Camels Model Application of Non-bank Financial Institution: Bangladesh Perspective

Abstract

NBFI (Non-Bank Financial Institutions) is one of the significant sectors in every economy. NBFIs is one kind of financial institution that provides certain types of banking services, but do not hold a banking license. NBFIs can offer banking services such as loans and credit facilities, retirement planning, money market, underwriting and merger activities. At present, there are 33 NBFIs, three are government owned, eleven are joint venture and nineteen are private owned. The goals of the research are to explore soundness of NBFIs in Bangladesh by using CAMELS model and their future forecast of rating point by CAMELS Model. For achieving these goals we have used most popular methods for the evaluation of NBFIs performance, namely the CAMELS framework. CAMELS’ ratio mainly indicates the capital adequacy, assets quality, management efficiency, earnings, liquidity condition and sensitivity of the market risk. After the study we found that out of 33 NBFIs 1 was “1 or Strong”, 15 were “2 or Satisfactory”, 13 were “3 or Fair” and 3 were “4 or Marginal” according to the CAMELS rating at end of the June 2016.