). Moreover, the well developed financial markets

facilitate mobilization of savings, by offering savers and investors wider choice

of instruments. Further, with NBFCs coming up on the financial system,

investors could place their funds at more attractive returns in comparison to the

bank deposits. This is the single most important reason to explain as to why the

NBFCs are popular among lower and middle class population including India.

This development paradigm is increasingly recognized around the world,

especially in the aftermath of repeated emerging market crises in countries with

bank-dominated financial systems. According to a report from the World Bank

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(2003), developed financial markets also have enhanced access to finance for

more firms and individuals at reasonable cost, reduced volatility and distortions,

by operating in an environment that is transparent, competitive, and

characterised by the presence of a diverse array of products and services,

including instruments for effective risk management. All these were made

possible because of widening the financial system with effective participation of

NBFIs.

It is therefore, necessary to view NBFIs segment of financial system as

a catalyst for economic growth and to provide proactive regulatory policy

support for their contribution towards economic development. NBFCs have

turned out to be engines of growth and are integral part of the Indian financial

system, enhancing competition and diversification in the financial sector,

spreading risks specifically at times of financial distress and have been

increasingly recognized as complementary of banking system at competitive

prices. The Banking sector has always been highly regulated, however

simplified sanction procedures, flexibility and timeliness in meeting the credit

needs and low cost operations resulted in the NBFCs getting an edge over banks

in providing funding.

Progressive movement towards Basel norms is expected to help

mitigate the systemic risks as there are relevant provisions in Basel III to

address systemic risks and inter-connectedness among systemically important

institutions by mitigating the risks arising from firm-level exposures. Higher

liquidity requirements against the excessive reliance on wholesale short-term

funding and higher capital requirements for inter-financial sector and intra-

financial sector exposures are some of the key prudential requirements need

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consideration. Prudential norms relating to NBFCs‟ exposures to capital

markets also need a relook. Last but not least, presently the system-wide inter-

institutional exposure related data is not available at a single point. This is

essential, particularly for the regulators to take a wholesome view.

In the recent global crisis, however, the role of non-bank financial

intermediaries (NBFIs)had been widely reproached. NBFIs, in general, were

known for taking higher risks than the banking system. The nexus between the

banking system and the NBFIs during the global crisis (2007-2009) put the

entire financial system in distress. Traditionally, the debate regarding the banks

expansion into non-banking activities veered around certain activities, viz.,

insurance, investment banking, etc. However, the recent global crisis has

extended the debate to the inter-connectedness of the banking system with the

NBFIs, as excessive inter-institutional exposure put the entire financial system

into vulnerability.

The framework of the study conducted is as follows:

Chapter I is the introductory part in which an attempt has been made to explain

the scenario of financial services. The chapter introduces the emergence of non

banking finance companies, its structure in India, various NBFCs committees,

its significance etc.

Chapter II has been devoted to the review of literature. The chapter presents an

overview of the findings and suggestions by various committees and study

groups. It also contains, brief description of articles pertaining to the topic of the

study selected from the national and international journals of repute, followed

by reviews from books, published thesis.

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Chapter III deals with the research methodology part of the study. The chapter

contains scope of study, research area, sampling, final data collection and

statistical framework.

Chapter IV describes the regulatory framework of NBFCs in India. It speaks

out on all the aspects of functioning of NBFCs, the norms for raising of

resources by NBFCs, prudential limit on bank exposure to NBFCs, the extant

key regulatory norms, liquidity reserves, creation of reserve fund, capital

adequacy, minimum net owned fund, RBI Directions, Public deposit norms,

credit rating norms, default in repayment of deposits, submission of returns,

Anti Money Laundering Standards, Fair Practices Code, Monitoring of frauds,

constitution of Audit Committee, constitution of Nomination Committee,

constitution of Risk Management Committee, disclosure and transparent,

foreign exchange investment in NBFC, overseas investment by NBFCs, etc.

have been comprehensively elaborated in this chapter.

Chapter V is about analysis and interpretation of the growth, financial and

operational performance of selected leasing companies. The performance was

examined by working out the percentage increase in different indicator like

reserves & surpluses, current liabilities, current assets, loans & advances, total

revenue, total expenses, profit before tax and profit/loss. The increase was seen

over the previous year. Then these financial and operational indicators were

compared between the three regions of Chandigarh, Delhi and Jammu. Various

other statistical tools and techniques are applied to the data.

