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