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DEFINITION
Non banking financial organizations are financial institutions that provide banking services without meeting the legal definition of a bank, i.e. one that does not hold a banking license. These institutions are not allowed to take deposits from the public. Nonetheless, all operations of these institutions are still exercised under bank regulation. However this depends on the jurisdiction, as in some jurisdictions, such as New Zealand, any company can do the business of banking, and there are no banking licenses issued. NBFCs do offer all sorts of banking services, such as loans and credit facilities, retirement planning, money markets, underwriting, and merger activities. The number of non-banking financial companieshas expanded greatly in the last several years asventure capital companies,retail and industrial companies have entered the lending business.

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EVOLUTION

The non-bank financial institutions operating in East Pakistan were the Industrial Development Bank of Pakistan, Equity Participation Fund, Pakistan Industrial Credit and Investment Trust Corporation, Investment Corporation of Pakistan, National Investment Trust and insurance companies. Such institutions established in Bangladesh in the 1970s include the House Building Finance Corporation (1973) and the Investment Corporation of Bangladesh (1976). Other NBFIs established in the country up to 31 August 2000 are United 6/5/12

REGULATION

Bangladesh Bank is empowered to oversee and regulate the affairs of the NBFIs under the provisions of the Financial Institutions Act 1993 and the Financial Institutions1994.The grant of authority to engage in borrowing from the general public is normally based on such factors as minimum capital requirement, quality of management, compliance with the concerned laws, rules, and regulations, and stability of financial standing. NBFIs may grant loans to their members and the general public up to a certain amount and may also engage in trust 6/5/12

SERVICES PROVIDED BY NBFCs

. NBFCs

offer most sorts of banking services, such as loans and credit facilities, private education funding, retirement planning, trading in money markets, underwriting stocks and shares, TFCs and other obligations. These institutions also provide wealth management such as managing portfolios of stocks and shares, discounting services e.g. discounting of instruments and advice on merger and acquisition activities. The number of non-banking financial 6/5/12 companies has expanded greatly in the last

DIFFERENCE BETWEEN BANKING AND NBFI

1.A bank interacts directly with customers while an NBFI interacts with Banks and Governments. 2. A bank indulges in a number of activities relating to finances with a range of customers while an NBFI is mainly concerned with the term loan needs of large enterprises. 3. A bank deals with both internal and international customers while NBFI is mainly concerned with the finance of foreign companies.
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4.A banks main interest is to help in business transactions, savings/investment activities while an NBFIs main interest is the stabilization of the currency. 5. NBFIs cannot issue cheques, pay-orders or demand drafts. 6.NBFIs cannot receive demand deposits, 7.NBFIs cannot be involved in foreign exchange financing, 8.FIs can conduct their business operations with diversified financing modes like syndicated financing, bridge financing, lease financing, securitization instruments, 6/5/12 private

CLASSIFICATIONS
The

non-bank financial sector has a wide diversity of institutions. Despite their importance as alternative sources of finance to the commercial banks, their liabilities may nevertheless be regarded as 'near money'. The most important NBFIs, among others, are the building societies, hire purchase companies, leasing companies, mortgage companies, insurance companies, saving banks, pension funds, investment companies, investment trusts, security dealer/brokers, pawn shops, central provident fund (CPF), post office saving 6/5/12

NBFIs WORKING IN BANGLADESH

31NBFIare

operating in Bangladesh while the maiden one was established in 1981. Out of the total, 2 is fully government owned, 1 is the subsidiary of a SOCB, 13 were initiated by private domestic initiative and 15 were initiated by joint venture initiative. Major sources of funds of NBFIs are Term Deposit (at least six months tenure), Credit Facility from Banks and other FIs, Call Money as well as Bond and Securitization

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HBFC
HOUSE BUILDING FINANCE COMPANY isa specialized public sector financial institution set up in 1973 under President's Order. Its sole objective is to provide credit facilities for construction, repair and remodeling of dwelling houses and apartments in cities, towns and other urban areas.

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INVESTMENT CORPORATION OF BANGLADESH

INVESTMENT CORPORATION OF BANGLADESH was established on 1 October 1976 under the Investment Corporation of Bangladesh Ordinance 1976. It is an investment bank established to accelerate the pace of industrialization and develop a sound securities market in Bangladesh.

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UNITED LEASING COMPANY

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BANGLADESH INDUSTRIAL FINANCE COMPANY

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MIDAS FINANCING

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INSURANCE
Insurance

is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete 6/5/12