Non-Banking Financial

Companies (NBFCs)

Presented by
GROUP-6
Sandeep
Nikhileshwar
Parul
Sathya
Apoorva
Gagan V Patil
Priyanka Sana

What are NBFCs???

A

Non-Banking Financial Company (NBFC) is a company registered under the

Companies Act, 1956 engaged in the business of loans and advances, acquisition
of shares/stocks/bonds/debentures/securities issued by Government or local
authority or other marketable securities of a like nature, leasing, hire-purchase,
insurance business, chit business
But does not include any institution whose principal business is that of agriculture
activity, industrial activity, purchase or sale of any goods (other than securities)
or providing any services and sale/purchase/construction of immovable property.
A non-banking institution which is a company and has principal business of
receiving deposits under any scheme or arrangement in one lump sum or in
installments by way of contributions or in any other manner, is also a nonbanking financial company (Residuary non-banking company). (Source:
www.rbi.org.in)

Services Provided
NBFCs offer most sorts of banking services, such as loans and credit facilities, private

education funding, retirement planning, trading inmoney markets,underwritingstocks

and shares and other obligations.
These institutions also provide wealth management such as managing portfolios of
stocks and shares, discounting services e.g. discounting of instruments and advice
onmerger and acquisitionactivities.
The number of non-banking financial companies has expanded greatly in the last
several years as venture capital companies, retail and industrial companies have
entered the lending business.
Non-bank institutions also frequently support investments in property and prepare
feasibility, market or industry studies for companies.
However they are typically not allowed to takedepositsfrom the general public and
have to find other means of funding their operations such as issuingdebtinstruments.

Types of NBFCs
Asset Finance Company (AFC)
Investment Company (IC)
Loan Company (LC)
Infrastructure Finance Company (IFC)
Gold Loan NBFCs in India
Infrastructure Debt Fund: Non- Banking

Financial

Company (IDF-NBFC)
Non-Banking Financial Company Factors (NBFC-Factors)
Residuary Non-Banking Companies (RNBCs)

Difference between NBFCs and Banks

BASIS FOR COMPARISON

NBFC

BANK

Meaning

An NBFC is a company that

provides banking services to
people without holding a bank
license.

Bank is a government
authorized financial
intermediary that aims at
providing banking services to
the general public.

Incorporated under

Companies Act 1956

Banking Regulation Act, 1949

Demand Deposit

Not Accepted

Accepted

Foreign Investment

Allowed up to 100%

Allowed up to 74% for private

sector banks

Payment and Settlement

system

Not a part of system.

Integral part of the system.

Maintenance of Reserve Ratios

Not required

Compulsory

Deposit insurance facility

Not available

Available

Advantages of NBFCs
Suppliers of loans and credit facilities
Supporting investments in property
Trading money market instruments
Funding private education
Wealth management such as Managing portfolios of stocks and

shares andUnderwrite stock and shares, and other obligations

Retirement planning
Advise companies in merger and acquisition
Prepare feasibility, market or industry studies for companies
Discounting services e.g., discounting of instruments

Disadvantages of NBFCs
NBFC cannot accept demand deposits;
NBFC is not a part of the payment and settlement system and

as such an NBFC cannot issue cheques drawn on itself; and

Deposit insurance facility of Deposit Insurance and Credit
Guarantee Corporation is not available for NBFC depositors
unlike in case of banks.

THANK YOU!!!