Section 406 of the Companies Act 2013 govern Nidhi Companies & RBI Act govern NBFC. In this...
Non-banking financial companies (NBFCs) are fast emerging as an important segment of the rapidly growing Indian economy. NBFC offers almost every service that banks do including performing financial intermediation, offering loans, accepting deposits, giving cash advances, leasing, hiring purchase, etc.
NBFCs have advantages in terms of short-term lending; for instance, a high ROI and no cap on interests. So, if you are interested in NBFC registration, this post has the information you need.
The RBI Amendment Act 1997 defines NBFC as:
The functions of the NBFCs look very similar to those of the bank as they lend money and make investments. However, there are many differences between NBFCs and bank. Some of them are as follows:
Based on liabilities-
Additionally NBFC Non-Deposit is categorized into-
Based on business activities-
Systematically Important Core Investment Company
It is a type of NBFC registration that carry on the business of share and securities takeover but-
Investment and Credit Company:
RBI had released a notification on Harmonization of the NBFCs categories on 22nd Feb, 2019. In the notice the Reserve Bank decided to merge three NBFCs i.e., Asset, Investment and Loan Company into one called as NBFC-Investment and Credit Company.
It is a company that does its principal business –asset finance by providing finance, whether by creating loans, advances or otherwise for any activity other than its own and acquisition of securities.
Infrastructure Finance Company (IFC):
If you are interested in financing infrastructure-related projects like construction of roads, bridges, new buildings, etc., you can proceed with IFC NBFC Registration.
Infrastructure Debt Fund (IDF):
Infrastructure Debt Fund is an NBFC which facilitate the flow of long-term debt into infrastructure projects. It can raise resources through currency bonds for a minimum of five years. If you are interested in raising funds and financing infrastructure projects like construction of roads, bridges and other infrastructure projects, etc., this type of NBFC is recommended.
Microfinance businesses in NBFC Registration are corporations that function in a similar manner to that of banks. Loans are provided by these to various small businesses that don’t have the access to formal banking channels and are not eligible to get loans.
A Microfinance Institution is required to fulfil the following conditions:
Non-Banking Financial Company – Factors (NBFC-Factors):
This type of NBFC has the principal business of factoring. Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. The financial assets in the NBFC factor must aggregate at least 50% of its total assets and also its income derived from factoring business should not be less than 50% of its gross income.
NBFC- Non-operative Financial Holding Company
Through this, any promoter or group of sponsors shall be authorized to set up new bank. It is a type of NBFC that would hold bank and all other financial companies regulated by RBI or other financial sector regulators, to the extent allowed under applicable regulatory prescriptions.
Mortgage Guarantee Company
This company includes:
NBFC Account Aggregator
It is a new notion. It provides data of numerous users and modifies their financial needs to various commercial organizations. It offers reliable information.
NBFC Peer to Peer Lending platforms
It delivers a platform to bring lenders as well as borrowers together by using a digital platform. It provides an opportunity for investors to diversify their portfolio.
Housing Finance Company
It is a kind of NBFC with the principal business of financing of acquisition or construction of houses. These are controlled by the RBI. A Housing Finance Company can’t commence activity until its gets a Certificate of Registration from the RBI.
Despite the fact that the NBFC is fast emerging as an important segment of the Indian economy, RBI is making very strict rules for giving to register NBFC Online. This is largely thanks to past scams and problems with NBFCs in the past. Founders should have a strong and credible finance background, they should have visions for the business model, and their visions should be well documented to obtain NBFC license.
Read our article:How are emerging technologies helping NBFC’s?