NBFCs or Non-Bank Financial Companies are financial institutes that have played an important role in raising the growth of the Indian economy but do not have a banking license. These companies operate according to the banking regulations in that particular country.
NBFCs are registered under the Companies Act, 1956 of India. They offer a range of banking products and services. The number of NBFCs has increased in the last few years and it gained good momentum in recent times.
Services Provided by NBFCs
Since NBFCs are similar to banks, they offer services like bank including loans and advances, credit facilities, saving and investment plans, acquisition of shares, stock, bonds hire-purchase, and acquisition of marketable securities, hire-purchase, and money transfer services.
NBFC are involved in the majority of banking services with certain exceptions:-
- NBFC cannot accept demand deposits
- NBFCs do not form part of the payment and settlement system
- Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs
- While banks are incorporated under the banking companies act, NBFC is incorporated under company act of 1956
Types of NBFCs:-
Investment Company (IC)
The main business of these companies is to deal in securities. IC means any company which is a financial institution carrying on as its principal business the acquisition of securities.
Asset Finance Company (AFC)
AFC is a company which is a financial institution carrying on as its principal business the financing of physical assets. The motive of these companies is to finance the assets such as machines, automobiles, generators, equipment and industrial machines etc.
Loan Companies (LC)
The aim of this financial institution is providing finance whether by making loans or advance.
Infrastructure Finance Company (IFC)
IFCs are companies with net owned funds of, at least, Rs. 300 Crore and require at least 75 percent of its total assets in infrastructure loans and CRAR of 15%.
Importance of NBFCs
Today’s growing economic environment it is very difficult to serve the need of investors whose financial requirements are left by banking system so the NBFC started its operations to fulfil the need of investor.
As per the result has shown, NBFCs are more profitable than the banking sector services because of the lower cost this will help the customer to get a cheaper loan.
Procedure For NBFC Registration:-
- Company Registration
The first step towards NBFC registration is to form a new private or public limited company under the company act.
- Minimum Net Owned Fund
For NBFC registration you need to have minimum net owned fund of Rs 200 Lakh.
After that application is to be submitted in two separate sets tied up properly in two files. Annex 2 to be submitted duly signed by the director/Authorized signatory and certified by statutory auditors.
The need of NBFC Consultant
The legal complexities of NBFC formation are more complicated and without legal authority and NBFC consultant you might be subject to fines and penalties.
NBFC consultant is responsible to handle all the legal activities, Registration and Licensing of your Company and provide full services in regard to setting up of NBFC and other requirements needed for it.