NBFCs are non-banking institutions that are registered under the Companies Act and engaged in financial activities like lending, but not agriculture or real estate. They perform important financial intermediation and supplement banking. The RBI regulates different types of NBFCs under various acts and directions. To operate, an NBFC must register with the RBI and maintain a minimum net owned fund of Rs. 200 lakh. NBFCs are subject to prudential norms on income recognition, asset classification, provisioning, and capital adequacy set by the RBI.