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Overview of NBFCs & Issues Relating to Repossession

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Overview of NBFCs & Issues Relating to Repossession Presented by : RAMAN AGGARWAL Co-Chairman Finance Industry Development Council (FIDC) NBFCs : OVERVIEW 13000 ... – PowerPoint PPT presentation

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Title: Overview of NBFCs & Issues Relating to Repossession


1
Overview of NBFCs Issues Relating to
Repossession
  • Presented by
  • RAMAN AGGARWAL
  • Co-Chairman
  • Finance Industry Development Council (FIDC)

2
NBFCs OVERVIEW
  • 13000 players registered under RBI A B
    categories
  • Spread all across the country
  • Approx. 570 NBFCs authorized to accept public
    deposits (Catg. A)
  • Assets worth Rs. 15000 Crore financed annually
    growing steadily
  • Asset financing
  • Commercial vehicles
  • Passenger cars
  • Multi-utility multi-purpose vehicles
  • Two-wheelers Three-wheelers
  • Construction equipments
  • Consumer durables

3
Role of NBFCs
  • As recognized by RBI Expert Committees /
    Taskforce
  • Development of sectors like Transport
    Infrastructure
  • Substantial employment generation
  • Help increase wealth creation
  • Broad base economic development
  • Irreplaceable supplement to bank credit in rural
    segments
  • major thrust on semi-urban, rural areas first
    time buyers / users
  • To finance economically weaker sections
  • Huge contribution to the State exchequer

4
Role of NBFCs (Contd..)
  • 70-80 of Commercial Vehicles are finance driven
  • Indian economy is more dependent on roads
  • Heavy Govt. outlay for mega road projects
  • Heavy replacement demand anticipated 30 lacs
    commercial vehicles by the year 2007
  • Another Rs.6000 Crores required for phasing out
    old commercial vehicles
  • CRISIL in its study has placed commercial vehicle
    financing under low risk category
  • Each commercial vehicle manufactured, sold and
    financed gives employment to minimum 20 persons
    (direct and indirect)

5
Customer Service
  • The key factor for our survival growth
  • NBFCs provide prompt, tailor made service with
    least hassles. This more than compensates for the
    higher lending rates of NBFCs as compared to
    Banks FIs
  • All customers get direct and easy access to and
    individual attention of the top management
  • NBFCs cater to a class of borrowers who -
  • - Do not necessarily have a high income
  • - But have adequate networth
  • - Are honest and sincere (gauged by the personal
    touch maintained
  • with them).

6
Customer Service (Contd..)
  • Weak and Fly by Night operators have been weeded
    out by RBI
  • Deposit mobilization at the doorstep of the
    depositors with personalized approach, interest
    warrants are delivered in advance
  • NBFCs provide financial assistance to their
    borrowers in case of emergency needs
  • NBFCs provide assistance and guidance to their
    customers in matters relating to insurance

7
FIDC - Introduction
  • Self Regulatory Organization for RBI Registered
    NBFCs
  • Deposit Taking NBFCs to be enrolled in the
    beginning
  • Registered as a Section 25 Company
  • Head Office in Mumbai with Regional Chapters
    started at Delhi, Kolkata, Chennai and Jalandhar
  • Code of Conduct Fair Business Practices has
    been formulated and enforced
  • Full recognition from MOF RBI Invited for
    Pre-Budget Credit Policy discussions
  • Equal representation to small big NBFCs in the
    Managing Committee

8
FIDC - Purpose
  • FIDC has been formed with a very clear focus
  • To protect the interest of its members
  • To promote Asset Finance Business
  • To represent to Govt., RBI various statutory
    Trade Bodies
  • To promote brotherhood amongst members
  • To ensure fair and ethical practices among its
    members
  • To bring NBFCs on the mainstream of the financial
    sector of the country

9
FIDC - Benefits / Services To Members
  • Code of Conduct
  • Standardization of Practice
  • System Manual
  • Risk Management
  • Defaulters List
  • Compilation of Data / Statistics
  • Pool of Funding / Contingency Fund
  • Recovery Agents
  • Trainings / Seminars / Workshops
  • Web Site
  • Members Directory
  • Journal
  • Grievance Forum

10
Recovery Repossession
  • Procedure
  • Notice to the borrower the guarantor on default
  • Seizure by authorized repossession agents
  • Signing of seizure list by financier borrower /
    representative
  • Intimation to the police by dialing 100 in
    writing to the local police station immediately
    after repossession
  • Final notice to the borrower To pay release
    the asset
  • Compliance of procedure by authorized
    repossession agent

11
Repossession Rights
  • Agreement clearly mentions the Financiers right
    to repossess in case of default
  • Rights upheld and endorsed by Supreme Court
    Rulings
  • Orix Auto Fin. Ind. Ltd. V/s. Jagmander Singh,
    2006
  • Charanjit S. Chadha V/s. Sudhir Mehra, 2001
  • K.A.Mathai Others V/s. Kora Bibbi Kutty, 1996
  • Manipal Finance V/s T Bangarappa, 1993
  • Trilok Singh and Others V/s Satyadeo Tripathi,
    1979

12
Issues
  • False criminal complaints harassment threats
  • FIRs lodged due to ignorance and misguidance
  • Supreme court Issue is CIVIL (not criminal)
  • FIRs lodged at police stations other than the
    police station under whose jurisdiction the place
    of repossession lies and where the intimation by
    the recovery agents has been given
  • Typical allegations
  • Thefts act of dacoity
  • Loss of cash valuables
  • Physical abuse

13
Issues (Contd..)
  • Lack of awareness on legal rights leading to
    aggravation of problem
  • Rights under finance agreement Supreme Court
    ruling
  • Civil criminal disputes need for clear
    distinction
  • Ownership under Motor Vehicles Act Sale of
    Goods Act
  • Only 1 to 2 of the cases lead to repossession
    blown up by the media
  • Criticality of repossession for survival of NBFC
  • Obligation towards depositors investors
    Timely Recovery of our dues ensures timely
    repayment of our liabilities including public
    deposits
  • Cascading effect due to malafide intentions of
    defaulters

14
Suggestions
  • Issuance of Circulars
  • Repossession rights of financiers
  • Differentiation of civil criminal offences
  • Verify before lodging FIRs for theft / robbery
    against the Financiers
  • Stringent Procedure for dealing with false
    complaints
  • Interconnectivity of various police stations
    within the State
  • Organization of Awareness Programs at State
    levels
  • Work in conjunction with the RBI to educate
  • Open channels of communication
  • Repossession Agents to be issued Licenses
  • Credentials to be Verified on the lines of
    Domestic Servant Verification
  • System

15
THANK YOU
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