Chapter VI is about analysis and interpretation of performance of NBFCs and

the problems faced by leasing companies by manager‟s viewpoint. The

managers of leasing companies were interviewed to judge their perceptions

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about the companies‟ operational performance as well as problem faced by

them. There were total 100 managers consisting 36 from Chandigarh region, 38

from Delhi region and 26 from Jammu region. Various statistical tools and

techniques are applied to the data.

Salient Findings of the Study

Growth and Financial Performance

1. The analysis showed that the number of NBFCs registered with RBI

was 7855 in 1999 which increased to 13815 in 2001 and further to 14077 in

2002. It then declined to 13849 in 2003 and further to 13266 in 2005. The rate

of growth worked at 9.54 percent compounded annually, significant at 5 percent

level of probability as indicated by the calculated t-value of 2.58.

2. The data indicated that the number of NBFCs registered with RBI was

13106 in 2006, which ultimately increased to 13215 in 2012 after wider

fluctuations. The compound growth rate of 0.19 percent per annum also came to

be non-significant, which revealed that the number of NBFCs registered with

the companies could not fetch the pace of growth of the period 1999-2005

during 2006-2012.

3. It is clear from the analysis that the number of NBFCs registered with

RBI was 7855 in 1999 which increased to 14077 in 2002 and then declined up

to 12625 in 2008. It again increased to 12709 in 2009, but decreased to 12641 in

the next year. However, there was again an increase to the level of 13215 in

2012. Hence, we can observe ups and downs in the number of NBFC

throughout 1999 to 2012. The non-significant growth rate also affirmed the

same. The growth rate was though positive to the tune of 2.07 compounded

annually, but non-significant. This revealed that with the passage of 12 years,

NBFCs could not get strengthened numerically.

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4. It could be predicted that in 2019-20, the number of NBFCs registered

with RBI would increase to 15403 and in 2024-25 to 16400. It would be a

respective increase of 16.56 percent and 24.10 percent over that in 2012.

Therefore, it can be predicted that the number of NBFCs registered with RBI

would increase in future.

5. It is evident that reserves and surpluses of Chandigarh region leasing

companies were Rs. 482582 in 2008-09 which met with a decline to the level of

Rs. 1000344 in 2011-12 i.e. a decline of 26.38 percent over the previous year.

The reserves and surpluses of Delhi region leasing companies were observed to

be Rs. 35975597 in 2008-09, which declined sharply to Rs. -64228711 in 2011-

12, registering a decline of as high as 177.53 percent over the previously year.

6. The Jammu region leasing companies secured their reserves and

surpluses of the order of Rs. 857244 in 2008-09 which increased to Rs. 1385581

in 2011-12 with an increase of 5.22 percent over the previous year. The pace of

increase was higher from 2008-09 to 2009-10 as compared to other years. The

calculated F-ratio indicated that the average level of reserves and surpluses was

significantly higher in case of Delhi region leasing companies as compared to

the Chandigarh and Jammu region leasing companies. This highlighted that

Delhi region leasing companies are stronger as far as reserves and surpluses are

concerned as compared to Chandigarh and Jammu region leasing companies.

7. It is clear from the data that current liabilities of Chandigarh region

leasing companies were Rs. 658167 in 2008-09 which increased to Rs. 7613620

in 2011-12 i.e. an increase of 110.87 percent over the previous year. The current

liabilities of Delhi region leasing companies were observed to be Rs. 44160704

in 2008-09 which increased to Rs. 107669600 in 2011-12, registering an

increase of 1.41 percent over the previous year.

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8. The Jammu region leasing companies secured their current liabilities

of the order of Rs. 406809 in 2008-09 which increased to Rs. 1191658 in 2010-

11. However, it declined to Rs. 1000639 in 2011-12 with a decline of 16.03

percent. The pace of increase was higher from 2008-09 to 2009-10 in case of

Chandigarh leasing companies and from 2009-10 to 2010-11 in case of Delhi

and Jammu leasing companies as compared to other years. It showed negative

trend in 2011-12 in Jammu region leasing companies. The calculated F-ratio

indicated that the average level of current liabilities was significantly higher in

case of Delhi region leasing companies as compared to the Chandigarh and

Jammu region leasing companies. The Jammu region leasing companies were

having lowest level of current liabilities throughout the period of the study.

9. The data indicated that current assets of Chandigarh region leasing

companies were Rs. 2799690 in 2008-09 which increased to Rs. 9929983 in

2010-11. However, it declined to the level of Rs. 6680658 in 2011-12 i.e. a

decrease of 32.72 percent. The current assets of Delhi region leasing companies

were observed to be Rs. 37696181 in 2008-09 which increased to Rs. 38957048

in the next year with an increase of 3.34 percent. Then it decreased to the level

of Rs. 35786045 in 2010-11 depicting a decrease of 8.14 percent and further to

Rs. 20342509 in 2011-12, registering a decrease of 43.16 percent.

