Financial Institutions-group submission.pdf

All India Financial Institutions (AIFI)= Development Finance Institutions (DFI) +

Financing and Institution associated with Housing & Infrastructure development

Investment InstitutionsAlso known as "financial instruments“

OBJECTIVE: Proper allocation of resources sourcing from surplus to who have deficitsp g p

AIM :•Continued circulation of money in the economy•Intermediary between borrowers and final lenders providing safety and liquidityIntermediary between borrowers and final lenders, providing safety and liquidity•Earnings on the investments and savings involved

Post Independence :

•People were encouraged to increase savings• Provide funds for investment by the Indian government• Gap between the supply of savings and demand for the investment

R l t d b R B k f I di• Regulated by Reserve Bank of India

Nilesh M. Shandilya, Areeba Khan, Richa Agarwal, Umair Waheedy , Lokesh NigamI EconomicsI M-Arch. I 2nd Sem1

INVESTMENT INSTITUTIONSMicrofinance institutions community development financial institution and revolvingMicrofinance institutions, community development financial institution and revolvingloan funds providing credit in the form of higher risk loans to private sectorinvestments in developing countries.

DFIs are backed by states with developed economiesDFIs are backed by states with developed economiesmandate to provide finance to the private sector for investments that promotedevelopment ensure investment in areas where otherwise, the market fails to investsufficiently

AIM :1) Helping companies implement investment plans2) Engage in countries where there is restricted access to domestic and foreign

it l k tcapital markets3) Provide risk mitigation that enables investors to proceed with plans they might

otherwise abandon4) Specialize in loans with longer maturities and other financial products5) U i d t i idi fi th t i l t d t th d i d5) Unique advantage in providing finance that is related to the design and

implementation of reforms and capacity-building programmes adopted bygovernments


The concept of development banking rose only after Second World War, afterthe Great Depression in 1930s.

The demand for reconstruction funds for the affected nations worldwide institution forThe demand for reconstruction funds for the affected nations worldwide institution forreconstruction.

This concept widened all over the world and resulted in large number of banks aroundthe world which coordinating the developmental activities of different nations withthe world which coordinating the developmental activities of different nations withdifferent objectives among the world.

At the time of Independence in 1947, India had a fairly well developed bankingsystem The adoption of bank dominated financial development strategy was aimed atsystem. The adoption of bank dominated financial development strategy was aimed atmeeting the sectoral credit needs, particularly of agriculture and industry.

Towards this end, the Reserve Bank concentrated on regulating and developingmechanisms for institution building The commercial banking network was expandedmechanisms for institution building. The commercial banking network was expandedto cater to the requirements of general banking and for meeting the short-termworking capital requirements of industry and agriculture.


Specialised development financial institutions (DFIs) such as the IDBI, HDFC, NHBand ICICI, etc., with majority ownership of the Reserve Bank were set up to meet thelong-term financing requirements of industry and agriculture.

To facilitate the growth of these institutions, a mechanism to provide concessionalfinance to these institutions was also put in place by the Reserve Bank.

The first development bank In India incorporated immediately after independence in1948 under the Industrial Finance Corporation Act as a statutory corporation topioneer institutional credit to medium and large-scale.

Then after in regular intervals the government started new and different developmentfinancial institutions to attain the different objectives and helpful to five-year plans.


HOUSING SCENARIOHOUSING SCENARIO:

India’s housing finance industry comprises of banks and housing financecompanies. The average ticket size of loan as expected has grown by around 9percent in 2011-12, primarily on account of rise in property prices. CRISILResearch estimates the long term forecast for housing finance penetration in urbanareas to be 42 percent of the population eligible for housing loan by 2014-15 onaccount of expansion of branch network and increasing property prices.

Over the last few years, the share of housing finance companies (HFC) in totaldisbursements has been increasing mainly due to their specialisation, bettercustomer service, and increasing focus on urban centres which have higher averageticket size.

