February 25, 2019

NBFCs OR non-banking financial companies

What are the non-banking financial companies ? 

 Non-Banking Financial Companies (NBFCs):- The company which is registered under the companies act 1956 that provide banking services are called Non-Banking Financial Companies.  NBFCs can not accept demand deposits,   NBFCs can not issue cheques drawn on itself, deposit insurance facility is not available for NBFCs, NBFCs can not offer interest rate  higher than the limit prescribed by Reserve Bank of India.  

 NBFCs position in Financial Sector:-They are pioneers to financing auto ( truck, tracter, bike etc)loans ,    pioneer in giving gold loans, gives financial services where banks are absent, responsible for promoting microfinance business, for funding support depends on banks.  

Classification of Non banking financial companies :- Asset Finance Company,  Micro Finance Institutions, Loan Company, Core Investment Company, Infrastructure Debt Company, Infrastructure Finance Company, Investment Company, Hire purchase Company, Mutual Fund Company, Chit Fund Company, Equipment Leasing Company, Nidhi Company etc.  

In another way NBFCs are classified into two types (I) Deposit taking and (II) Non deposit taking. 

NBFCs follows RBI Norms:- minimum net owned fund on the regular basis which is implemented by RBI, According to RBI norms NBFCs are limited to accept deposit from the public, Deposit accepted minimum 12 months and maximum five years. 

RBI Simplifies the Registration Process for New NBFCs:- There would be two different types of applications for non deposit taking NBFCs based on Sources of Funds and Customer Interface one of them given below. 
Type I- The processing of cases for Type I NBFC Non Deposit taking Applicants would be on fast track mode. As these companies will not have access to public fund and will not have customer interface, they will be subjected to less intensive scrutiny.      
These companies will be prohibited from accessing public funds and having customer interface. In case these companies intend to avail public fund or intend to have customer interface in the future, they are required to take approval from RBI.                                                                                   

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