10. The Jammu region leasing companies secured their current assets of

the order of Rs. 2475997 in 2008-09 which increased to Rs. 3180316 in 2011-12

with an increase of 17.98 percent over the previous year.

11. The trend of change from 2008-09 to 2009-10was positive in case of

Chandigarh and Delhi leasing companies and negative in case of Jammu region

leasing companies. From 2009-10 to 2010-11, it was positive in case of

Chandigarh and Jammu region leasing companies and negative in case of Delhi

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region companies. It showed negative trend in 2011-12 in Chandigarh and Delhi

region leasing companies and positive in case of Jammu region leasing

companies. The calculated F-ratio indicated that the average level of current

assets was significantly higher in case of Delhi region leasing companies as

compared to the Chandigarh and Jammu region leasing companies. The Jammu

region leasing companies were having lowest level of current assets throughout

the period of the study.

12. The analysis showed that loans and advances of Chandigarh region

leasing companies were Rs. 4401278 in 2008-09 which increased to Rs.

13933994 in 2011-12 i.e. an increase of 1.28 percent over the previous year.

The loans and advances of Delhi region leasing companies were observed to be

Rs. 14841483 in 2008-09 which increased to Rs. 30099630 in 2011-12,

registering an increase of 26.40 percent over the previous year.

13. The Jammu region leasing companies secured their loans and advances

of the order of Rs. 7911768 in 2008-09 which increased to Rs. 20033321 in

2010-11. However, it decreased to Rs. 8295807 in 2011-12 with a decline of

58.59 percent. The calculated F-ratio indicated that the average level of loans

and advances was significantly higher in case of Delhi region leasing companies

as compared to the Chandigarh and Jammu region leasing companies. The

Chandigarh region leasing companies were having lowest level of loans and

advances throughout the period of the study.

14. The analysis showed that total revenue of Chandigarh region leasing

companies were Rs. 2899811 in 2008-09 which increased to Rs. 3457657 in

2011-12 i.e. a slight increase of 0.11 percent over the previous year. The total

revenue of Delhi region leasing companies were observed to be Rs. 10482380 in

2008-09 which increased to the level of Rs. 12811726 in 2010-11. However, it

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decreased to Rs. 5106969 in 2011-12, registering a decline of 60.14 percent

over the previous year.

15. The Jammu region leasing companies secured their total revenue of the

order of Rs. 1762073 in 2008-09 which increased to Rs. 2022649 in 2009-10 i.e.

an increase of 14.79 percent. It then increased to the level of Rs. 2089914 in

2010-11, showing an increase of 3.33 percent and further to Rs. 2123064 in

2011-12 with an increase of 1.59 percent. The trend of change from 2008-09 to

2009-10was positive in case of Chandigarh and Jammu region leasing

companies and negative in case of Delhi region leasing companies. It was

positive for all the regions from 2009-10 to 2010-11. It showed positive trend in

2011-12 in Chandigarh and Jammu region leasing companies and negative in

case of Delhi region leasing companies. The calculated F-ratio indicated that the

average level of total revenue was significantly higher in case of Delhi region

leasing companies as compared to the Chandigarh and Jammu region leasing

companies. The Jammu region leasing companies were having lowest level of

total revenue throughout the period of the study.

16. The study revealed that total expenses of Chandigarh region leasing

companies were Rs. 2710801 in 2008-09 which increased to Rs. 3375050 in

2010-11. However, it decreased to the level of Rs. 3216678 in 2011-12 i.e. a

decrease of 4.69 percent. The total expenses of Delhi region leasing companies

were observed to be Rs. 11835080 in 2008-09 which increased to the level of

Rs. 9843127 in 2010-11. However, it decreased to Rs. 5305310 in 2011-12,

registering a decline of 46.10 percent.

17. The Jammu region leasing companies secured their total expenses of

the order of Rs. 1536842 in 2008-09 which increased to Rs. 1849599 in 2011-12

with an increase of 1.98 percent over the previous year. The calculated F-ratio

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indicated that the average level of total expenses was significantly higher in

case of Delhi region leasing companies as compared to the Chandigarh and

Jammu region leasing companies. The Jammu region leasing companies were

having lowest level of total expenses throughout the period of the study.

