Non Banking Fiscal Companies (Nbfcs) – Banking Awareness

The NBFC (Non-bank fiscal company) is an arrangement which  provides banking services without having a banking license. According to the Reserve Bank of Bharat (RBI), NBFC is a a fellowship registered nether the Companies Act, 1956 together with is engaged inwards the concern of loans together with advances, acquisition of shares / stock / bonds / debentures / securities issued past times Government or local potency or other securities of similar marketable nature, leasing, hire-purchase, insurance business, chit concern but does non include whatsoever establishment whose mind concern is that of agriculture activity, industrial activity, sale / buy / construction of immovable property.

NBFCs create offering all sorts of banking services, such equally loans together with credit facilities, retirement planning, coin markets, underwriting, together with merger activites.
Ofcourse, the functions of NBFCs are well-nigh same equally banks, yet at that spot are a few differences,

 

some of the differences betwixt NBFCs together with Banks are :

  • An NBFC cannot bring need deposits (they are non allowed to bring deposits from public)
  • An NBFC is non a constituent of the payment together with short town scheme together with equally such an NBFC cannot effect cheques drawn on itself
  • Deposit insurance facility of Deposit Insurance together with Credit Guarantee Corporation is non available for NBFC depositors dissimilar inwards illustration of banks.

Different types of NBFCs are :
  • Asset Finance Company (AFC) : An AFC is a fellowship which is a fiscal establishment carrying on equally its mind concern the financing of physical assets supporting productive/economic activity, such equally automobiles, tractors, lathe machines, generator sets, world moving together with cloth treatment equipments, moving on ain ability together with full general purpose industrial machines. Principal concern for this purpose is defined equally aggregate of financing real/physical assets supporting economical activeness together with income arising therefrom is non less than 60% of its full assets together with full income respectively.
  • Investment Company (IC) : IC agency whatsoever fellowship which is a fiscal establishment carrying on equally its mind concern the acquisition of securities.
  • Loan Company (LC) : LC agency whatsoever fellowship which is a fiscal establishment carrying on equally its mind concern the providing of finance whether past times making loans or advances or otherwise for whatsoever activeness other than its ain but does non include an Asset Finance Company.
  • Infrastructure Finance Company (IFC) : IFC is a non-banking finance fellowship a) which deploys at to the lowest degree 75 per cent of its full assets inwards infrastructure loans, b) has a minimum Net Owned Funds of Rs. 300 crore, c) has a minimum credit rating of ‘A ‘or equivalent d) together with a CRAR of 15%.
  • Systemically Important Core Investment Company (CIC-ND-SI) : CIC-ND-SI is an NBFC carrying on the concern of acquisition of shares together with securities which satisfies the next weather condition :
    • it holds non less than 90% of its Total Assets inwards the shape of investment inwards equity shares, preference shares, debt or loans inwards grouping companies
    • its investments inwards the equity shares (including instruments compulsorily convertible into equity shares inside a menstruum non exceeding 10 years from the appointment of issue) inwards grouping companies constitutes non less than 60% of its Total Assets
    • it does non merchandise inwards its investments inwards shares, debt or loans inwards grouping companies except through block sale for the purpose of dilution or disinvestment
    • it does non bear on whatsoever other fiscal activeness referred to inwards Section 45I(c) together with 45I(f) of the RBI act, 1934 except investment inwards banking firm deposits, coin marketplace position instruments, authorities securities, loans to together with investments inwards debt issuances of grouping companies or guarantees issued on behalf of grouping companies.
    • Its asset size is Rs 100 crore or to a higher identify and
    • It accepts world funds
  • Infrastructure Debt Fund : Non- Banking Financial Company (IDF-NBFC) : IDF-NBFC is a fellowship registered equally NBFC to facilitate the stream of long term debt into infrastructure projects. IDF-NBFC enhance resources through effect of Rupee or Dollar denominated bonds of minimum five twelvemonth maturity. Only Infrastructure Finanace Companies (IFC) tin sponsor IDF-NBFCs.
  • Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI) : NBFC-MFI is a non-deposit taking NBFC having non less than 85% of its assets inwards the nature of qualifying assets which satisfy the next criteria :
    • loan disbursed past times an NBFC-MFI to a borrower alongside a rural identify annual income non exceeding Rs. 60,000 or urban together with semi-urban identify income non exceeding Rs. 1,20,000
    • loan sum does non hit Rs. 35,000 inwards the commencement wheel together with Rs. 50,000 inwards subsequent cycles
    • total indebtedness of the borrower does non hit Rs. 50,000
    • tenure of the loan non to last less than 24 months for loan sum inwards excess of Rs. 15,000 alongside prepayment without penalty
    • loan to last extended without collateral
    • aggregate sum of loans, given for income generation, is non less than 75 per cent of the full loans given past times the MFIs
    • loan is repayable on weekly, fortnightly or monthly instalments at the pick of the borrower
  • Non-Banking Financial Company – Factors (NBFC-Factors) : NBFC-Factor is a non-deposit taking NBFC engaged inwards the mind concern of factoring. The fiscal assets inwards the factoring concern should institute at to the lowest degree 75 percentage of its full assets together with its income derived from factoring concern should non last less than 75 percentage of its gross income.
Note : This listing is for the sake of data Only. There is no involve to recollect all these names. 
Sources RBI together with MHA websites

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