Short note on Non Banking Financial Corporations

1. •Nonbank financial companies (NBFCs), also known as nonbank
financial institutions (NBFIs) are entities that provide certain bank-like and
financial services but do not hold a banking license.
•NBFCs are not subject to the banking regulations and oversight
by federal and state authorities adhered to by traditional banks.
•Since the Great Recession, NBFCs have proliferated in number
and type, playing a key role in meeting the credit demand unmet by
traditional
banks.

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Types Of NBFC :
The different types of Non-Banking Financial Corporations or
NBFCs are as follows:
1.On the nature of their activity:
• Asset Finance Company
• Investment Company
• Loan Company
• Infrastructure Finance Company
• Mortgage Guarantee Company
• Core Investment Company
• Micro Finance Company
• Housing Finance Company
2. On the basis of deposits:
• Deposit accepting Non-Banking Financial Corporations
• Non-deposit accepting Non-Banking Financial Corporations

3. • Asset Finance Company: It is a financial institution that facilitates the service of financing the various assets for
individuals and the businesses which include machinery, heavy industrial equipment, production and farming
equipment and large power generators.
• Investment Company: It is a financial institution whose principal business is the acquisition of securities.In a simple
term, these companies take money from the public which is invested in various securities and financial products.
Then the company deducts its operational cost from the earned profit and later distribute to shareholders.
• Loan Company: It is a financial institution that offers a loan for various purposes except for AFC. The loanis offered
not for assets but for other purposes such as working capital finance etc. but includes the Housing Finance Firms.
• Infrastructure Finance Company: It is an NBFC which –Deploys 3/4th of its total assets in infrastructure loans, has
a minimum Net Owned Fund of Rs 300 crores, Has been ranked at least “A” in its credit ratin or similar,
CRAR(Capital to Risk Assets Ratio) of at least 15%.
• Mutual Benefit Finance Company(Nidhi Companies): Any company which is notified by the central Government as
a Nidhi Company under section 620A of the companies Act, 1956. It is a NBFC doing the business of lending and
borrowing with its members or shareholders.

4. • Micro Finance Company: These institutions come up to help the people in urban, semi-urban or rural areas of
India who need financial help to start their business and fulfill other requirements but are hesitant to seek the
help from banks because of the formalities which need to fulfill to get the required money.
• NBFC Factor: These types of NBFCs in India are low. These companies usually buy loans at a much discounted
rate from lenders and after that, they adjust repayment table of the debtor to ensure facile settlement adding
small profit.
• Mortgage Company: It is a financial institution where- at least 90% of the business turnover is of mortgage
guarantee or at least 90% of the gross income is from mortgage guarantee business or net owned Fund is 100
crores.
• Deposit and Non-Deposit Accepting NBFCs: Non-bank finance companies, which have been issued Certificate
of Registration by RBI with a specific license to accept deposits, are entitled to accept public deposit and are
known as Deposit Accepting NBFCs whereas those that don’t accept deposits are known as Non-Deposit
Accepting NBFCs. They can, however, accept deposits, only to the extent permissible.

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