18. The analysis revealed that profit before tax of Chandigarh region

leasing companies were Rs. 210899 in 2008-09 which increased to Rs. 502396

in 2010-11. However, it decreased to the level of Rs. 240290 in 2011-12 i.e. a

decrease of 52.17 percent. The profit before tax of Delhi region leasing

companies were observed to be negative to the tune of Rs. -1312834 in 2008-09

which increased to the level of Rs. 2968551 in 2010-11. However, it again

turned to be negative to Rs. -2056438 in 2011-12, registering a decline of

169.27 percent.

19. The Jammu region leasing companies secured their profit before tax of

the order of Rs. 207815 in 2008-09 which increased to Rs. 282336 in 2010-11.

However, it declined to Rs. 254162 in 2011-12 with a decline of 9.98 percent.

The calculated F-ratio indicated that the average level of profit before tax was

significantly lower in case of Delhi region leasing companies as compared to

the Chandigarh and Jammu region leasing companies during 2008-09 and 2011-

12, while it was significantly higher in Jammu region during 2009-10 and Delhi

region during 2010-11. However, it was again significantly lower in Delhi

region during 2011-12 as compared to their counter parts in Chandigarh and

Jammu region. The trend in profit before tax was in correspondence with that of

total revenue.

20. The analysis revealed that profit/loss of Chandigarh region leasing

companies were Rs. 138353 in 2008-09 which increased to Rs. 246837 in 2010-

11 and decreased to the level of Rs. 120228 in 2011-12 i.e. a decrease of 51.29

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percent. The profit/loss of Delhi region leasing companies were observed to be

negative to the tune of Rs. -1455116 in 2008-09 which turned to be positive to

the level of Rs. 3918310 in 2010-11. However, it again turned to be negative to

Rs. -2409669 in 2011-12, registering a decline of 161.50 percent.

21. The Jammu region leasing companies secured their profit/loss of the

order of Rs. 145428 in 2008-09 which increased to the level of Rs. 297476 in

2010-11. However, it declined to Rs. 163682 in 2011-12 with a decline of 44.98

percent. The calculated F-ratio indicated that the average level of profit/loss was

significantly lower in case of Delhi region leasing companies as compared to

the Chandigarh and Jammu region leasing companies during 2008-09, 2009-10

and 2011-12, while it was significantly higher in Jammu region during all the

years under study. The trend in profit/loss was in correspondence with that of

total revenue and profit before tax.

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Performance Evaluation: Managers’ Viewpoint

1. The mean age of managers worked at 40.68, 35.33 and 39.38 years in

Delhi, Chandigarh and Jammu region respectively. The calculated F-ratio (8.31,

p<0.01) indicated that the managers in Chandigarh region were significantly

younger as compared to those in Chandigarh and Jammu region.

2. Vast majority i.e. 94.74 percent of managers in Delhi region was male

while this proportion came to be 100 percent in case of managers in Chandigarh

and Jammu region. This showed that it might be cumbersome to manage leasing

company affairs as there were overall 96 percent male managers.

3. The mean family size was 4.37, 4.61 and 4.69 in Delhi, Chandigarh

and Jammu region respectively. The F-ratio (0.60) conveyed that the average

family size did not differ significantly between different regions.

4. Majority of the managers belonged to the nuclear type of families. This

proportion came to be 57.89 percent in Delhi region, 66.67 percent in

Chandigarh region and 76.92 percent in Jammu region.

5. The average self-income worked at Rs. 27623.68 in Delhi region, Rs.

25188.89 in Chandigarh region and Rs. 31092.31 in Jammu region. The

calculated F-ratio of 1.31 indicated that the average self-income was similar in

the three regions under study.

6. The average level of family income came to be Rs. 92815.79 in Delhi

region, Rs. 52588.89 in Chandigarh region and Rs. 60115.38 in Jammu region.

The non-significant F-ratio conveyed that the average level of family income

was statistically at par in all the regions.

7. Majority i.e. 63.16, 72.22 and 69.23 percent of managers in Delhi,

Chandigarh and Jammu region respectively were postgraduates None of the

managers in Chandigarh and Jammu region was reported to be under-graduate.

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8. Majority of managers were having their urban background. This

proportion came to be 84.21 percent in Delhi region, 77.78 percent in

Chandigarh region and 57.69 percent in Jammu region. The chi-square value

(6.02, p<0.05) revealed that the pattern of locality of managers differed

significantly between different regions.

