NBFCS AID IN ECONOMIC DEVELOPMENT:
Non-Banking Financial Corporations (NBFCs) have emerged as the primary source of
financing for a vast section of the population including small and medium-scale
enterprises as well as the economically unserved and underserved individuals. They have
been able to meet the diverse requirements of borrowers in the most efficient and timely
approach considering their wide geographic reach, comprehension of the numerous financial
needs of people, and extremely swift turnarounds. Therefore, non-bank lenders have
contributed significantly to the cause of financial inclusion in this process and have
also been a key component in fostering the expansion of millions of MSMEs and
self-employed people. In addition to the growing role played by non-bank lenders in the
consumer financing industry, the expansion of a few key economic sectors, including
housing, consumer goods, and transportation, has been boosted. Non-Banking Financial
Companies (NBFCs) have contributed towards the development of the countrys
infrastructure. The availability of long-term funding by non-bank lenders has helped in
the financial closure and growth of many large-scale infrastructural projects. Non-Banking
Financial Companies (NBFCs) have played a crucial role in fostering credit expansion
across a range of industries, including microfinance loans, personal loans, and auto
finance loans.
MACROECONOMIC OVERVIEW:
A tentative recovery in 2022 has been followed by increasingly gloomy developments in
2023 as risks began to materialize. Global output contracted in the second quarter of this
year, owing to downturns in China and Russia, while US consumer spending undershot
expectations. Several shocks have hit a world economy already weakened by the pandemic:
higher-than-expected inflation worldwide especially in the United States and major
European economies triggering tighter financial conditions; a worse-than-anticipated
slowdown in China, reflecting COVID- 19 outbreaks and lockdowns; and further negative
spillovers from the war in Ukraine.
The baseline forecast is for growth to slow from 6.1 percent last year to 3.2 percent
in 2022, 0.4 percentage point lower than in the April 2022 World Economic Outlook. Lower
growth earlier this year, reduced household purchasing power, and tighter monetary policy
drove a downward revision of 1.4 percentage points in the United States. In China, further
lockdowns and the deepening real estate crisis have led growth to be revised down by 1.1
percentage points, with major global spillovers. And in Europe, significant downgrades
reflect spillovers from the war in Ukraine and tighter monetary policy. Global inflation
has been revised up due to food and energy prices as well as lingering supply-demand
imbalances, and is anticipated to reach 6.6 percent in advanced economies and 9.5 percent
in emerging market and developing economies this year upward revisions of 0.9 and 0.8
percentage point, respectively. In 2023, disinflationary monetary policy is expected to
bite, with global output growing by just 2.9 percent.
Financial markets remained jittery in FY 21-22 due to domestic economic slowdown,
concerns on fiscal slippage and geopolitical tensions. Weaknesses in overall economic
activity also put pressure on business growth of lenders including NBFCs. The spread of
COVID-19 in March 2020, further heightened uncertainties for FY21-22.
In response, Governments across the world have unleashed massive fiscal measures to
protect economic activity and dramatically strengthen health services and testing. Central
banks, too, have initiated multiple monetary and regulatory measures.
INDINDUSTRY OVERVIEW:
After the pandemic decline, 2023 has brought growth for the NBFCs. It has demonstrated
an innovative and resilient streak over the years which includes adapting efficiently even
during the COVID-19 pandemic to avoid the revolving credit landscape. The market share of
NBFCs has increased in the last few years with Asset Under Management (AUM) accounting for
as much as 18% of the overall credit on March 2019, up from 12% in March 2008. A few
challenges over the past three years lowered their share to 16% in fiscal 2022, with banks
making bigger growth strides. The increase in NBFCs AUM from US$ 44.02 billion (Rs. 3.6
lakh crore) in March 2008 to almost US$ 330.21 billion (Rs. 27 lakh crore) in March 2022,
and is expected to increase further, indicates the importance of the sector to overall
credit delivery in the economy.
