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Assets Finance Company

An Asset finance company which is a financial institution engaged in the principal business of financing of a physical asset or movable assets and other economic activity such as Bus, Car, tractors, lathe machines, generator sets & manufacturing machine. An Assets finance company also provides short-term working capital loan against receivables, inventory i.e. Assets finance company must generate 60% of its revenue from the aggregate of physical assets supporting the economic activity is not less than 60% of its total assets and total income respectively. Assets finance can be either deposit taking NBFC or non-deposit taking NBFC. Assets finance can be registered with RBI with minimum net owned fund Rs. 200 Lakh.

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Assets Finance Company

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  1. AssetFinanceCompany NBFCLicensebyRBI www.enterslice.com

  2. NBFCMEANING NBFCMEANING • Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 /2013 engaged in the business of loans and advances, Assets financing , investment share, debenture or other marketable securities of a like nature, leasing, hire-purchase and insurance business • NBFC provides working capital loan and credit facilities and investment in properties. It is useful for trading money market instruments • AFC provides financing against physical assets like car, bust, machine or Loan against property

  3. WhatisthebusinessactivityofAFC WhatisthebusinessactivityofAFC • AnAssetfinancecompanywhichisafinancialinstitutionengagedintheprincipal businessoffinancingofphysicalassetormovableassetsandothereconomicactivity suchasBus,Car,tractors,lathemachines,generatorsets&manufacturingmachine • AnAssetsfinancecompanyalsoprovidesshorttermworkingcapitalloanagainst againstreceivables,inventoryi.e. • Assetsfinancecompanymustgenerate60%ofitsrevenuefromtheaggregateof physicalassetssupportingtheeconomicactivityisnotlessthan60%ofitstotalassets andtotalincomerespectively • AssetsfinancecanbeeitherdeposittakingNBFCornondeposittakingNBFC • AssetsfinancecanberegisteredwithRBIwithminimumnetownedfundRs.200Lakh •

  4. ConditionforAssetsfinancecompanyLicense AFC • • 60%ofTotalAssetsinFinancingFinancingReal/PhysicalReal/Physical Assets • 60%ofTotalIncomearisesfromtheaforesaidaforesaidAssets • MinimumNetownedfundRs.200Lakh • 60%oftotalincomemustbegeneratedfromassetsfinancingbusiness • Assetsfinancecompanycangivesecuredorunsecuredloansubjectto totallendingshouldbelessthan40%oftotalassetssizeofthecompany

  5. AssetsfinancecompanyregistrationChecklist üInformationaboutmanagement üCertifiedcopiesofCertificateofIncorporation üCertifiedCopiesofup-to-dateMemorandumofAssociation&Articles ofAssociationofthecompany. üCopyofPAN/CINallottedtothecompany. üAuditorsreportaboutreceiptofminimumnetownedfund. üAcertificateofCharteredAccountantregardingdetailsof group/associate/subsidiary/holdingcompaniesalongwithdetailsof investmentsinotherNBFCsasshowninthePerformaBalanceSheet

  6. Contine… üStatutoryAuditorsCertificatethatthecompanydoesnotacceptanypublic deposit. üDetailsofAuthorizedsharecapital&latestshareholdingpatternofthecompany. üBoardresolutiontotheeffectthatthecompanyhasnotacceptinganypublic deposit. üDetailsofthebankbalances/bankaccounts/bankloanetc. üCertifiedcopyofBoardResolutionforformulationofFairPracticesCode

  7. NOF(NETOWNEDFUND)REQUIREMENT NOF(NETOWNEDFUND)REQUIREMENT üIntermsofsection45IAoftheRBIAct,1934,netownedfunds(NOF)ofanNBFCmeans- ü(a)theaggregateofthepaid-upequitycapitalandfreereservesasdisclosedinthelatest balance-sheetofthecompanyafterdeductingtherefrom– ü (i)accumulatedbalanceofloss; (ii)deferredrevenueexpenditure;and (iii)otherintangibleassets;and ü(b)furtherreducedbytheamountsrepresenting ü(1)investmentsofsuchcompanyinsharesof– ü (i)itssubsidiaries; (ii)companiesinthesamegroup; (iii)allothernon-bankingfinancialcompanies;and ü(2)thebookvalueofdebentures,bonds,outstandingloansandadvances(includinghire- purchaseandleasefinance)madeto,anddepositswith,– ü (i)subsidiariesofsuchcompany;and (ii)companiesinthesamegroup, ütotheextentsuchamountexceedstenpercentof(a)above.

  8. PROSANDCONS PROSANDCONS Pros. üSecurefinancing,LowestNPA,HighROIincaseof secondhandfinancing,BigMarketsizeascompare otherNBFCactivity.40%oftotalassetscanbeusefor unsecureloanorworkingcapitalloan Cons.. üTheROIislowerthanaLoancompany,ondefaultof EMIpaymentbythecustomeritisdifficulttorecover thecompleteloanamountduetoautomobilemarket istechnologydriven&depreciationrateishigh

