Predicting Solvency Of Non-Banking Financial Institutions In India Using Fulmer And Springate Model | R. KASILINGAM & G. RAMASUNDARAM

The study of solvency is becoming more relevant and important as even large companies across the world are failing, resulting in economic and social problems to the society. Using financial distress models to predict failure in advance is absolutely essential for most businesses in their decision making process. Hence, this study involves a critical investigation using Fulmer H-Score and Springate Z-score models in predicting solvency of Non-Banking Financial Institutions in India. The Fulmer and Springate models were however developed in a different economic environment, time horizon, industry and country. Testing these models in the Indian context is important to determine the practical applicability and relevance of the models. The study is confined to 25 Non-Banking Finance companies including housing finance companies catering to asset finance, infrastructure finance, investment finance and housing finance. The study employed an analysis of financial statements for a period of 5 years (2005-2009). The study examined not only solvency position but also factors which have an impact on solvency position of NBFCs (Non Banking Financial Corporation).