This document defines and describes non-banking financial companies (NBFCs) in India. It states that NBFCs are companies registered under the Companies Act of 2013 that are engaged in financial activities like lending, leasing, investments, but do not carry out regular banking activities. NBFCs must be registered with the Reserve Bank of India and comply with regulations around minimum capital, liquid assets, public deposits, interest rates, and credit ratings. The document also outlines different types of NBFCs including mutual benefit companies, investment companies, equipment leasing companies, hire purchase companies, and loan companies.

1. NON BANKING FINANCIAL
COMPANIES (NBFCS)

2. What is NBFC?
A Non-Banking Financial Company (NBFC) is a
company registered under the Companies Act, 2013
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.

3. 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.

4. REGULATIONS
 In terms of Section 45-IA of the RBI Act, 1934,
it is mandatory that every NBFC should be
registered with RBI to commence or carry on
any business of non-banking financial
institution.
 Should have a minimum net owned fund of
Rs:25 lakh (raised to Rs:200 lakh from April
21,1999)

5.  NBFC have to maintain 15 per cent of their
deposits in liquid assets effectively from April
1,1998.
 All NBFCs are not entitled to accept public
deposits. Only those NBFCs holding a valid
Certificate of Registration with authorization
to accept Public Deposits can accept/hold
public deposits.

6.  The NBFCs are allowed to accept/renew
public deposits for a minimum period of 12
months and maximum period of 60 months.
They cannot accept deposits repayable on
demand.
 NBFCs cannot offer interest rates higher than
the ceiling rate prescribed by RBI from time
to time. The present ceiling is 11 per cent per
annum.

7.  They have to obtain a minimum credit rating
from anyone of the three credit rating
agencies.
 NBFCs cannot offer gifts/incentives or any
other additional benefit to the depositors
 They have to create reserve fund and transfer
not less than 20 per cent of their net deposits
to it every year.

8. Types of NBFC

9. MUTUAL BENEFIT FINANCIAL
COMPANY (MBFC)
 Nidhis or Mutual Benefit Finance Companies
are one of the oldest forms of non-financial
companies. It is a company structure in which
the company's owners are also its clients.
 That is, the mutual company's profits are
distributed to its participating customers
each year in proportion to their individual
exposures to the company.
 Many insurance companies are structured as
mutual companies.

10.  Some of the important objectives of Nidhis are
to enable the members to save money, to invest
their savings and to secure loans at favourable
rates of interest.
 They work on the principles of complete
mutuality of interest and are generally well-
managed.
 The Govt has granted certain concessions under
Section 620A of the Companies Act, 2013.
 Primarily regulated by Department of Company
Affairs (DCA) under the directions / guidelines
issued by them under Section 637 A of the
Companies Act, 2013.

11. INVESTMENT COMPANY
 Investment Company is any financial
intermediary whose principal business is that
of buying and selling of securities.
 It is a company whose main business is
holding securities of other companies purely
for investment purposes.
 The investment company invests money on
behalf of its shareholders who in turn share in
the profits and losses.

12. EQUIPMENT LEASING COMPANY
Equipment leasing company is any financial
institution whose principal business is that of
leasing equipment's or financing of such an
activity.
Leasing
Leasing is a process by which a firm can obtain
the use of a certain fixed assets for which it
must pay a series of contractual, periodic, tax
deductible payments.

13. HIRE-PURCHASE COMPANY
 Any financial intermediary whose principal
business relates to hire purchase transactions
or financing of such transactions.
 A method of buying goods through making
instalment payments overtime.
 Under a hire purchase contract, the buyer is
leasing the goods and does not obtain
ownership until the full amount of the
contract is paid.

14.  Hire purchase combines elements of both a
loan and a lease. You reach an agreement
with the dealer to pay an initial deposit,
typically anything between 10% and 50%,
and then pay off the balance in monthly
instalments over an agreed period of time. At
the end of this period, the product is yours

15. LOAN COMPANY
 Loan company means any financial
institution whose principal business is that of
providing finance, whether by making loans
or advances or otherwise for any activity
other than its own (excluding any equipment
leasing or hire-purchase finance activity).
 A loan is a type of debt. Like all debt
instruments, a loan entails the redistribution
of financial assets over time, between the
lender and the borrower

16. Types of loans:
 Secured : A secured loan is a loan in which
the borrower pledges some asset (e.g. a car
or property) as collateral.
 Unsecured : Unsecured loans are monetary
loans that are not secured against the
borrower's assets.
 Credit card debt
 personal loans
 Bankoverdrafts

17. Thank you