All there is to

All there is to know about Non-Banking Financial Companies      (NBFCs)

Nowadays a lot of advertisements can be seen on televisions and radios and even on You-Tube channels advertising loans in return for gold or against some other property. But, one may wonder if they are small banking organisations.

No, they are non-banking financial companies or NBFCs.

Interested to know more? Read on.

What are NBFCs?

According to the Reserve Bank of India (RBI), a company dealing in acquisition and trading of stocks, bonds,shares, debentures, securities issued by the government, and in the business of providing loans and/or advances, registered under the Companies Act of 1956, is known as a non-banking financial company.

They work and operate as per the norms and rules framed by the Reserve Bank of India and comply with all the conditions posed by them. To know more about them, you can search for List of Nbfc In Pune on the internet to get a better idea about it.

Distinguishing points between a bank and a Non-banking Financial Company:

1. NBFCs don't hold a banking licence. But, they can perform almost all of its functions.
2. Non-banking Financial Companies can’t accept Demand Drafts (DDs)
3. Non-banking Financial Companies can’t issue cheques drawn on itself.
4. Foreign investment is allowed upto 100%
5. It is not required to maintain ratios.

Types of Non-banking Financial Companies:

Based on the number of functions performed by an NBFC, it is categorised into the following types:

1. Asset Finance Company(AFC): It is a financing institution with its primary focus on providing financial aid to industries producing automobiles/ lates/ machinery (light or heavy) in its expansion, or running.
2. Loan company (LC): This company focuses on loan or advance provision. The loan is provided against various collaterals like gold, property, etc.
3. Investment Company (IC): These companies mainly deals with investments in stocks, bonds, securities, etc. provided by the government or other sources. It also deals with its acquisitions.
4. Infrastructure Finance Company (IFC): These are NBFCs who deploy three-quarters of their investment towards infrastructure financing.
5. Infrastructure Debt Fund-Non-Banking Financial companies (IDF-NBFC): These companies raise currency through the Multiple-currency bond. The minimum maturity period must be for 5 years in this bond. The raised amount is transitioned into infrastructural investments.

6. Gold Loan Non-Banking Financial Company (GL-NBFC): These are the most advertised NBFCs in India at present. They can be seen everywhere advertising true loan values against the gold available to the public. They represent the face of NBFCs today. As the name suggests, they provide loans against the gold submitted as collateral. This method is mainly preferred due to its quick processing and easy returns.

7. Residuary Non-Banking Financial companies: These are companies that have all the qualifications to be an NBFC but do not fall under any of the previous categories.

As we can see, there are several other options to invest money, trade in the stock market, obtain loans and manage finances apart from banks. These have the advantage of being user-friendly and not have complicated proceedings that can bedazzle a common an. In case of the reader wanting to see the non-banking financial companies available in their city, they can put this query onto any search engine and type “list of nbfc companies in Pune” to get a list of the NBFC companies.