9. The mean level of satisfaction worked at 3.95 (79.00%) in Delhi

region, 4.06 (81.20%) in Chandigarh region and 4.08 (81.60%) in Jammu

region. The calculated F-ratio was 0.48, which was non-significant. This

showed that the level of satisfaction among managers exhibited no significant

difference between the three regions under study.

10. The mean level of satisfaction worked at 3.79 (75.80%) in Delhi

region, 3.44 (68.80%) in Chandigarh region and 3.54 (70.80%) in Jammu

region. The calculated F-ratio was 3.19, which was significant at 5 percent

level. This showed that the level of satisfaction among managers exhibited

significant difference between the three regions under study.

11. Majority i.e. 63.16 percent of managers in Delhi region, 69.44 percent

in Chandigarh region and 53.85 percent in Jammu region was of the opinion

that company‟s business was equal to what was expected. The mean level of

business sufficiency was 0.74 (37.00%) in Delhi region, 0.81 (40.28%) in

Chandigarh region and 0.77 (38.46%) in Jammu region. The overall level of

business was said to be equal to what was expected. The F-ratio (1.47)

conveyed that the level of business was statistically at par in different regions.

12. Majority of the managers reported that their company dealt in area of

motor leasing. This proportion came to be 63.16, 94.44 and 76.92 percent in

Delhi, Chandigarh and Jammu region respectively.

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13. Among Delhi region managers, the 1st rank of importance of various

statements was found to be on S5, 2nd on S6, 3rd on S1, 4th on S4, 5th on S3, 6th

on S7 and 7th on S2. Among Chandigarh region managers, 1st rank was assigned

to S1, 2nd to S4, 3rd to S7, 4th to S2, 5th to S6, 6th to S5 and 7th to S3. Among

manager of Jammu region, 1st rank was assigned to S6, 2nd to S1, 3rd to S5, 4th to

S3, 5th to S7, 6th to S2 and 7th to S4. The Kendall Coefficient of Concordance

(K-W) worked at 0.405 with a chi-square value of 7.29, which was found to be

non-significant. This revealed that the importance of different statements related

to company‟s financial performance differed significantly between different

regions.

14. Among Delhi region managers, the 1st rank of importance of various

factors was found to be on F1, 2nd on F2, 3rd on F5, 4th on F6, 5th on F4, 6th on

F3, 7th on F8 and 8th on F7. Among Chandigarh region managers, 1st rank was

assigned to F1, 2nd on F7, 3rd on F4, 4th on F5, 5th on F2, 6th on F8, 7th on F3 and

8th on F6. Among manager of Jammu region, 1st rank was assigned to F1, 2nd on

F2, 3rd on F5, 4th on F6, 5th on F3, 6th on F8, 7th on F7 and 8th on F4. The

Kendall Coefficient of Concordance (K-W) worked at 0.577 with a chi-square

value of 12.11, which was found to be non-significant. This revealed that the

importance of different statements related to company‟s financial performance

differed significantly between different regions.

15. Among Delhi region managers, the 1st rank of importance of various

statements was found to be on S6, 2nd on S2, 3rd on S3, 4th on S5, 5th on S4, 6th

on S7, 7th on S8, 8th on S1, 9th on S10, 10th on S11 and 11th on S9. Among

Chandigarh region managers, 1st rank was assigned to S4, 2nd on S3, 3rd on S1,

4th on S7, 5th on S6, 6th on S2, 7th on S9, 8th on S5, 9th on S8, 10th on S10 and

11th on S11 Among manager of Jammu region, 1st rank was assigned to S5, 2nd

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on S6, 3rd on S4, 4th on S7, 5th on S8, 6th on S10, 7th on S11, 8th on S1, 9th on S2,

10th on S3 and 11th on S9. The Kendall Coefficient of Concordance (K-W)

worked at 0.517 with a chi-square value of 15.52, which was found to be non-

significant. This revealed that the importance of different statements related to

company‟s financial performance differed significantly between different

regions.

16. Among Delhi region managers, the 1st rank was assigned to the

problem P10, 2nd to P1, 3rd to P6, 4th to P11, 5th to P3, 6th to P12, 7th to P5, 8th to

P7, 9th to P9, 10th to P8, 11th to P4 and 12th to P2. Among Chandigarh region

managers, the 1st rank was assigned to the problem P1, 2nd to P2, 3rd to P6, 4th to

P9, 5th to P11, 6th to P5, 7th to P4, 8th to P10, 9th to P12, 10th to P3, 11th to P7 and

12th to P8 .Among manager of Jammu region, the 1st rank was assigned to the

problem P1, 2nd to P3, 3rd to P5, 4th to P6, 5th to P10, 6th to P4, 7th to P11, 8th to

P9, 9th to P2, 10th to P12, 11th to P8 and 12th to P7. The Kendall Coefficient of

Concordance (K-W) worked at 0.599 with a chi-square value of 19.77, which

was found to be significant at 5 percent level. This revealed that the ranking

pattern of problems in different regions was almost similar. The leasing

companies faced almost same problems in all the three regions.

