BACKGROUND
Kamavati Finance Limited (KFL) is a Non-Banking Finance Company ("NBFC"),
holding a Certificate of Registration from the Reserve Bank of India ("RBI").
The KFL is non- deposit accepting NBFC engaged in financial services. The market for this
activity offers high potential for growth. The company is giving loan including personal
loan, business loan, vehicle loan and loan against property to individuals as well as
non-individual customers and also providing services of money changing via. FFMC License
and is operating from Mumbai having its corporate office in Jamnagar.
More than half of personal savings in India are invested in physical assets such as
land, houses, cattle and gold. The Indian money market is classified into:
a) The organized sector (comprising private, public and foreign owned commercial banks
and cooperative banks, together known as scheduled banks); and
b) The unorganized sector (compromising individual or family owned indigenous bankers
or money lenders and non- banking financial companies (NBFCs). The unorganized sector and
microcredit are still preferred over traditional banks in rural and suburban areas,
especially for non-productivity purposes, like ceremonies and short duration loans.
Since liberalization, the government has approved significant banking reforms. While
some of these relate to nationalized banks (like encouraging mergers, reducing government
interface and increasing profitability and competitiveness) other reforms have opened up
the banking and insurance sectors to private and foreign players.
Non-Banking Financial Companies (NBFC) are an integral part of the Indian Financial
system, augmenting competition and diversification in the financial sector and
complementing the banking system. The Indian NBFC sector has been providing credit to
customers in the underserved and unbanked areas. Their channeling the savings and
investments of customers and the subsequent capital formation is necessary for
India’s economic growth and development. Their ability to innovate products in
conformity with the needs of their clients is well established.
GLOBAL ECONOMY
The global economy is set to expand 5.6 percent in 2021—its strongest
post-recession pace in 80 years. This recovery is uneven and largely reflects sharp
rebounds in some major economies—most notably the United States, owing to substantial
fiscal support—amid highly unequal vaccine access. In many emerging market and
developing economies (EMDEs), elevated COVID-19 caseloads, obstacles to vaccination, and a
partial withdrawal of macroeconomic support are offsetting some of the benefits of
strengthening external demand and elevated commodity prices. By 2022, global output will
remain about 2 percent below pre-pandemic projections, and per capita income losses
incurred last year will not be fully unwound in about two-thirds of EMDEs. The global
outlook remains subject to significant downside risks, which include the possibility of
large COVID-19 waves in the context of new virus variants and financial stress amid high
EMDE debt levels. Controlling the pandemic at the global level will require more equitable
vaccine distribution, especially for lowincome countries. The legacies of the pandemic
exacerbate the challenges facing policy makers as they balance the need to support the
recovery while safeguarding price stability and fiscal sustainability. As the recovery
becomes more entrenched, policy makers also need to continue efforts toward promoting
growth-enhancing reforms and steering their economies onto a green, resilient, and
inclusive development path
Uncertainly about the length and depth of this health crisis propelled economic and
financial crisis. Very well respected studies have suggested that emerging market and
developing economics could suffer output losses of 3-8 percent in the short term.
INDIAN ECONOMY
In India, the pandemic hit the economy at a time when growth was already decelerating.
Indias economy is estimated to contract by 9.6 per cent in the fiscal year 2020-21,
reflecting a sharp drop in household spending and private investment, and the growth is
expected to recover to 5.4 per cent in 2021.
In its Global Economic Prospects report, the World Bank said that the informal sector,
which accounts for four-fifths of employment, has been subject to severe income losses
during the Covid-19 pandemic.
In India, growth is expected to recover to 5.4 per cent in 2021, as the rebound from a
low base is offset by muted private investment growth given financial sector weaknesses.In
the financial sector, non-performing loans were already high before the pandemic.
The informal sector, which accounts for four-fifths of employment, has also been
subject to severe income losses during the pandemic. Recent high-frequency data indicate
that the services and manufacturing recovery are gaining momentum.
INDUSTRY STRUCTURE AND DEVELOPMENTS
Non-banking finance companies (NBFCs), an integral component of the Indian lending
ecosystem, could see a major impact of COVID-19 on their liquidity position and asset
liquidity in the financial year 2020-21 due to complete halt of economic activity due to
massive lockdown. Before the coronavirus outbreak, RBI and the government took several
measures to support NBFCs since August 2019, especially after credit crisis and confidence
crisis in the NBFC sector, due to default by some major financial institutions in Infra
sector. The COVID-19 pandemic clipped the recovery. Small and medium sized NBFCs are
most at risk due to disruption caused by the COVID-19 pandemic. The central bank has
sought to cushion borrowers and lenders against the coronavirus outbreak effect, allowing
companies a six month grace period on loan repayments. In last 2 months, several measures
have been taken by RBI and Finance Ministry to boost liquidity and economy as follows;
Measures taken by RBI
Repo Rate and Reverse Repo Rate: RBI keeps Repo Rate unchanged at 4.00%. Reverse repo
rate also remains unchanged at 3.35%.
