Non Banking Financial Company

Non-Banking Financial Company Registration in India

NBFC stands for Non-Banking Financial Company and is registered under the Companies Act, 2013 and managed by RBI with activities very similar to the bank except for some major differences. NBFC is known to provide financial support and services to businesses and individuals. One of the principal objectives of a Non-Banking Financial Company is to provide loans, personal loans, working capital loans, shared investments, other stocks and debenture issued by the Government or the other local authorities, leasing, chit business, hire purchase, insurance business as well as offers Market Place Lending Platform (P2P) for businesses.

The NBFC Registration comes under the Companies Act 2013 and the RBI Act 1934. In India, The Reserve Bank of India is the supreme regulator of the NBFC. An NBFC is different from the Traditional Banks in the following ways:

  • A Bank is registered under the Banking Regulation Act, 1949, whereas an NBFC is registered under the Companies Act 2013 or 1956 and RBI Act, 1934.
  • NBFC Provides Banking services to People without holding a Bank license
  • Unlike Banks, NBFCs cannot accept and lend deposits.An NBFC cannot accept Demand Deposits i.e. NBFCs are not allowed to accept deposits, which have to be refund on demand. The RBI gives no guarantee of the repayment of deposits by the NBFCs.
  • Deposit insurance facility of the Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors, unlike banks.
  • The RBI gives no guarantee of the repayment of deposits by the NBFCs. The deposits are not secured.
  • An NBFC cannot indulge Primarily in Agricultural, Industrial Activity, Sale-Purchase, Construction of Immovable Property
  • Foreign Investment in Banks is limited up to a specific fixed limit, whereas foreign investment in NBFC is allowed 100%.
  • Banks can issue a self-demand draft on itself, whereas NBFCs are not allowed to issue a self-demand draft as they are not the part of the settlement system or the part of the payment system. NBFC can accept only term Deposits.
  • Bank provides a variety of transaction services, whereas NBFCs do not facilitate transaction services.
  • An NBFC does not guarantee insurance or the credit facility.An NBFC is not required to maintain Reserve Ratios (CRR, SLR etc.)
  • All NBFCs are allowed to take the public deposits for the minimum period of 12 months which goes up to maximum period of 60 months.
  • The NBFCs must have minimum investment-grade credit rating.
  • companies cannot offer the interest rate higher than the ceiling rate fixed by RBI on time to time
  • The companies are not allowed to offer any gifts, incentives, or any other benefit to the depositors