Due to the volatility in the market, housing demand could witness phases of spikesand slowing down, but these should be taken as runs of a cycle and the comfortpoint for any lender in the housing industry will be the genuineness of the demand,the urgency of the demand and the huge market potential. In fact the policies ofthe Union Government is clearly in the direction to provide encouragement forhousing development, therefore, there shall be no cause for cynicism so far as thebusiness expectations are concerned.


Helps in analyzing the trend of institutional credit in Housing Sector.

IMPORTANCE OF COLLECTION OF HOUSING LOAN DATA

Indicates flow of the institutional credit to various Slab-wise borrower segments.

Helps in analyzing movement of NPA, in slab-wise Housing loans.y g g

Analysis of the data helps in recommending the required Policy Interventions bythe GoI or RBI.

Helps in forecasting the requirement of funds under various Interest SubventionSchemes.


IDBI BANK LIMITEDIDBI BANK LIMITED

• “Other public sector bank“established in 1964 by an Act of Parliament• Provide credit and other facilities for the development of the fledgling Indian

industryindustry• 10th largest development bank in the world in terms of reach with 1594 ATMs,

1000 branches including one overseas branch at DIFC, Dubai• Two overseas centres at Singapore & Beijing• Institutions built by IDBIInstitutions built by IDBI• Securities and Exchange Board of India (SEBI),• National Stock Exchange of India (NSE),• National Securities Depository Limited (NSDL),• Stock Holding Corporation of India Limited (SHCIL)Stock Holding Corporation of India Limited (SHCIL),• Credit Analysis & Research Ltd,• EXIM Bank (India),• Small Industries Development Bank of India (SIDBI),• Entrepreneurship Development Institute of IndiaEntrepreneurship Development Institute of India,• Government shareholding 75%• IDBI provides financial assistance


For green-field projects as also for expansion, modernisation and diversification g p j p ,purposes. In the wake of financial sector reforms by the government since 1992, IDBI also provides indirect financial assistance by way of refinancing of loans extended by State-level financial institutions and banks and by way of rediscounting of bills of exchange arising out of sale of indigenous machinery on deferred payment terms.g g g y p y

•IDBI has played a pioneering role, particularly in the pre-reform era (1964–91)

•Narasimam committee recommends that IDBI should give up its direct financingfunctions and concentrate only in promotional and refinancing role. But thisrecommendation was rejected by the government.

•The committee wanted the development financial institution to diversify itsactivity. It recommended to harmonise the role of development financing andbanking activities by getting away from the conventional distinction betweencommercial banking and developmental banking.

•In 2006, IDBI Bank acquired United Western Bank in a rescue FoundedJuly 1964Headquarters MumbaiKey peopleRM Malla (CMD)

d b ki b ki fi d i i


Products- consumer banking, corporate banking, finance and insurance, investmentbanking,mortgage loans, private banking, private equity, wealth management,

The Housing and Urban Development Corporation Ltd. (HUDCO) was incorporated onApril 25, 1970 under the Companies Act 1956, as a fully owned enterprise of theGovernment of India.

OBJECTIVE OF HUDCO AS UNDER:

• To provide long term finance for construction of houses for residential purposes orfinance or undertake housing and urban development programmes in the country.

• To finance or undertake, wholly or partly, the setting up of new or satellite town.• To subscribe to the debentures and bonds to be issued by the State Housing (and or

Urban Development) Boards, Improvement Trusts, Development Authorities etc.,specifically for the purpose of financing housing and urban development programmes.

• To finance or undertake the setting up of industrial enterprises of building material.• To administer the moneys received, from time to time, from the Government of India

and other sources as grants or otherwise for the purposes of financing or undertakinghousing and urban development programmes in the country.

• To promote, establish, assist, collaborate and provide consultancy services for theprojects of designing and planning of works relating to Housing and UrbanDevelopment programmes in India and abroad.


