NON BANKING FINANCE COMPANIES (NBFCS)/NON BANKING FINANCIAL INSTITUTIONS(NBFIS)

What is NBFC?

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and
is engaged in the business of Loans, Advances, Acquisition of shares/stock/bonds/debentures/
securities issued by Government or local authority or other securities of like marketable nature,
Leasing, Hire-purchase, Insurance business, Chit business.

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).

TYPES OF NBFC

Asset finance Companies (AFC) AFC are financial institutions whose principal business is of financing
physical assets such as automobiles, tractors, construction equipments material handling equipments
and other machines. ex: Bajaj Auto Finance corp. , Fullerton India etc 

Investment Companies (IC) ICs generally are involved in the business of shares, stocks, bonds,
debentures issued by government or local authority that are marketable in nature ex: Stock Broking
Companies, etc

Loan Companies (LC) LCs are loan giving companies which operate in the business of providing loans.
These can be housing loans, gold loans etc ex: Mannapuram Gold Finance, HDFC

Business of a Financial Institution includes:

 Making loans and advances,

 Acquisition of shares, stock, bonds, debentures, securities issued by Government or other marketable
securities, etc,

 Letting / delivering of goods to hirer under Hire Purchase Agreement,

 Carrying on any class of insurance business,

 Chit business or

 Accepting Public Deposits under any Scheme / Arrangement.

Registration of an NBFC

 Minimum Net Owned Fund of Rs. 200 Lacs and

 Certificate of Registration u/s 45-IA of the Reserve Bank of India Act, 1934