A study on the failure of Dewan Housing Finance Corporation Limited (DHFL)

Abstract

In India, NBFCs comprise a wide range of Non-Bank financial institutions, operating various businesses models- traditional lending, asset-based finance, direct investment etc. Some of these come under RBI’s supervision and need a license to operate; others do not. The biggest difference between a bank and an NBFC is that NBFCs are generally not allowed to accept retail deposits, which is a very cheap source of financing for the banks. NBFCs with assets exceeding INR 5 billion are designated systematically important by the RBI. There are currently around 2651 such NBFCs in India, constituting over 80% of total NBFC assets. In FY 2017-18, NBFCs constituted 19.22 percent of the total credit system in India. There are multiple types of NBFCs in India, which majorly consist of Asset Finance Company, Housing Finance companies, Infrastructure Finance Company, Gold Loan NBFCs, Loan companies, Account Aggregators and Factoring Service providers.