CRR: it has been decided to gradually restore the CRR in two phases in a non-disruptive
manner. Accordingly, banks are required to maintain the CRR at 3.50 per cent of their NDTL
effective from the reporting fortnight beginning March 27, 2021 and 4.00 per cent of their
NDTL effective from fortnight beginning May 22, 2021.
The minimum daily CRR balance requirement was reduced from 90.0% to 80.0% effective
from the fortnight beginning March 28,
2020. This was allowed up to September 25, 2020.
Banks and other lending institutions were allowed to provide a moratorium on all term
loans (including agriculture term loans, retail and crop loans). Initially the moratorium
was permitted for three months on payment of installments falling due between March 1,
2020 to May 31, 2020, which was subsequently extended by another three months to August
31, 2020. Interest would continue to accrue on the outstanding portion of the term loan
during the moratorium period. Installments include principal and/or interest component,
bullet repayments, equated monthly installments and credit card dues.
Loan Moratorium: In March, RBI Governor announced that lenders could give a moratorium
of 3 months from March 2020 to May 2020 which was further extended by 3 months in May 2020
from June 2020 to August 2020 on repayment of all term loans. Those accounts that have
availed the moratorium facility, the period of moratorium will be excluded from the 90
days NPA classification norms of RBI.
The Corporation offered the moratorium to eligible customers through the
‘opt-in’ mechanism during the moratorium period. Post the moratorium period, the
movement of ageing has been at actuals. As at March 31, 2021, there are nil accounts where
asset classification benefits are extended. The Corporation has made adequate provisions
for impairment loss as per its Expected Credit Loss model. Disclosures are provided in the
notes forming part of the standalone financial statement.
During the quarter ended September 30, 2020 and December 30, 2020, no additional
borrower accounts under moratorium granted category were classified as NPA which was not
declared as NPA till August 31, 2020. The Corporation, however, classified such accounts
as stage 3 and provisioned accordingly in the Statement of Profit and Loss. Such accounts
were also reported as proforma NPA numbers during the quarter ended September 30, 2020 and
December 31, 2020. Further details on asset quality is provided elsewhere in this report.
As a COVID-19 relief scheme, the government announced a grant of ex-gratia payment of
the difference between compound interest and simple interest for six months to eligible
borrowers for the period March 1, 2020 up to August 31, 2020, irrespective of whether the
moratorium was availed or not. The ex-gratia payment by the government was for certain
categories of loans such as housing loans, consumer loans, MSME loans amongst others,
which were standard as at February 29, 2020 and the aggregate facilities with all lending
institutions did not exceed 2 crore.
In November 2020, the Corporation implemented the scheme and credited the accounts or
remitted the amounts to eligible borrowers. Of the Corporation’s total claim of 278
crore, an amount of 213 crore was received from the government.
Following the Hon’ble SC judgement dated March 23, 2021, RBI in April 2021
instructed lenders to refund/ adjust interest on interest charged to all borrowers during
the moratorium period i.e. March 1, 2020 to August 31, 2020, irrespective whether the
moratorium had been availed or not. The methodology for determining the amount of interest
on interest was issued by the Indian Banks’ Association
TLTRO 1.0 & 2.0: Overall, the total liquidity support announced by RBI since
February 6, 2020 up to March 31, 2021, amounted to Rs. 13.6 lac crore. This entailed a
combination of open market operations, variable rate repos, long-term repo operations,
targeted longterm repo operations (TLTRO 1.0 and 2.0), reduction in the cash reserve ratio
and statutory liquidity ratio of banks, special liquidity facility for mutual funds,
refinance lines to NABARD, SIDBI, NHB and Exim Bank and simultaneous purchase and sale of
securities under special open market operations to better manage the yield curve. The
banking system remained in surplus throughout FY21 and the surplus ranged between Rs. 2.1
lac crore and Rs. 6.7 lac crore
SPECIAL RE-FINANCE FACILITY: National Housing Bank (NHB) has rolled out a ?10,000-crore
‘Special Refinance Facility- 2021’ (SRF-2021) to provide short term refinance
support to housing finance companies (HFCs) and other eligible Primary Lending
Institutions (PLIs).This facility is expected to meet the short-term liquidity
requirements of the PLIs and will also support them for onward lending to individuals to
maintain steady growth in the housing finance sector, according to NHB.This NHB initiative
comes on the heels of the Reserve Bank of India (RBI) extending fresh support ( in the
recent monetary policy review) under another Special Liquidity Facility-2 (SLF-2) of ?
10,000 crore to the NHB for one year to support the housing sector.
OPPORTUNITIES AND THREATS OPPORTUNITIES:
• Diversified portfolio products across personal finance, business finance and
mortgage finance (Loan against property)
• Opening of financial sector in India along with Introduction of Innovative
products
• Strong relationship with public, private as well as banks, institutions and
investors
• Focus on MSME segments traditionally not served by banks
• Large untapped rural and urban markets.