INTRODUCTIONIndustrial Credit and Investment Corporation of India was registered as a private limited company

Industrial Credit and Investment Corporation of India (ICICI)

Industrial Credit and Investment Corporation of India was registered as a private limited companyin 1955. It was set up as a private sector development bank to assist and promote private industrialconcerns in the country. The scope of its operations has been enlarged in recent years by includingthe projects in the joint, public and cooperative sectors. As far as industry wise assistanceis concerned the major recipients of the financial assistance from the ICICI are non-traditionalis concerned, the major recipients of the financial assistance from the ICICI are non-traditionalgrowth-oriented industries such as chemicals, petrochemicals, heavy engineering and metal products.The ICICI differs from two other all-India development banks, viz., the IFCI and IDBI in respect ofownership, management and lending operations. Unlike the IFCI and the IDBI which are publicsector development banks the ICICI is a private sector development bank Its distinguishing featuresector development banks, the ICICI is a private sector development bank. Its distinguishing featureis that it provides underwriting facilities which are generally neglected by the other institutions. OnApril 1, 1996, SCICI Ltd. was merged with ICICI Ltd

OBJECTIVE

FUNCTIONS OF ICICI

(a) To assist in the creation, expansion and modernization of private concerns;(b) To encourage the participation of internal and external capital in the private concerns;(c) To encourage private ownership of industrial investment.

FUNCTIONS OF ICICI(i) It provides long-term and medium-term loans in rupees and foreign currencies.(ii) It participates the equity capital of the industrial concerns.(iii) It underwrites new issues of shares and debentures to the public.( ) p(iv) It guarantees loans raised by private concerns from other sources.(v) It provides technical, managerial and administrative assistance to industrial concerns.


FINANCIAL RESOURCES:The resource of ICICI comprises 2 kinds:a. Foreign currency resource.b Rb. Rupee resource.

The resources of the ICICI consisted with interest free loan from the GOI and an advance inforeign currency from the world bank .

The rupee resources of the ICICI comprise the following components:A Sh i lA. Share capitalB. ReservesC. BorrowingsD. Public Deposits.

FEATURES OF ICICI:The important features of the functioning of the ICICI arc as given below:(i) The financial assistance as provided by the ICICI includes rupee loans, foreign currency loans, ( ) e a c a ass s a ce as p ov ded by e C C c udes upee oa s, o e g cu e cy oa s,

guarantees, underwriting of shares & debentures, & direct subscription to shares and debentures.

(ii) Originally, the ICICI was established to provide financial assistance to industrial concerns in the private sector. But, recently, its scope has been widened by including industrial concerns in the public, p , y, p y g p ,joint & cooperative sectors.

(iii) ICICI has been providing special attention to financing riskier and non-traditional industries, such as chemicals, petrochemicals, heavy engineering and metal products. These four categories of industries , p , y g g p ghave accounted for more than half of the total assistance.


FEATURES OF ICICI:FEATURES OF ICICI:(iv) Of late, the ICICI has also been providing assistance to the small scale industries and the

projects in backward areas.(v) Along with other financial institutions, the ICICI has actively participated in conducting ( ) g , y p p g

surveys to examine industrial potential in various states.(vi) In 1977, the ICICI promoted the Housing Development Finance Corporation Ltd. to grant

term loans for the construction and purchase of residential houses.(vii) Since 1983, the ICICI has been providing leasing assistance for computerization, ( ) , p g g p ,

modernization and replacement schemes; for energy conservate; for export orientation; for pollution controller balancing and expansion: etc.

(viii)The ICICI has not contributed much to reduce regional disparities. About three-fifth of the total assistance given by the ICICI has been received by the advanced states of Maharashtra, g y y ,Gujrat and Tamil Nadu.

(ix) With effect from April 1, 1996, Shipping Credit and Investment company of India ltd, (SCICI) was merged with ICICI.

(x) The ICICI Ltd. was merged with ICICI Bank Ltd. effective from May 3, 2002.( ) g y ,


Housing Development finance corporation (HDFC): HOUSING FINANCE SECTOR:

Against the milieu of rapid urbanization and a changing socio-economic scenario, the demandfor housing has grown explosively. The importance of the housing sector in the economy can beo ous g as g ow e p os ve y. e po a ce o e ous g sec o e eco o y ca beillustrated by a few key statistics. According to the National Building Organization (NBO), thetotal housing shortfall is estimated to be 19.4 million units, of which 12.76 million units is fromrural areas and 6.64 million units from urban areas. The housing industry is the second largestemployment generator in the country. Having identified housing as a priority area in the Ninthp y g y g g p yFive Year Plan (1997-2002), the National housing Policy has envisaged an investment target ofRs. 1,500 billion for this sector. In order to achieve this investment target, the Govt. needs tomake low cost funds easily available and enforce legal and regulatory reforms.

