Non-Banking Financial Companies

 

Non-Banking Financial Companies

What is the full form of NBFC?

The full form of NBFC is the Non-Banking Financial Companies. It relates to assets institutions providing financial services without the need for a banking licence or without a bank’s legal definition being fulfilled. Such entities are registered under the Companies Act, 1956 and, as specified under Section 45-IA of the RBI Act, 1934, do operation as a non-banking financial institution.

  • An NBFC is primarily involved in the business of loans, stocks, equity acquisition, insurance business, government-issued bonds, chit fund business, and much more.
  • An organization whose principal business is linked to agriculture, sale, purchase or construction of immovable property, industrial production, sale and so on.
  • The key difference among NBFC & the bank in which we can withdraw or deposit cash in a bank when we required it, but NBFC does not allow withdrawals or deposit cash when it is necessary.
  • NBFC deposits are not considered as investments, like the amount you invest for your health insurance or LIC policy and so on. It is just long-term premiums or deposits.

NBFC’s Requirement for RBI certification:

A corporation registered under the Companies Act, 1956 and willing to start a non – banking organization business, as specified in Section 45 IA of the RBI Act, 1934, is needed to deal with the applicable conditions:

  • Under Section 3 of the Companies Act, 1956, it should be reported.
  • It should own an Rs . 2 crores minimum net fund. Even so, the criteria for a minimum net-owned fund for specific NBFCs can differ.

Few examples of NBFC

  1. Housing finance firms regulated by the National Housing Bank (NHB).
  2. Chit fund firms as described in Section 2 of Section (b) of the Chit Funds Act, 1982, and controlled by the state government
  3. Stockbroking companies, merchant banking companies, SEBI controlled venture capital finances
  4. Businesses of Nidhi that are registered under section 620A of the Companies Act, 1956, and governed by the Ministry of Corporations.

 From, Bujus



Pankaj Mandape

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