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Assignment

Uploaded by

sanjanaswime
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© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Non-Banking Financial Institutions

Introduction:
NBFI stands for non-bank financial institution which is a financial institution that
doesn't have a full banking license and cannot accept deposits from the public. NBFI
provides financial services to individuals and firms, such Investment, risk pooling,
financial consulting, brokerage, money transmission, and check cashing. They are not
supervised by a national or international banking regulatory agency, but their operations
are often covered under the country's banking regulations.

Examples of nonbanks of financial institutions include insurance firms, venture


capitalists, currency exchanges, some micro loan organizations and pawn shops. These
non-bank financial institutions provide services that are not necessarily suited to banks
serve as competition to banks, and specialize in sectors on groups.

According to the InCAP, some of the top NBFIs in Bangladesh in 2023 are Agrani SME
Finance and Investment Co. Ltd., Bangladesh Infrastructure Finance Fund Limited,
IDLC Finance Limited, and IPDC Finance Limited.

Non-Bank Financial Institutions (NBFIS) in Bangladesh are gaining increased


popularity in recent times. Though the major business of most NBFIs is leasing some
are also diversifying into other lines of business, like term lending, housing finance,
merchant banking, equity financing and venture capital financing.

History of NBFI

NBFCs started humbly in India in the 1960s as an alternative for savers and investors
whose financial needs were not sufficiently meet by the existing banking system. The
NBFCs initially operated by a limited scale without making much impact on the
financial industry. The first Stage of development, the companies Act Regulated
financing. In Bangladesh, the journey of NBFIs was started in 1981, ten years after the
independence of the country. A private sector, namely, Industrial Promotion and
Development company (IPDC) was the pioneer in the sector in Bangladesh. Over the
years, the non-banking sectors has grown in numbers as many State-owned, private,

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and joint venture firms started to join the sector, and by the end of 2023 a total number
of 35 firms were reported by the Ministry of Finance as NBFIs.

Size of NBFIs

Total asset of NBFI's at the end of June 2021 was BDT 914.25 billion, which was BDT
901.73 billion at the end of 2020. Total deposits of the NBFIs at the end of June 2021
increased by 0.95 percent to BDT 445.4 billion (53.43 percent of total liabilities) from
BDT 441.2 billion (57.39%. of total liabilities) at the end of June 2020. Total liability
of the industry increased to BDT 828.8 billion at the end of June 2021 from BDT 768.7
billion at the end of June 2020. Total equity Stood at BDT 85.5 billion.
Structure of Non-Banking Financial Institutions:
Non-Bank Financial Institutions (NBFIS) in Bangladesh are regulated by Bangladesh
Bank using a risk based supervisory system. NBFIs are licensed and regulated under
the Financial Institution Act, 1993, and the minimum paid up capital is TK 1.0 billion.
NBFIs offer a wide range of banking Services, including:
➢ Loans
➢ Credit facilities
➢ Retirement planning
➢ Education funding etc.
NBFIs may be access public funds, through term deposits (minimum 3 months
duration), Commercial papers (CPs), bonds and debentures. Depositors of NBFIs are
not covered under the Deposit Insurance Scheme of Bangladesh Bank. NBFIs are not
allowed to deal with gold and exchange. Nevertheless, they may obtain foreign
currency loan from abroad subject to prior approval of Bangladesh Bank. NBFIs are
subject to some prudential guidelines in terms of income recognition, asset
classification and provisioning norms, single borrower exposure, capital market
exposures, classification and valuation of the investment portfolio etc.

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