In 1970, Housing and Urban Development Corporation (HUDCO), a wholly government, g p p ( ), y gowned enterprise, was setup with the objective of housing and urban development as well asinfrastructure development. After that, in 1977, another Corporation named HousingDevelopment Finance Corporation (HDFC) was set up in private sector.

Housing was given due priority only in 1988 when a National Housing Policy wasg g p y y g yannounced. The policy reflected the trust that housing was not merely consumption expenditurebut also a productive investment which would provide economic activity in the country.

With the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in 2005, for thefirst time, integrated, urban-focused reforms were implemented that addressed both housing and

13

, g , p ginfrastructure provision.

Nilesh M. Shandilya, Areeba Khan, Richa Agarwal, Umair Waheedy , Lokesh NigamI EconomicsI M-Arch. I 2nd Sem

BACKGROUND:Housing Development Finance Corporation Ltd is India's premier housing finance company hasHousing Development Finance Corporation Ltd is India s premier housing finance company has

assisted more than 3.8 million families own a home, since its inception in 1977 across 2400 cities andtowns through its network of over 289 offices. The company was promoted with an initial sharecapital of Rs 100 million. In the year 1979, the Corporation introduced HDFC Certificate of DepositScheme In the year 1981 they introduced their first retail Deposit ProductScheme. In the year 1981, they introduced their first retail Deposit Product.

The Corporation's main business is to provide loans for the purchase or construction ofresidential houses, purchase of land, home improvement loans, home extension loans, non-residentialpremises loans for professionals and loan against property, while its flexible repayment optionsinclude Step Up Repayment Facility (SURF) and Flexible Loan Installment Plan (FLIP) HDFC hasinclude Step Up Repayment Facility (SURF) and Flexible Loan Installment Plan (FLIP). . HDFC hasset benchmarks for the Indian housing finance industry. Recognition for the service to the sector hascome from several national and international entities including the World Bank that has lauded HDFCas a model housing finance company for the developing countries.

OBJECTIVES:•Meeting a social need that of promoting home ownership by providing long-term finance to households for their housing needs. •HDFC commenced operations as a mortgage bankHDFC commenced operations as a mortgage bank. •It raised large resources, both domestic and international ,and lends primarily to individual households. •In 1991, it entered the retail deposit market by offering savings and investment opportunities to households by competing with other instruments in the financial market As a result, the number of depositors have risen from 56 thousand in 1991 to over 9 58000 in 1998 with an outstanding amount of

14Nilesh M. Shandilya, Areeba Khan, Richa Agarwal, Umair Waheedy , Lokesh NigamI EconomicsI M-Arch. I 2nd Sem

depositors have risen from 56 thousand in 1991 to over 9, 58000 in 1998 with an outstanding amount of Rs. 44.24 billion, HDFC has a mix of individual and corporate clients ,both on the funding and lending side.

•HDFC's lease finance facilities are being offered to companies and development authorities for the d l t f i f t t l f iliti d th tdevelopment of infrastructural facilities and other assets. •Cumulative approvals and disbursements of HDFC as on 31'' March 1998 were Rs.4.33 billion and Rs.3.01 billion respectively.