17. Twelve types of future opportunities were identified by the managers

of leasing companies, which include outstanding lease and hire purchase assets,

large variety of user segment, propensity for credit purchase & huge used cars

finance market, working capital finance market, personal loan market, low lease

penetration ratio, huge infrastructure spending in future, steadily rising

disposable income, generating huge demand for consumer goods, cross border

lease allowed, substantially reduced dependence on public deposits as a source

of funds and comparatively low default rate.

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18. The most commonly reported future opportunity by Delhi region

managers was found to be „comparatively low default rate‟ (84.21%) while the

least commonly reported future opportunity was „substantially reduced

dependence on public deposits as a source of funds‟ (42.11%). The most

commonly reported future opportunity by Chandigarh region managers was

found to be „outstanding lease & hire purchase assets‟ (94.44%) while the least

commonly reported future opportunity was „low lease penetration ratio‟

(33.33%). The most commonly reported future opportunity by Jammu region

managers was found to be „propensity for credit purchase & huge used cars

finance market‟ (92.31%) while the least commonly reported future opportunity

was „substantially reduced dependence on public deposits as a source of funds‟,

„personal loan market‟ and „cross border lease allowed‟ (46.15% each).

19. The most common future strategy reported by Delhi region managers

was „sustainable, varied and innovative resource mobilization practices‟

(84.21%) while he least common future strategy reported by Delhi region

managers was „consolidation of the business‟ (21.05%). The most common

future strategy reported by Chandigarh region managers was „identification of

focus areas and core strength‟ (94.44%) while the least common future strategy

reported by Chandigarh region managers was „wider distribution of insurance

products‟ (38.89%). The most common future strategy reported by Jammu

region managers was „identification of focus areas and core strength‟, „customer

centric services‟, and „improvement in quality of asset portfolio‟ (84.62% each)

while the least common future strategy reported by Jammu region managers was

„consolidation of the business‟ (23.08%).

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 Conclusion

1. The rate of growth of number of NBFCs registered with the RBI was

higher during 1999-2005 as compared to that during 2006-2012. It was due to

ups and downs in the number of NBFCs during latter period. Overall, the

growth was found to non-significant. However, the number of NBFCs

registered with RBI would increase in future.

2. The pace of increase in reserves and surpluses was higher from 2008-

09 to 2009-10 as compared to other years. Rather, it showed negative trends in

2010-11 and 2011-12 in Delhi region leasing companies. The same was also

true in case of Chandigarh leasing companies from 2010-11 to 2011-12.

3. The pace of increase in current liabilities was higher from 2008-09 to

2009-10 in case of Chandigarh leasing companies and from 2009-10 to 2010-11

in case of Delhi and Jammu leasing companies as compared to other years. It

showed negative trend in 2011-12 in Jammu region leasing companies.

4. From 2009-10 to 2010-11, the increase in current assets was positive in

case of Chandigarh and Jammu region leasing companies and negative in case

of Delhi region companies. It showed negative trend in 2011-12 in Chandigarh

and Delhi region leasing companies and positive in case of Jammu region

leasing companies.

5. The trend of change in loans and advances from 2008-09 to 2009-

10was positive in case of Chandigarh, Delhi and Jammu region leasing

companies and same was the trend from 2009-10 to 2010-11. It showed positive

trend in 2011-12 in Chandigarh and Delhi region leasing companies and

negative in case of Jammu region leasing companies.

6. The trend of change in total revenue from 2008-09 to 2009-10was

positive in case of Chandigarh and Jammu region leasing companies and

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negative in case of Delhi region leasing companies. It was positive for all the

regions from 2009-10 to 2010-11. It showed positive trend in 2011-12 in

Chandigarh and Jammu region leasing companies and negative in case of Delhi

region leasing companies.

7. The trend of change in total expenses from 2008-09 to 2009-10was

positive in case of Chandigarh and Jammu region leasing companies and

negative in case of Delhi region leasing companies. It was positive for all the

regions from 2009-10 to 2010-11. It showed positive trend in 2011-12 in

Chandigarh and Jammu region leasing companies and negative in case of Delhi

region leasing companies.

