A Business Encyclopedia

Non-Banking Financial Companies (NBFCs)

Definition: The Non-Banking Financial Companies (NBFCs) are the financial institutions that offer the banking services, but does not comply with the legal definition of a bank, i.e. it does not hold a bank license.

The non-banking financial companies are registered under the Companies Act, 1956 and deals in the business of loans and advances, investments in bonds/shares/debentures/stock and other marketable securities Viz. Lease, hire-purchase, insurance business, but do not include any institution which is principally engaged in the business of agricultural activity, purchase of any goods and services (other than securities), industrial activity and sale/purchase/construction of immovable property.

Types of non-banking financial companies

  1. Mutual Benefit Finance Company
  2. Investment Company
  3. Equipment Leasing Company
  4. Hire-Purchase Company
  5. Loan Company
  6. Asset Finance Company (AFC)
  7. Infrastructure Finance Company (IFC)
  8. Infrastructure Debt Fund: Non-Banking Finance Company (IDF-NBFC)
  9. Non-banking Financial Company: Micro Finance Institution (NBFC-MFI)
  10. Systematically Important Core Investment Company (CIC-ND-SI)
  11. Non-Banking Financial Company-Factors
  12. Housing Finance Company
  13. Chit Fund Company
  14. Residuary Non-Banking Company

The non-banking companies, registered with the Reserve Bank of India can accept the public deposits and must comply with the following regulations as stated under the Non-Banking Financial Companies Acceptance of Public Deposits Directions, issued by RBI. These are:

  • The NBFCs are allowed to take the public deposits for a minimum period of 12 months and the maximum period of 60 months.
  • These companies are not allowed to accept deposits, which are repayable on demand.
  • The NBFCs cannot offer the interest rate higher than the ceiling rate as prescribed by RBI from time to time.
  • The companies cannot offer any gifts, incentives, or any other benefit to the depositors.
  • The deposits are not insured.
  • The NBFCs must have minimum investment grade credit rating.
  • The RBI gives no guarantee of the repayment of deposits by the NBFCs.

Note: Although, the non-banking financial companies do not hold the bank license and are restricted to take any public deposits their operations are covered under the banking regulations and are regulated by the Reserve Bank of India.

Leave a Reply

Your email address will not be published. Required fields are marked *


Related pages

definition of disinvestmentpayback period financeindifference curvesbackward integration example companythe law of diminishing marginal utilitymotives for holding cashelasticity of demand examplesdefinition sole proprietorautocracy definitionlaw of diminishing marginal utility examplespsychoanalytical theoriescontractionary policy definitionmanagement accounting marginal costingschumpeter on innovationforced distribution method of performance appraisaldividend payout definitiondefine enunciatedexamples of stratified sampling in statisticscharacteristics affecting consumer behaviorfactors influencing purchase decisionethnocentric companiesdefinition of unstructured interviewdefine slrfixed assets turnover ratio calculatorsnowballing sampling methodbusiness cycle definition macroeconomicswhistle blowing policy definitionselection process steps in hrmfiedler situational leadershipbarometric trend definitionoutsourced definitionphysiological barriers of communicationdefinition of golden parachuterevitalise meansinstrumentality in expectancy theoryinteration definitionwhat is indifference curve and its propertiesletters of credit investopediameaning whistleblowerpoison pill defensedefine recruitment in hrmcardinal utility approachvestibules meaningself theory carl rogersdefinition of a carrotcost ascertainmenttheories of profit in managerial economicswhat is scalar chainverbal communication wikipediadefinition of geocentric theorylanguage barriers in business communicationprocess theories of motivationgate graduate aptitude test in engineeringcorrelation factor definitiondefinition of propoundbusiness process reengineringconflict mgtdefinition of authoritarian leadershipwhat is a swing loandiminishing rate of substitutionarbitrage opportunity definitiondefine chit fundwhat does ojt meandp meaning in financecontent and process theories of motivationdefensive strategies in strategic managementunconditioning stimuluscommunication skills meaning in urdudifference between perfect and imperfect marketunitary perspective of industrial relationspath-goal leadership modelordinal utility functioncontingency models of leadershipbusiness process reengineering frameworke tailing advantagespurchasing power parity defineinstrumentality theorydefine rationingchit fund company listsystematic sampling methods