Non Banking Financial Companies (NBFC) which carry on a primarily financial business must be registered with the Reserve Bank of India (RBI). Where the financial assets exceed 50% of the company’s balance sheet size and the income derived from such assets is more than 50% of the total income, the business is regarded as primarily financial.
Types of Non Banking Financial Companies
Asset Financing Company
The business of an Asset Financing Company will be predominantly leasing, hire purchase, loans and advances and investment in marketable securities issued by Government, quasi government authorities, etc.
Residuary NBFC
Companies which are mainly engaged in the mobilization of deposits are referred to as Residuary NBFC. But these NBFC cannot accept demand deposits which is a preserve of banks. Further, deposits with NBFC are not protected by the insurance of Deposit Insurance and Credit Guarantee Corporation (DICGC). This coverage is available only for deposits with banks.
Other NBFC
Infrastructure Debt Fund (IDF-NBFC), Core Investment Companies (CIC), Infrastructure Finance Companies, Micro Finance Companies, and NBFC Factors are also regulated by RBI.
There are also NBFC which are regulated by authorities such as Securities and Exchange Board of India (SEBI) – venture capital, stock broking and merchant banking; Insurance Regulatory and Development Authority (IRDA) – insurance; National Housing Bank (NHB) – housing finance; and chit funds, nidhi companies and mutual benefit companies
