Non-banking Financial Companies (nbfc)

NON-BANKING FINANCIAL COMPANIES (NBFC)

WHAT ARE NBFC’S ??  Financial institutions that provide banking

services without meeting the legal definition of a bank, i.e. does not hold a banking license.  Principal business of receiving deposits under any

scheme or arrangement or any other manner, or lending in any manner.

SERVICES  Suppliers of loans and credit facilities  Supporting investments in property  Trading money market instruments  Funding private education  Wealth management such as Managing portfolios

of stocks and shares

 Underwrite stock and shares  Retirement planning  Advise companies in merger and acquisition  Prepare feasibility, market or industry studies for

companies  Discounting services e.g., discounting of instruments

DIFFERENCE BETWEEN BANKS AND NBFC’S  NBFC cannot accept demand deposits.  It is not a part of the payment and settlement

system and as such cannot issue cheques to its customers.  Deposit insurance facility of DICGC is not

available for NBFC depositors unlike in case of banks.

CLASSIFICATION  Development finance institutions  Equipment leasing Company  Hire-purchase Company  Loan Company  Investment Company  Venture capital companies

REGULATIONS  It is mandatory that every NBFC should be

registered with RBI.

 Requirements for registration:  A company incorporated under the Companies Act,1956  Desirous of commencing business of non-banking financial

institution as defined under Section 45 I(a) of the RBI Act, 1934  The company is required to submit its application for registration.  The bank issues certificate of registration after satisfying itself

 Only those NBFCs holding a valid certificate of

registration with authorisation to accept public deposits can accept/hold public deposits.  Accept/renew public deposits for a minimum

period of 12 months and maximum period of 60 months

NBFCs regulations which the depositor may note at the time of investment:  NBFCs cannot offer interest rates higher than the

ceiling rate prescribed by RBI from time to time.  It cannot offer gifts/incentives or any other

additional benefit to the depositors.  NBFCs (except certain AFCs) should have

minimum investment grade credit rating (MIGR).

 The deposits with NBFCs are not insured.  The repayment of deposits by NBFCs is not

guaranteed by RBI.  The NBFCs are allowed to accept/renew public

deposits for a minimum period of 12 months and maximum period of 60 months

 The Reserve Bank of India does not accept any

responsibility or guarantee about the present position of the NBFCs.  A proper deposit receipt should be insisted.  The receipt shall be duly signed by an officer

authorised by the company in that behalf.

THANK YOU !!