8. The trend of change in profit before tax from 2008-09 to 2009-10was

positive in case of Delhi and Jammu region leasing companies and negative in

case of Chandigarh region leasing companies. It was positive for all the regions

from 2009-10 to 2010-11 and negative from 2010-11 to 2011-12 for the regions.

9. The trend of change in profit/loss from 2008-09 to 2009-10was

positive only in case of Delhi region leasing companies and negative in case of

Chandigarh and Jammu region leasing companies. It was positive for all the

regions from 2009-10 to 2010-11 and negative from 2010-11 to 2011-12 for the

regions.

10. Overall, it may be said that though in case of reserves and surpluses,

current assets and total revenue, Delhi region leasing companies are leading, but

Delhi region is also found to be leading in case of current liabilities and total

expenses. The total expenses of Delhi region leasing companies exceed total

revenue. This turned the progression of Delhi region leasing companies to

negative or declining profit, the ultimate aim of any economic activity.

However, the profit before tax was positive in Chandigarh region leasing

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companies but remained at the decline. On the other hand, the profit before tax

in Jammu region companies was increasing from 2008-09 to 2010-11, but

declined during 2011-12. Therefore, it may be concluded that leasing companies

are performing better in Chandigarh and Jammu region as compared to that in

Delhi region.

11. The most important issue for managers of Delhi region was „sound

recovery of loan‟, while the same for Chandigarh region was „there is an

increase in resource profile‟ and for Jammu region „increased customers base‟.

The least important issue for Delhi region managers was „there is significant

decline in NPAs‟, for Chandigarh region managers „substantial improvement in

brand image‟ and for Jammu region managers, the least important issue was

„improvement in profitability margins‟.

12. The most important factor for managers of all the three regions was

„better customer services‟. The least important factor for Delhi region managers

was „customer focused operations‟, for Chandigarh region managers „product

focused operations‟ and for Jammu region managers, the least important factor

was „healthy capitalization‟.

13. The most important issue for managers of Delhi region was

„employees have knowledge and skill to serve the customers‟, while the same

for Chandigarh region was „employees always willing to help the customers‟

and for Jammu region „customers feel safe in their transactions‟. The least

important issue for Delhi and Jammu region managers was „company provides

access to wide range of leasing products‟ and for Chandigarh region managers;

the least important issue was „employees‟ behavior instills confidence in

customers‟.

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14. The most commonly faced problem by managers of Delhi region was

„impediments in the implementation of right of repossession of assets‟, while

the same for Chandigarh and Jammu region was „economic competition from

banks and MNCs‟. The least faced problem by Delhi region managers was „no

focused recovery mechanism‟ for Chandigarh region managers „lack of

employees‟ and for Jammu region managers, the least faced problem was „rising

NPAs‟.

15. The analysis revealed that for Delhi region, the most important future

opportunities are „comparatively low default rate‟, „outstanding lease and hire

purchase assets‟ and „large variety of user segment‟. The same for Chandigarh

region are „outstanding lease and hire purchase assets‟, „large variety of user

segment‟, „propensity for credit purchase and huge used cars finance market‟,

„huge infrastructure spending in future‟ and „substantially reduced dependence

on public deposits as a source of funds‟. The most important future

opportunities for Jammu region are „propensity for credit purchase and huge

used cars finance market‟, „outstanding lease and hire purchase assets‟ and

comparatively low default ratio‟.

16. The analysis highlighted that the most important future strategies for

Delhi region managers are „sustainable, varied and innovative resource

mobilization practices‟, „consumer centric services‟, product centric services‟,

improvement in quality of asset portfolio‟ and „implementation of risk

mitigating tools‟. The most important future strategies for Chandigarh region

managers are „identification of focus areas and core strength‟, „customer centric

services‟, „sustainable, varied and innovative resource mobilization practices‟,

and „wider distribution of financial products‟. The most important future

strategies for Jammu region managers are „identification of focus areas and core

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strength‟, „customer centric services‟, and „improvement in quality of asset

portfolio‟.

SUGGESTIONS

Here are few suggestions in the light of the present research study:

 To achieve higher standards of efficiency and performance, it is

suggested the NBFCs should introduce the concepts like market research,

product demonstrations, fee based activities, dual pricing and relationship

pricing in their systems.

 NBFCs are advised to inculcate marketing orientation in their work

culture, mechanize their operations, advertise and promote their services

vigorously in order to keep their market share intact in the long run.

