NBFCs register higher profitability in fiscal 2008-09 as compared to the commercial banks

May 21, 2009: Over all profitability of Non-Banking Financial Companies (NBFCs) in fiscal 2008-09 stood higher at 18.90 per cent as compared to those of Scheduled commercial banks whose average profitability has been at lower side of 10.08 per cent, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

This is despite world wide financial crisis and slowdown in key sectors of Indian economy led the Non-Banking Financial Companies to face severe cash shortage in fiscal 2008-09.

In its Financial Pulse Study (AFP) titled 'Indian Banks vs. NBFCs: Profitability Analysis' conducted by ASSOCHAM, it has been pointed out that as financial markets faced heat of global crisis in 2008-09, most of NBFCs faced problems in fund raising. Yet, their profitability was much higher as compared to their competitors in scheduled commercial banks.

Releasing the Study, Mr. Sajjan Jindal, ASSOCHAM President pointed out, among the seven NBFCs, the highest profitability was reported by Infrastructure Development Finance Company Limited at 20.89 per cent, with total income at Rs.3626.38 crore with net profit of Rs.757.73 crore in 2008-09. It was followed by Housing Development Finance Companies Limited (HDFC) and Power Finance Companies Limited (PFCL) at 20.76 per cent and 20.67 per cent respectively.

The Reserve Bank of India (RBI) monetary measures by cutting interest rates during 2008-09 has benefited the NBFCs since many of them finance their operations through market borrowings. said Mr. Jindal.




For the banking sector ASSOCHAM Research Bureau (ARB) has considered both public and private sector banks for the study. However, aggregate net profit to total income ratio of 17 public sector banks and 12 private sector banks reported to be 10.08 per cent during 2008-09.

Among the 17 public sector banks, the highest profitability was reported by Indian Bank and Bank of India at 15.83 per cent and 15.50 per cent respectively. Out of the private sector banks the top positions were occupied by Axis Bank and Yes Bank at 13.22 per cent and 12.46 per cent respectively, among others.

The 7 NBFCs, aggregate total income grew by a whooping 57.3 per cent to Rs.28,208.72 crore in FY'09 from Rs.17,906.84 crore in the previous fiscal. However, the aggregate total income of 29 banks have increased by 25.3 per cent from Rs 2,69,055 crore in 2007-08 to Rs 3,37,206.9 crore in 2008-09.

Year-on-year performance of the 29 banks regarding net profit to total income ratio at the aggregate level showed a marginal decline during FY'09 with 10.08 per cent as against FY'08 recorded at 10.52 per cent, while in the case of 7 major NBFCs, the ratio declined during 2008-09 at 18.90 per cent as against 21.80 per cent in FY'08.

RELATED REPORTS:

Bank NPAs to triple by 2011, but won’t endanger banking sector, says CRISIL
India’s financial sector is sound, resilient & fairly liquid
Medium-term fiscal consolidation a priority for India, says IMF
S&P cuts India outlook to negative on unsustainable budget deficit
Fitch Affirms India’s Long-term foreign currency and local currency ratings Moody's changes credit outlook for Indian banking system to negative
Fitch affirms Indian Bank's ratings with long term stable outlook
India's Ratings Maintained by S&P on Growth Outlook
Indian Banking sector challenged by domestic, not global, factors

CLICK FOR SPECIAL SECTION ON GLOBAL FINANCIAL CRISIS
CLICK FOR MORE FEATURES & STORIES