Return on total income of NBFCs declines

Written by Pradip Kumar Dey | Mumbai, Sep 22 | Updated: Sep 23 2008, 06:08am hrs
The return on total income of 383 NBFCs decreased during the period between April and June 2008 against the previous level in the corresponding period last year, indicating a moderate performance of NBFCs. The RBI has been continually strengthening the supervisory framework for NBFCs in order to ensure sound and healthy functioning and avoid excessive risk taking. It has issued several new guidelines in the recent past. Mention amay be made of: i) know your customer guidelines-Anti-Money Laundering Standards, ii) Guidelines on classification, monitoring and reporting of frauds, iii) Guidelines on Securitisation of Standard Assets, iv) NBFC with an asset size of Rs 100 & above will have to maintain CRAR of 12% as against 10% now, from April 1,2009.

Of the 383 NBFCs selected for this study, 42% was found to have increased their efficiency during the quarter April-June'08.

Aggregate income of 383 NBFCs has increased 22.1% to Rs 12,443 crore during April-June'08 from the level of Rs 10,193 crore during April-June '07. But their combined net profits have increased 11.2% to Rs 2,533 crore, resulting a decrease in return on total income from 22.35% in April-June'07 to 20.36% in April-June'08.

Among the 383 NBFCs, 223 have witnessed a fall in PAT to total income ratio, while 160 NBFCs have shown a higher ratio in April-June'08 compared with the period April-June'07.

A significant improvement in April-June'08 was noticed in the case of LIC Housing Finance (10.11% in April-June'07 to 16.83% in April-June'08), Sundaram Finance (12% to 14.35%), SREI Infra Fin (19.14% to 31.34%), GRUH Finance(11.5% to 13.12 %) and Can Fin Homes (7.07% to 11.09%).

On the other hand, a significant fall was observed in the case of Reliance Capital (58.86% to 41.63%), Power Finance Corp.(26.01% to 20.55%), Infra. Devlp. Fin (30.14% to 25.23%), Magma Fin Cap (20.74% to 10.25%) and Sakthi Finance (19.49% to 9.11%).

The top five NBFCs in terms of PAT during April-June'08 were HDFC (Rs 468 crore), Reliance Capital (Rs 327 crore), Power Fin. Corp. (Rs 296 crore), REC (Rs 272 crore), and Infra. Devlp. Fin (Rs 205 crore).