  9. NPA(NON NPA(NON- - PERFORMINGASSEST)NORMS PERFORMINGASSEST)NORMS A.ForleaseRental&HirepurchaseAssets: ü Overduefor9monthsason31stMarch2016 ü Leaserental&HirepurchaseassetsshallbecomeNPAiftheyoverduefor9 months(currently12months)forthefinancialyearendingMarch2016; Overduefor6monthsason31stMarch2017 üLeaserental&HirepurchaseassetsshallbecomeNPAiftheyoverduefor6 monthsforthefinancialyearendingMarch31,2017and ü Overduefor6monthsason31stMarch2018&onwards– üLeaserental&HirepurchaseassetsshallbecomeNPAiftheyoverduefor3 monthsforthefinancialyearendingMarch31,2018andthereafter

  10. • CONT……. B.Sub– StandardAssets: Forallloan&hirepurchase&leaseassets,sub- standardassetwouldmean: • NPAupto16monthson31/03/2016– AnassetthathasbeenclassifiedasNPAforaperiodnotexceeding16months( currently18months)forthefinancialyearendingMarch31,2016 • NPAupto14monthson31/03/2017– AnassetthathasbeenclassifiedasNPAforaperiodnotexceeding14monthsfor thefinancialyearendingMarch31,2017and • NPAupto12monthson31/03/2018– AnassetthathasbeenclassifiedasNPAforaperiodnotexceeding12monthsfor thefinancialyearendingMarch31,2018

  11. RoleofNBFCinEconomicDevelopment RoleofNBFCinEconomicDevelopment NBFCsaidineconomicdevelopmentinthefollowingways– 1. MOBILIZATIONOFRESOURCES– itconvertsavingsintoinvestments 2. CAPITALFORMATION- aidstoincreasecapitalstockofacompany 3. Helpindevelopmentoffinancialmarkets 4. Itprovideslongtermcredit&specializedcredit 5. Helpinattractingforeigngrants. 6. Aidinemploymentgeneration.

  12. Credit/InvestmentConcentrationNormsforAFCs Credit/InvestmentConcentrationNormsforAFCs • Asasteptowardsmeetingthebroadobjectiveofharmonizing regulationstotheextentpossiblewithintheNBFCsector,thecredit concentrationnormsforAFCsarenowbeingbroughtinlinewithother NBFCs.Thiswillbeapplicablewithimmediateeffectforallnewloans excludingthosealreadysanctioned.Allexistingexcessexposures wouldbeallowedtorunofftillmaturity.

  13. Systematically importantNBFC • NBFCswhoseassetsizeisof₹500cr ormoreasperlastaudited balancesheetareconsideredassystemicallyimportantNBFCs. • TherationaleforsuchclassificationisthattheactivitiesofsuchNBFCs willhaveabearingonthefinancialstabilityoftheoveralleconomy.

  14. ReturnstobesubmittedbydeposittakingNBFCs ReturnstobesubmittedbydeposittakingNBFCs • NBS-1 QuarterlyReturnsondepositsinFirstSchedule. • NBS-2 QuarterlyreturnonPrudentialNormsisrequiredtobesubmittedbyNBFCacceptingpublic deposits. • NBS-3 QuarterlyreturnonLiquidAssetsbydeposittakingNBFC. • NBS-4 Annualreturnofcriticalparametersbyarejectedcompanyholdingpublicdeposits.(NBS-5 standswithdrawnassubmissionofNBS1hasbeenmadequarterly.) • NBS-6 MonthlyreturnonexposuretocapitalmarketbydeposittakingNBFCwithtotalassetsof₹ 100croreandabove. • Half-yearlyALMreturn byNBFCholdingpublicdepositsofmorethan₹20croreorassetsizeof morethan₹100crore • AuditedBalancesheetandAuditor’sReportbyNBFCacceptingpublicdeposits. • BranchInfoReturn.

  15. NBFCCOMPLIANCES NBFCCOMPLIANCES üDutyofNBFCtofurnishstatementsonrequirementtoRBI. üSubmissionofAuditorsCertificateby30thJuneofFollowingyear. üAnnualBalancesheet&PL. üListofResolutionpassedinayear. üUnauditedMarchMonthlyreturn/NBS7onorbefore30thJune. üAuditedMarchMonthlyreturn/NBS7. üStatutoryAuditorscertificateonIncome&Assetsonorbefore30thJune. üFileAuditedAnnualBalanceSheetandP&LAccountOnemonthfromthe dateofsignoff. üDeclarationofAuditorstoActasAuditorsoftheCompanyonannualbasis.

  16. CONT…… • ConstitutionofAuditCommitteeaccordingtosection177oftheCompaniesAct 2013,CompanyhavingassetsofRs.50crores andaboveshallconstituteanaudit committee. • AllApplicableNBFCsshallformaNominationCommitteetoensure'fitand proper'statusofproposed/existingdirectors. • EveryNBFCshallcreatereservefundatleast20%ofitsnetprofitbeforedividend everyyear. • ChangeinManagement/directorsofNBFCmustbereportedtoRBIwithin30 days.

  17. Scope&Importanceinfuture Scope&Importanceinfuture • The scope of NBFCs is fast growing with multiplication of financial services. Some of NBFCs are also engaged in underwriting through subsidiary unit and by offering allied financial services including stock broking, investment banking, assets management and portfolio management. • In recent times non- baking financial companies (NBFCs) have emerged substantial contributors to the Indian economics growth by supplementing the effort of banks and other financial institutions. They pay key role in the direction of saving and investment .in wave of rapid industrial development &liberalization of the financial sector, key financial institution and professional have promoted financial institution to create have promoted financial institution to create a diversified and competitive financial system.

  18. Thank You www.enterslice.com

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