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NBFC is a company registered under the Companies Act, 2013. NBFC is regulated by the Reserve Bank of India (RBI). It is defined under RBI in Section 45-IA of RBI Act, 1934 that NBFC is a non-banking financial institution whose main business is lending of loans or receiving of deposits in any arrangement. This article is explaining the difference between NBFC & Micro Finance Company.
It is a kind of bank which is providing banking services. The main functions of NBFC are lending loans, receiving deposits; acquisitions of shares, debentures, stocks issued by the government or other marketable securities, leasing, or hire purchase agreements are entered by them. However, the core business cannot be sale or purchase of immovable property or its construction. It cannot include any business activity or agricultural activity, or any other industrial activity.
It provides financial support to business houses and individuals. It gives loans, working capital loans, personal loans, shared investments, leasing and also engaged in the insurance business.
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A Nidhi Company is a type of non-banking financial company. It is covered under section 406 of the Companies Act, 2013[1]. It is a company whose business is the lending of loans or the receiving of deposits is done between only its members, for their mutual benefit. It is a company that is a public limited company and governed by the rules of a central government for such class of companies. The government defines its transactions from time to time.
Read our article:A Brief Comparison on Nidhi Company vs NBFCs
Microfinance companies are commonly termed as microcredit, or micro benefit organization. They are mostly registered in the section8 of the Companies Act, 2013.
The micro finance company is a type of, non-banking financial intuition whose business is to provide loans. The main objective is to give small scale financial services, in the format of loan, or credit facilities, or savings facility.
There are two types of a microfinance company which has been allowed in India, one which has to be registered with RBI and the other like a non-profit organization which has to be first registered as the Section 8 Company under the Companies Act, 2013 and where no approval of RBI is required.
It can be concluded that:
Read our article:Non-Banking Financial Company vs Micro Finance Institution
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