OPPORTUNITIES, THREATS, RISKS, CONCERNS, PERFORMANCE AND OUTLOOK:
NBFCs have become increasingly important in recent years as they have played a critical
role in providing credit to individuals and businesses that are underserved by traditional
banks. This is especially true in rural and semi-urban areas, where NBFCs have been able
to fill the gap left by banks. One of the key advantages of NBFCs is their ability to be
flexible in their lending practices. Unlike banks, which have a rigid set of guidelines
for lending, NBFCs can tailor their lending practices to meet the specific needs of their
clients. This has made them an attractive option for those who are looking for more
personalised financial services. They are financial institutions that provide a wide range
of banking services like loans, credit facilities, investments, and other financial
products. NBFCs have played a significant role in the Indian economys growth story,
especially in the rural and semi-urban areas. They cater to the financial needs of small
and medium-sized businesses, entrepreneurs, farmers, and individuals who do not have
access to traditional banking services. In this article, we will explore the future of
NBFCs in India.
However, NBFCs also have their share of challenges. One of the biggest challenges
facing NBFCs in India is access to funding. Unlike banks, which have access to low-cost
deposits, NBFCs must rely on borrowing from banks or issuing bonds to raise funds. This
can make it difficult for NBFCs to compete with banks on interest rates. Another challenge
faced by NBFCs is the regulatory environment. While the RBI regulates NBFCs, there are
also several other regulators that oversee different aspects of the financial services
industry. This can create confusion for NBFCs, especially those that operate across
multiple states or regions.
In the past Aadhar has been a great help for financial institutions for faster
on-boarding and managing KYC. The SC ruling had impacted many players who build their
business models on Aadhar. P2P lenders had a good year end to rejoice as RBI had hiked the
investment limit from Rs 10 lakh to Rs 50 lakh subject to declaration of net worth by a
Chartered Accountant. The recent boost from RBI which raised P2P lending cap from Rs 10
lakh to Rs 50 lakh is a game changer, an income tax rebate/deduction for P2P investment
can further help the P2P lending industry. Also, operational efficiencies can be
significantly improved if the government facilitates Aadhaar based services for KYC &
agreements signing.
According to the Reserve Bank of Indias (RBI) Financial Stability Report-2020, recent
developments in the non-banking financial companies (NBFC) sector have brought the sector
under greater market discipline as the better performing companies continued to raise
funds while those with Assets Liability Mismatch and/or asset quality concerns were
subjected to higher borrowing costs. In terms of network analysis, the total outstanding
bilateral exposures among constituents of the financial system narrowed during 2021-22.
One of the key factors driving the positive outlook for NBFCs in India is the
regulatory environment. The Reserve Bank of India (RBI) and other regulatory bodies have
taken significant steps to promote the growth and stability of the sector. They have
introduced measures to streamline NBFC operations, enhance risk management practices, and
strengthen corporate governance. These regulatory reforms have not only fostered investor
confidence but have also encouraged NBFCs to adopt more responsible lending practices,
ensuring the overall stability of the financial system. Another catalyst for the booming
NBFC sector is the rapid advancement of technology. The digital revolution has transformed
the way financial services are delivered and consumed. NBFCs have embraced technology to
enhance their operational efficiency, expand their reach, and offer innovative products
and services. Digital lending platforms, online payment systems, and mobile banking
solutions have empowered NBFCs to cater to a broader customer base efficiently. Moreover,
technology-driven credit assessment models and analytics have enabled NBFCs to make
faster, data-driven lending decisions, reducing the time taken for loan approvals. Indias
growing middle class, urbanization, and increasing disposable incomes are also fueling the
demand for NBFC services. As aspirations rise and consumer preferences evolve, there is a
greater need for accessible and flexible financial solutions. NBFCs have been quick to
adapt to these changing dynamics by introducing customer-centric products and customizing
their offerings to suit specific needs. From instant personal loans to EMI financing for
consumer durables, NBFCs are well-positioned to meet the evolving demands of the Indian
population.
