What are the Non Banking Financial Companies (NBFCs)?<\/strong><\/h2>\n\n\n\nNBFC is a Company registered <\/a>under Companies Act 1956\/2013<\/strong>[1]<\/a><\/sup>, engaged in the financing activities.<\/p>\n\n\n\nNBFCs are an essential part of the Indian financial system due to the enhancement of competition and diversification in the financial sector, spreading risks specifically at times of financial distress and also recognized as complementary to the banking system at competitive prices.<\/p>\n\n\n\n
The number of NBFCs<\/strong> has increased immensely in the last few years since the venture capital companies, retail and industrial companies have entered into the lending business.<\/p>\n\n\n\nWhat are the Types of <\/strong>Non-Banking Financial Companies?<\/strong><\/h2>\n\n\n\nNBFCs varying types playing a key role in meeting the credit demand unmet by traditional banks. NBFCs are broadly divided into three categories namely:<\/p>\n\n\n\n
- NBFCs accepting deposits from banks (NBFC-D)<\/li>
- NBFCs not accepting\/holding public deposits (NBFC-ND)<\/li>
- Core Investment Companies(CIC)<\/li><\/ul>\n\n\n\n
Further, they are classified into various categories namely:<\/p>\n\n\n\n
- Asset Finance Company (AFC)<\/li>
- Investment Company(IC)<\/li>
- Loan Company(LC)<\/li>
- Infrastructure Finance Company(IFC)<\/li>
- Micro Finance Institution(MFI)<\/li><\/ul>\n\n\n\n
Besides the above categories, the fastest-growing segment of the non-bank lending sector peer-to-peer lending has also recognized as NBFC by the RBI. The growth of P2P lending<\/strong> <\/a>has been facilitated by the power of social networking, which brings like-minded people from all over the world together.<\/p>\n\n\n\nWhat are the Services Provided by the NBFCs?<\/strong><\/h2>\n\n\n\n![\"Non](\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2017\/10\/loan.jpg\")
<\/a><\/figure><\/div>\n\n\n\nNBFCs offer a range of product and services which includes loans and advances, credit facilities, saving and investment plans, acquisition of shares, stock, bonds hire-purchase, insurance business or chit business and money transfer service.<\/p>\n\n\n\n
It also includes private education funding, retirement planning, underwriting stocks and shares, trading in money markets, TFCs (Term Finance Certificate) and other obligations.<\/p>\n\n\n\n
Apart from this, NBFCs also provide wealth management services such as handling portfolios of stocks and shares and discounting services.<\/p>\n\n\n\n
NBFCs are typically into the funding of:<\/h3>\n\n\n\n- Construction equipment<\/li>
- Commercial vehicles and cars<\/li>
- Gold loans<\/li>
- Microfinance<\/li>
- Consumer durables and two-wheelers<\/li>
- Loan against shares, etc.<\/li><\/ul>\n\n\n\n
List of major products offered by NBFCs in India:<\/h3>\n\n\n\n- Funding for commercial vehicles<\/li>
- Funding for infrastructure assets<\/li>
- Retail financing<\/li>
- Loan against shares<\/li>
- Funding for plant and machinery<\/li>
- Project finance<\/li>
- Unsecured personal loans<\/li>
- Trade finance<\/li>
- Venture finance<\/li><\/ul>\n\n\n\n
Small and Medium Enterprises Financing:<\/h3>\n\n\n\n- Financing of specialized equipment<\/li>
- Operating leases of cars, etc.<\/li><\/ul>\n\n\n\n
Types of the instrument generally executed:<\/h3>\n\n\n\n- Loans<\/li>
- Hire purchase<\/li>
- Financial lease<\/li>
- Operating Lease<\/li><\/ul>\n\n\n\n
Why does One Prefer NBFC over Banks?<\/strong><\/h2>\n\n\n\n![\"Non](\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2017\/10\/bank-loan-isometric-concept_1284-10904.jpg\")
<\/a><\/figure><\/div>\n\n\n\nNBFC’s provide all types of financial services similar to banks with two major differences – they do not hold a banking license and they cannot accept monetary deposit from individual customers.<\/p>\n\n\n\n
NBFC’s are recognized as complementary to the banking sector as a result of the implementation of innovative marketing strategies, the introduction of tailor-made products, customer-oriented services, attractive rates of return on deposits and simplified procedures, etc.<\/p>\n\n\n\n
Recommended Article:<\/b> Compliance of Housing Finance Companies in India<\/a><\/mark>.<\/p><\/div>\n\n\n\nIn the past few years, the increased competition from banks in the retail finance segment has led to excess diversification by NBFCs from their core business activities. The NBFCs has introduced various innovative products such as IPO financing, three-wheeler financing, vehicles financing, small personal loans, finance for tires & fuel, asset management, mutual fund distribution, and insurance advisory, etc.<\/p>\n\n\n\n
