Non Banking Financial Companies (NBFC) provide limited banking services like loans, advances, small savings products, investment, etc. But they don’t have any Banking license. The services provided by non banking financial companies differ from company to company and depends on their discretion or jurisdiction.
Non Banking Financial Companies are registered under Companies Act, 1956. They are however, regulated by the Reserve Bank of India Act,1934. The guidelines are detailed in Chapter III B of the RBI Act.
Difference between Non Banking Financial Companies and Banks
- They cannot accept demand deposits
- They can’t open savings account
- They are not allowed to issue cheques that are drawn on them.
- The deposits maintained with them are not secured by the Deposit Insurance and Credit Guarantee Corporation
Types on NBFCs operating in India
- Asset Finance Company
- Investment Company
- Loan Company
- Infrastructure Debt Fund Company
- Infrastructure Finance Company
- NBFC – Factors
NBFCs play an important role in financial inclusion and their credit portfolio is increasing at a rate which is more than the growth percentage of Banks. As they operate through agents on a large scale they are able to provide credit support at low costs. Also, their recovery rate is quite impressive.
