Status of NBFCs in India by Amit Kumar Verma, 12IB-006, EBUS-C

NBFC

A Non Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 of India, engaged in the business of loans and advances, acquisition of shares, stock, bonds purchase, insurance business, or chit business: but does not include any institution whose principal business is that includes agriculture or industrial activity; or the sale, purchase or construction of immovable property.

A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (residuary non-banking company).

 

NBFC Vs Bank

Difference between a NBFC and a Bank is that NBFC's cannot accept demand deposits whereas, banks can accept and also NBFC's can't issue cheques to its customer.

 

RBI & NBFC

It is mandatory for every NBFC to be registered with RBI

There are three different types of NBFC's registered with RBI. They are as follows:-

Ø  Asset Finance Company (AFC) - AFC could be defined as any such financial company which as a part of its objective finances physical assets like tractors, automobiles, lathe machines, generator and material handling equipment.

Ø   Investment Company (IC)

Ø  Loan Company (LC)

Key Notes

Ø  All NBFC's cannot accept public deposits, only those NBFC's who hold a valid certificate can hold/accept public deposits

Ø  They can accept deposits only for a period of 12-60 months and these deposits are not payable on demand

Ø  NBFC's can offer a maximum of 11% interest rate as per ceiling declared by RBI.

Ø  Deposits in NBFC's are uninsured

Ø  RBI doesn't guarantees repayment by NBFC's

Ø  NBFC's are not authorized to offer any gifts or promotional offers as a part of account opening

Ø  List of all the registered NBFC's can be found on the website of RBI

Ø  Like the banks NBFC's, also offer nomination facility

Ø  Unrated NBFC's except certain AFC's cannot accept public deposits

Ø  If a NBFC defaults in its payment of deposits then consumers can knock the doors of Company Law Board or can go to Consumer Forum or can file a law suit

Ø  Till date there is not any Ombudsman available for hearing of complaint against NBFC's.