What is the full form of NBFC?
The full form of NBFC is the Non-Banking Financial Companies. It relates to assets institutions providing financial services without the need for a banking licence or without a bank’s legal definition being fulfilled. Such entities are registered under the Companies Act, 1956 and, as specified under Section 45-IA of the RBI Act, 1934, do operation as a non-banking financial institution.
- An NBFC is primarily involved in the business of loans, stocks, equity acquisition, insurance business, government-issued bonds, chit fund business, and much more.
- An organization whose principal business is linked to agriculture, sale, purchase or construction of immovable property, industrial production, sale and so on.
- The key difference among NBFC & the bank in which we can withdraw or deposit cash in a bank when we required it, but NBFC does not allow withdrawals or deposit cash when it is necessary.
- NBFC deposits are not considered as investments, like the amount you invest for your health insurance or LIC policy and so on. It is just long-term premiums or deposits.
NBFC’s Requirement for RBI certification:
A corporation registered under the Companies Act, 1956 and willing to start a non – banking organization business, as specified in Section 45 IA of the RBI Act, 1934, is needed to deal with the applicable conditions:
- Under Section 3 of the Companies Act, 1956, it should be reported.
- It should own an Rs . 2 crores minimum net fund. Even so, the criteria for a minimum net-owned fund for specific NBFCs can differ.
Few examples of NBFC
- Housing finance firms regulated by the National Housing Bank (NHB).
- Chit fund firms as described in Section 2 of Section (b) of the Chit Funds Act, 1982, and controlled by the state government
- Stockbroking companies, merchant banking companies, SEBI controlled venture capital finances
- Businesses of Nidhi that are registered under section 620A of the Companies Act, 1956, and governed by the Ministry of Corporations.