Moreover, NBFCs are aspiring to emerge as a one-stop-shop for all financial services.<\/p>\n\n\n\n
In recent years, NBFCs have begun to create niches for themselves which are often neglected by banks. These mainly include providing finance to non-salaried individuals, traders, transporters, stockbrokers, etc.<\/p>\n\n\n\n
NBFCs have also offered into riskier segments such as unsecured loans, purchase finance for used commercial vehicles, capital market<\/a> lending, etc. NBFC’s customer profile is concentrated on the self-employed segment.<\/p>\n\n\n\nWhat is the Difference between Banks and NBFCs?<\/h2>\n\n\n\n
NBFCs are an essential part of the Indian financial system due to the enhancement of competition and diversification in the financial sector, spreading risks specifically at times of financial distress and also recognized as complementary to the banking system at competitive prices.<\/p>\n\n\n\n
The number of NBFCs<\/strong> has increased immensely in the last few years since the venture capital companies, retail and industrial companies have entered into the lending business.<\/p>\n\n\n\n NBFCs varying types playing a key role in meeting the credit demand unmet by traditional banks. NBFCs are broadly divided into three categories namely:<\/p>\n\n\n\n Further, they are classified into various categories namely:<\/p>\n\n\n\n Besides the above categories, the fastest-growing segment of the non-bank lending sector peer-to-peer lending has also recognized as NBFC by the RBI. The growth of P2P lending<\/strong> <\/a>has been facilitated by the power of social networking, which brings like-minded people from all over the world together.<\/p>\n\n\n\n NBFCs offer a range of product and services which includes loans and advances, credit facilities, saving and investment plans, acquisition of shares, stock, bonds hire-purchase, insurance business or chit business and money transfer service.<\/p>\n\n\n\n It also includes private education funding, retirement planning, underwriting stocks and shares, trading in money markets, TFCs (Term Finance Certificate) and other obligations.<\/p>\n\n\n\n Apart from this, NBFCs also provide wealth management services such as handling portfolios of stocks and shares and discounting services.<\/p>\n\n\n\n NBFC’s provide all types of financial services similar to banks with two major differences – they do not hold a banking license and they cannot accept monetary deposit from individual customers.<\/p>\n\n\n\n NBFC’s are recognized as complementary to the banking sector as a result of the implementation of innovative marketing strategies, the introduction of tailor-made products, customer-oriented services, attractive rates of return on deposits and simplified procedures, etc.<\/p>\n\n\n\n Recommended Article:<\/b> Compliance of Housing Finance Companies in India<\/a><\/mark>.<\/p><\/div>\n\n\n\n In the past few years, the increased competition from banks in the retail finance segment has led to excess diversification by NBFCs from their core business activities. The NBFCs has introduced various innovative products such as IPO financing, three-wheeler financing, vehicles financing, small personal loans, finance for tires & fuel, asset management, mutual fund distribution, and insurance advisory, etc.<\/p>\n\n\n\n Moreover, NBFCs are aspiring to emerge as a one-stop-shop for all financial services.<\/p>\n\n\n\n In recent years, NBFCs have begun to create niches for themselves which are often neglected by banks. These mainly include providing finance to non-salaried individuals, traders, transporters, stockbrokers, etc.<\/p>\n\n\n\n NBFCs have also offered into riskier segments such as unsecured loans, purchase finance for used commercial vehicles, capital market<\/a> lending, etc. NBFC’s customer profile is concentrated on the self-employed segment.<\/p>\n\n\n\nWhat are the Types of <\/strong>Non-Banking Financial Companies?<\/strong><\/h2>\n\n\n\n
What are the Services Provided by the NBFCs?<\/strong><\/h2>\n\n\n\n
<\/a><\/figure><\/div>\n\n\n\nNBFCs are typically into the funding of:<\/h3>\n\n\n\n
List of major products offered by NBFCs in India:<\/h3>\n\n\n\n
Small and Medium Enterprises Financing:<\/h3>\n\n\n\n
Types of the instrument generally executed:<\/h3>\n\n\n\n
Why does One Prefer NBFC over Banks?<\/strong><\/h2>\n\n\n\n
<\/a><\/figure><\/div>\n\n\n\nWhat is the Difference between Banks and NBFCs?<\/h2>\n\n\n\n
![\"nbfc](\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2017\/10\/finance-concept_1284-6512.jpg\")
<\/a><\/figure><\/div>\n\n\n\n