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NBFC full form is Non Banking Financial Company. It is a financial institution established under the Companies Act, 2013, and regulated by the Reserve Bank of India (RBI). In this blog post, we shall explain what an NBFC is, its various functions and different types of NBFCs in India.
NBFC full form is Non Banking Financial Company. It is a financial institution that is registered under the Companies Act, 2013, and authorized by the Reserve Bank of India (RBI) performs banking-like functions such as providing various types of loans and credit facilities as well as investment and wealth management services.
However, it does not have a full banking license, which means it cannot accept demand deposits like savings or checking accounts. NBFCs play a crucial role in financial inclusion as many of them extend their services to individuals and businesses in areas where traditional banking services are inaccessible or limited.
To set up an NBFC, a certificate of registration (COR), sometimes known as an NBFC license, must be obtained from the Reserve Bank of India. Popular NBFCs in India include Bajaj Finance, Shriram Finance, L&T Finance, Muthoot Finance, Tata Capital and HDB Financial Services.
The key functions of NBFCs are as follows :-
To offer loans like personal loans, home loans, gold loans, etc., to individuals, especially those who have limited access to formal banking services.
To offer small loans (microfinance) to individuals and small businesses with low income for income-generating activities.
It acts as an intermediary for life, health and general insurance products.
To fund early stage businesses having high growth potential.
To boost job creation in the Indian economy by supporting businesses that create employment opportunities.
Another key function of the NBFC is to provide funding for large scale projects like power, road and telecommunication, which many traditional banks tend to avoid.
In India, the major types of NBFCs registered with the RBI are as follows :-
NBFC - Investment and Credit Company :- NBFC - Investment and Credit Company is an NBFC type. Its purpose is to provide finance for various activities (excluding its own activities) through loans, advances and investments.
NBFC - Housing Finance Company :- The purpose of this NBFC is to provide finance for housing and housing-related activities like acquisition, construction and renovation.
NBFC - Infrastructure Finance Companies :- The primary purpose of setting up this type of NBFC is to provide long term funding for the infrastructure projects.
NBFC - Microfinance Institutions :- The microfinance institutions are NBFCs that provide small loans and financial services to low income households, small vendors and underserved populations in rural/urban areas.
NBFC - Account Aggregators :- This type of NBFC acts as an intermediary for secure digital sharing of financial data between customers and different financial institutions.
NBFC - Core Investment Companies :- This type of NBFC is set up for investment. It acquires shares and securities for the purpose of holding a stake in its group companies rather than for trading.
NBFC stands for Non Banking Financial Company. It is a type of financial institution that offers loans, investment and wealth management services to individuals and businesses. The RBI is responsible for registering and monitoring the NBFCs in India. Without approval from the RBI, it is not possible to establish an NBFC in the country.
Need assistance in securing NBFC license from the RBI? Connect with our experts at Registrationwala.
Q1. What is NBFC full form?
A. NBFC full form is Non-Banking Financial Company. They are registered under the Companies Act, 2013, and are established to provide loans, credit facilities, investment, wealth management services, etc., to individuals and businesses.
Q2. Who regulates NBFCs in India?
A. The Reserve Bank of India (RBI) is responsible for regulating the NBFCs in India.
Q3. What are the different types of NBFCs in India?
A. The different types of NBFCs in India are Investment & Credit Companies (ICC), Infrastructure Finance Companies (IFC), Microfinance Institutions (MFI), Core Investment Companies (CIC), Account Aggregators (AA) and Housing Finance Companies (HFC). Each and every type of NBFC serves a specific purpose.
Q4. Is an NBFC a bank?
A. No, an NBFC is not a bank. Although it offers banking-like services like loans and investments, it doesn’t possess a full banking license.
Q5. Can an NBFC accept demand deposits?
A. No, an NBFC cannot accept demand deposits unlike the traditional banks.
Disclaimer: While we have made every effort to provide accurate and up-to-date information in this article, we do not guarantee the completeness or 100% accuracy of the information to our readers. This content is for informational purposes only and should not be treated as business, legal or financial advice. Registrationwala will not be responsible for any losses or debts incurred as a result of information provided in this article.
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