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NBFC (Non-Banking Financial Company) is engaged in financial activities as defined under section 45-IA of the RBI Act 1934 but does not possess a banking license. A company can offer banking services such as the lending of loans, assets mortgage, insurance, hedge funds, etc after NBFC Registration.
However, they do not have permission to perform banking
operations of accepting demand deposits from the public. They also cannot issue
cheques drawn on it.
NBFCs are registered as per the rules and regulations prescribed under Companies Act, 2013 and the Reserve Bank of India Act, 1934. They are playing a vital role in executing financial functions in the economy. They help to meet the demand that remains unfulfilled by the traditional banking system in shorter processing times.
An NBFC can provide both secured and unsecured loans to the
takers based on alternative lending models. The government has been promoting
NBFC so that the unorganized money lenders and people willing to run financial
services can organize their lending operations.
Introduction of NBFC Regulation in India
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