• Enhanced digital solutions for business and collections THREATS:
• Slower economic activity and weak rural demand could lead to high credit costs
due to COVID-19 pandemic
• Increased competition across the company’s product segments from captive
finance companies and small finance banks
• Inadequate availability of bank finance and upsurge in borrowing cost
• External risks associated with liquidity stress, political uncertainties, fiscal
slippage concerns, etc.
• Growing number of Fintech companies.
• Attraction and retention of human capital
(Amount in Lakhs)
| Particulars |
F.Y. 2021-22 |
F.Y. 2020-21 |
| Revenue From Operations |
219.53 |
100.30 |
| Other operation Income |
20.43 |
2.50 |
| Impairment Profit |
0 |
19.40 |
| Total Revenue |
239.96 |
122.20 |
| Less: Total Expenses before Depreciation, Finance Cost & Tax |
203.36 |
95.57 |
| Operating Profits before Depreciation, Finance Cost & Tax |
44.14 |
26.63 |
| Less: Depreciation |
0.77 |
1.24 |
| Finance cost |
2.86 |
4.91 |
| Profit/(Loss) Before Tax |
40.51 |
20.48 |
| Less: Current Tax |
10.21 |
5.25 |
| Less: Deferred Tax Liability (Assets) |
(0.016) |
2.88 |
| Profit/(Loss) after Tax |
30.32 |
12.35 |
Financial Performance
During the financial year 2021-22, The Company has earned total income of Rs. 239.96
Lakhs from business activities as compared to Rs122.20 Lakhs in previous year. The total
revenue of the company is increased by 96.36%. The Total income of the Company decreased
mainly due to Interest on Loan received by company was decreased in comparison of previous
year.
The total Profit before tax for the financial year 2021-22 stood at Rs. 40.51 Lakhs and
the total net profit after tax for the financial year 2021-22 stood at Rs. 30.32 Lakhs.
The Directors of the Company are planning to expand the business of the Company in
areas of providing loan against securities and opening of FFMC branches in various cities
in the current year and thus confident of presenting the better figures in the coming
years.
RESOURCES AND LIQUIDITY
During the year under review, KFL has not raised any funds from the market by way of
allotment of shares/bonds/ warrants/debentures, or by raising public deposits etc.
PORTFOLIO
KFL’s investment portfolio stood at Rs. 186,933,178/- as on March 31,2022.
KFL’s strategy for its portfolio is to focus on asset quality and asset mix to
achieve good returns.
OUTLOOK
Estimates of India’s GDP for fiscal 2022, by various agencies and analysts,
indicate a strong growth in GDP. However, in March-April
2021, the second wave of the Covid-19 pandemic, where the number of new cases has
increased significantly in India, has resulted in reimposition of localised/regional
lock-down measures in various parts of the country. Going forward, economic activity will
depend on the trajectory of the second wave of Covid-19, the progress of the vaccination
programmeand the restrictions on activity and the period for which they continue A
prolonged period of economic weakness caused by the second wave of the pandemic and
uncertainty regarding normalisation could continue to impact banking sector loan growth,
revenues, margins, asset quality and credit costs in fiscal
2022.
RISK MANAGEMENT
As in the case of any lending entity, the entire proposition of the Company - providing
finance to various segments of the economy is
on the fundamentals of managing the risk rather than avoiding it. With proper
operational systems in place, the Company successfully manages these risks which also help
in achieving the desired outcome, while fixing responsibility and accountability. The
Board is responsible for monitoring and reviewing of the risk and taking steps to mitigate
the same.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUECY
The Company has an internal control system to commensurate with the size, scale and
complexity of its operations and nature to ensure smooth business operation to provide
reasonable assurance that all assets are safeguarded and protected from any kind of loss
or misuse, transactions are authorized, recorded and reported properly and that all
applicable statutes and corporate policies are duly complied with.
SUBSIDIARY COMPANY
As there are no subsidiaries of the company, investment made in subsidiaries is nil.
HUMAN RESOURCES
The Company takes pride in the commitment, competence and dedication of its employees
in all areas of the business. The Company is committed to nurturing, enhancing and
retaining its top talent through superior learning and organizational development. This is
a critical pillar to support the organization’s growth and its sustainability in the
long run. The Company also has zero tolerance for harassment of women at workplace. The
overall industrial relations atmosphere continued to be cordial.
SEGMENT-WISE OR PRODUCT WISE PERFORMANCE
The company operates in only single segment. Hence segment wise performance is not
applicable.
CAUTIONARY STATEMENT
This report describing the company’s activities, projections about future
estimates, assumptions with regard to global economic conditions, government policies, etc
may contain "forward looking statements" based on the information available with
the company. Forward-looking statements are based on certain assumptions and expectations
of future events. These statements are subject to certain risks and uncertainties. The
company cannot guarantee that these assumptions and expectations are accurate or will be
realized. The actual results may be different from those expressed or implied since the
companys operations are affected by the many external and internal factors, which are
beyond the control of the management. Hence the company assumes no responsibility in
respect of forwardlooking statements that may be amended or modified in future on the
basis of subsequent developments, information or events. Company follows all Mandatory
Accounting Standards
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