HDFC SNAPSHOT: Business summary:-• Loans Outstanding : Rs. 1,482.62 bn(J 30 2012) US$ 26 96 b(June 30, 2012) : US$ 26.96 bn

• Mortgage Loans CAGR* (5 years) : 22%• Cumulative Housing Units Financed : 4.02 million• Total loan write offs since inception : 4 basis points

(of c m lati e disb rsements)(of cumulative disbursements)• Cost to Income Ratio (FY 2012) : 7.6%• Unrealised gains on listed investments : Rs. 270.01 bn(June 30, 2012) : US$ 4.91 bn• Profit After Tax CAGR (5 years) : 21%• Profit After Tax CAGR (5 years) : 21%

*CAGR – Compound Annual Growth rate


LOAN APPROVAL ANDDISBURSEMENTS:-

MARKET SCENARIO:-High demand growth driven by:

d Aff d bili– Improved Affordability• Rising disposable income • Tax incentives (interest and principal repayments deductible)• Affordable interest rates

I i U b i i– Increasing Urbanisation• Currently only 31% of Indian population is urban– Favorable Demographics• 60% of India’s population is below 30 years of age

R id i i h h ld


• Rapid rise in new households• Urban housing shortage estimated at 26.53 million units (Source: Eleventh Five Year Plan)

OPERATIONAL AND FINANCIAL HIGHLIGHTS:-


Year Milestone

1970 HUDCO was established under the Companies Act 1956 with an equity of Rs 201970 HUDCO was established under the Companies Act 1956 with an equity of Rs.20 million

1976 Started Design & Development activities1977 F di f R l H i S h1977 Funding for Rural Housing Schemes1979 Funding for water supply /urban infrastructure schemes1980 Funding for Shelter Upgradation Scheme

1988 Introduced Financing for Village Abadi Environmental Improvement Scheme1989 Creation of Urban Infrastructure Window

1994 Started financing Private Sector for Commercial & Housing Schemes1995 Started Providing housing finance through NGOs1997 Staff Rental Housing Program and Support to Two Million Housing Programme1998 St t d t il fi l di HUDCO NIWAS1998 Started retail finance lending – HUDCO NIWAS2006 Creation of an exclusive Urban and Regional Planning Wing2006-07 Major Role in JnNURM

2009-10 Major role in Interest Subsidy Scheme for Housing for the Urban Poor (ISHUP); 2009-10 Affordable Housing in Partnership Scheme


Company ProfileLIC Housing Finance Ltd. is one of the largest Housing Finance company in India. g g g p y

Incorporated In 1989.

The Company listed on the (NSE) & (BSE)The Company listed on the (NSE) & (BSE).

Objective :providing long term finance to individuals for purchase / construction / repair and renovation of new / existing houses. e ova o o ew / e s g ouses.

The Company also provides finance on existing property for business / personal needs

Gives loans to professionals for purchase / construction of Clinics / Nursing Homes / Diagnostic Centres / Office Space

Purchase of equipmentsPurchase of equipments.


SUBSIDIARY COMPANIESSUBSIDIARY COMPANIESLICHFL Care Homes Limited

Housing for the senior citizens

LICHFL Financial Services Limited :For undertaking non fund based activities like marketing of housing loans, insurance products, credit card, mutual fund, personal loan etc..

LICHFL Trustee Company Private Limited :For undertaking the business of trustees of venture capital trust, funds in India and offshore fundfund.

LICHFL Asset Management Company Private Limited:For undertaking the business of managing, advising, administering venture funds, unit trust, investment trust in India as well as abroad.


National Housing Bank (NHB), a wholly owned subsidiary of Reserve Bank of India (RBI), was set up by an Act of Parliament in 1987. NHB has been established with an objective to operate as a principal agency to promote

NATIONAL HOUSING BANK

NHB has been established with an objective to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support incidental to such institutions and for matters connected therewith

INTRODUCTION & BACKGROUNDNational Housing Bank (NHB) is collecting the slab-wise housing loan data from Public SectorBanks (PSBs) and Housing Finance Companies (HFCs) on quarterly and yearly basis.

The data is collected in five different slabs namely: housing loans upto 2 lakh, Above 2 lakh andupto 5 lakh, Above 5 lakh and upto 10 lakh, Above 10 lakh and upto 25 lakh and above 25 lakh .

The slab wise data so collected captures following attributes:• Total housing loans disbursed during the quarter.• Total Housing loans outstanding as on last day of the quarter.

% f NPA i t f th l b i l


• % of NPA in respect of the slab-wise loans.

Financial Institutions-group submission.pdf

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Transcript of Financial Institutions-group submission.pdf