Furthermore, the governments initiatives such as the Pradhan Mantri Awas Yojana
(PMAY), the Pradhan Mantri Mudra Yojana (PMMY), and the Atmanirbhar Bharat Abhiyan have
provided a significant boost to the NBFC sector. These programs focus on affordable
housing, small business development, and self-reliance, aligning perfectly with the core
competencies of NBFCs. By supporting these initiatives, NBFCs contribute to inclusive
growth and help foster entrepreneurship and job creation in the country.
NBFCs can bring the much-needed diversity to the financial sector thereby diversify the
risks, increase liquidity in the markets thereby financial stability and efficiency can be
promoted to the financial sector. In the backdrop of a growing economy, NBFCs will
continue to grow in the financial ecosystem and create meaningful financial inclusion and
further the government agenda of “Self- reliant India”, “Make in
India” and ‘Start-Up India.
The Directors confirm that all the investments have been made with the intent to hold
for long term appreciation, to enhance the income from dividends and are not held for
trade. The Company continues to remain invested in sectors, which we believe have
potential to remain value accretive over the long term. The Company continues to invest
for the long term while availing opportunities to realize gains. The Company endeavours to
evaluate opportunities considering the macroeconomic conditions both globally and
domestically
In Conclusion, By having a clear vision and leveraging the growth potential of the NBFC
industry, individuals can benefit financially and actively participate in Indias evolving
financial landscape.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:
The financial performance of the Company for the year 2022-23 is described in the
Directors Report under the head of ‘Operation.
SEGMENT WISE PERFORMANCE:
The Company has only one segment i.e., NBFC Investment and loan Company.
INTERNAL CONTROL SYSTEMS AND ADEQUACY:
The Internal Control Systems and their Adequacy of the company for the year 2022-23 is
described in the Directors Report under the head of ‘Internal Control Systems and
Their Adequacy.
HUMAN RESOURCE DEVELOPMENT/INDUSTRIAL RELATIONS:
Driven by the Groups visionary leadership during the year, training programs are
conducted to facilitate competency development both functional and behavioral for
harmonious and cordial Industrial relations. The knowledge and skill enhancement programme
were conducted for the employees. No operating days were lost due to strike, lock out etc.
Human Resources Development, in all its aspects like training safety and social values are
under constant focus of the management.
We responded swiftly to the COVID-19 outbreak by adopting various measures to ensure
health and safety of our employees. We cancelled all physical trainings and conferences
and took extensive precautions like sanitization of offices, availability of hand
sanitizers and masks and operations in multiple shifts to ensure lesser number of staff
thus enabling social distancing. We have readied our offices to further ensure health
protocols, such as making operational our Central Emergency Service Desk (CESD) into a
24x7 helpline, continuous communication on protection and social distancing, and
self-declaration surveys for employees on their health status.
Statement in this Management Discussion and analysis describing the Companys
objective, projects, estimates and expectations may be forward looking statement within
the meaning of applicable laws and regulations. Actual results may vary significantly from
the forward-looking statements contained in this document due to various risks and
uncertainties. Several factors could make a significant difference to the Companys
operations. These include
economic conditions, Government regulations and Tax Laws, political situation, natural
calamities etc. over which the Company does not have any direct control.
| Date: 05/09/2023 |
|
| Place: Surat |
|
| Registered Office: |
|
| Office No. 316 & 317, Massimo |
|
| Commercial Building, 3rd Floor, |
|
| Althan Bhimrad Road, Bhimrad, |
|
| Surat, Gujarat, 395017 |
|
| CIN: L67120GJ1995PLC024449 |
|
| Email: aadhaarventures@gmail.coms |
|
| Website: www.aadhaarltd.com |
|
| By Order of the Board of Directors |
|
| For Aadhaar Ventures India Limited |
|
| Sd/- |
Sd/- |
| Jils Madan |
Jyoti Munver |
| Director |
Director |
| DIN: 02810555 |
DIN: 02810560 |
+91-9892691696