 Education, training, motivation and satisfaction of the NBFCs staff are

pre-requisite to customer satisfaction. For this purpose, NBFCs should ensure

that there is a separate marketing cell dealing specifically with aspects like

market research, management training programmes, improvement in delivery

processes etc.

 Market research should be carried out on regular basis to carry out

market segmentation. This will facilitate in the identification of customer

groups, analysis of customer‟s needs and requirements. The market research

will also prove helpful in engendering valuable feedback to assess the level of

customer satisfaction index, which in turn, can be made use in upgrading the

service levels.

 The lease financing activity as such has decreased due to changes in

economic scenario wherein all the companies are moving towards owning the

assets instead of leasing. This is mainly because of sufficient availability of

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funds as a result of Joint ventures with Multi National Companies. On the

contrary those industries highly affected by economic recession are struggling

for survival and hence are not in a position to expand their business. Hence, it is

right time that the company has to concentrate on increasing the leasing of cars

and computers by promotional and other marketing activities.

 The policy change made with respect to the leasing department of

leasing only computers and cars, though to reduce risk, can include leasing to

the companies of reputation and in existence for more than five years with

profits, which would result in reduced risk with a better return. Since the

manufacturing industry is in the growth stage once again, though sparing a few

industries, the change made in the policy could be brought down considering the

following.

 The Indian Government has privatized the airline transport resulting directly in

increased air traffic than earlier. This is the time to revert back to leasing of

aircrafts to the companies.

 In India, the pressure to improve farm production is intense and lasting. This

means mechanization, and therefore a growing market for leasing of farm

equipment. Hence the company could concentrate in this industry, of course,

with higher risk because of the unpredictable monsoon in our country.

 Construction also will grow rapidly, as developing countries build housing

and services for their expanding populations. This is one industry where the

leasing activity is expected to grow in near future and would sustain to be as the

population and hence the demand is growing. This industry has many big

companies coming for leasing as the requirement from both Government and

private corporate are engaged for the same, which could bring.

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 Russia, China, the “stans,” and perhaps India all will provide significant

leasing markets for drilling and other oil-field equipment, which is also a bright

area for leasing in the immediate future.

 Scrubbers and other antipollution equipment will form a growing market for

equipment leasing. Despite their fundamental disinterest in environmental

causes, the governments of developing lands are likely to find themselves

compelled to clean up their industries. This could stimulate rapid growth of the

market for antipollution equipment in these countries five to ten years ahead.

This equipment is likely to be leased, not purchased, with maintenance contracts

a significant part of the package.

 With the opening up of the economy to the outsourcing business, the

transactions that this company could get from such companies is expected to

grow as regards the leasing of computer equipments and cars.

 State and local governments are likely to lease equipment for use by school

systems, community centers since the computer education is made compulsory

for all classes and at all schools.

 International markets for business equipment, computers, peripherals,

and information technology is likely to grow rapidly in the years ahead. This

trend will be particularly to lessors of business equipment, where the pressure is

to get work done, not to have cutting-edge technology. Hence, it becomes

important for the company to maintain its market for leasing of computer

hardware and software with competitive rates and services.

 The company is considered to be a conservative and tradition-minded.

The companies that most aggressively adopt or develop information-based

management systems will have strong advantages in flexibility and control over

the competitors.

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 Many of the public engaged in business are unaware of the leasing

business carried out by the company. If this could be improved it could bring

about a greater difference in the overall leasing business.

 The Bills discounting activity could be increased further as the market

for the same is growing with increasing financial requirements of the business

housing for their operations in the competitive environment.

 Many of the companies primarily started to engage in hire-purchase

business, are performing well with the same. It could do much better if the

prices offered are competitive as compared to its competitors. The market for

the hire purchase is growing at a very fast rate as regards the motor vehicles and

other semi electric and electronic goods.

 Since NBFCs have been kept outside the purview of SARFAESI Act, a

reform in this area is quite urgently needed. A suitable legislative amendment

extending the operation of the said Act to NBFCs too would go a long way in

fortifying the faith of the investors and which in turn would greatly contribute to

the growth of this Sector.

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Agenda for Further Research

1. It would be very interesting to conduct another study within the same

area of research, with the incorporation of more NBFCs which will give more

integrated result to the topic as the present study has concentrated on

Chandigarh, Delhi and Jammu regions only.

2. The present study is confined only to category A of NBFCs i.e. deposit

taking NBFCs. Therefore, a further study can be conducted on non deposit

taking NBFCs.

3. Some of the All India level companies and multinational companies

also provide leasing facilities. So, a study can be conducted to evaluate financial

performance of these companies.

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