About the term
NBFC:
A Non-Banking
Financial Company (NBFC) is a company registered under the Companies Act, 1956
engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities
issued by Government or local authority or other marketable securities of a
like nature, leasing, hire-purchase, insurance business, chit fund business.
Difference
between BANK & NBFC:
NBFCs lend and
make investments and hence their activities are akin to that of banks; however
there are a few differences as given below:
i. NBFC cannot
accept demand deposits;
ii. NBFCs do
not form part of the payment and settlement system and cannot issue cheques
drawn on itself;
iii. deposit
insurance facility of Deposit Insurance and Credit Guarantee Corporation is not
available to depositors of NBFCs, unlike in case of banks.
Different
types/categories of NBFCs registered with RBI:
NBFCs are
categorized
a) In terms of
the type of liabilities into Deposit and Non-Deposit accepting NBFCs,
b) Non deposit
taking NBFCs by their size into systemically important and other non-deposit
holding companies (NBFC-NDSI and NBFC-ND) and
c) By the kind
of activity they conduct.
Within this
broad categorization the different types of NBFCs are as follows:
i. Asset Finance Company(AFC) : An AFC is a company which is a financial
institution carrying on as its principal business the financing of physical
assets supporting productive/economic activity, such as automobiles, tractors,
lathe machines, generator sets, earth moving and material handling equipments,
moving on own power and general purpose industrial machines.
ii. Investment Company (IC) : IC means any company which is a financial institution carrying on
as its principal business the acquisition of securities.
iii. Loan Company (LC): LC means any company which is a financial institution carrying on as
its principal business the providing of finance whether by making loans or
advances or otherwise for any activity other than its own but does not include
an Asset Finance Company.
iv. Infrastructure Finance Company (IFC): IFC is a non-banking finance company
a) which
deploys at least 75 per cent of its total assets in infrastructure loans,
b) has a
minimum Net Owned Funds of Rs. 300 crore,
c) has a
minimum credit rating of ‘A ‘or equivalent d) and a CRAR of 15%.
v. Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC) :
IDF-NBFC is a company registered as NBFC to facilitate the flow of long term
debt into infrastructure projects. IDF-NBFC raise resources through issue of
Rupee or Dollar denominated bonds of minimum 5 year maturity. Only
Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs.
vi. Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI): NBFC-MFI is a non-deposit taking
NBFC having not less than 85%of its assets in the nature of qualifying assets
which satisfy the following criteria:
a. loan disbursed by an NBFC-MFI to a borrower with a rural household annual
income not exceeding Rs. 60,000 or urban and semi-urban household income not
exceeding Rs. 1,20,000.
b. tenure of the loan not to be less than 24 months for loan amount in excess
of Rs. 15,000 with prepayment without penalty;
vii. Non-Banking Financial Company – Factors (NBFC-Factors): NBFC-Factor is a non-deposit
taking NBFC engaged in the principal business of factoring. The financial
assets in the factoring business should constitute at least 75 percent of its
total assets and its income derived from factoring business should not be less
than 75 percent of its gross income.
Register with RBI:
A company
incorporated under the Companies Act, 1956 and desirous of commencing business
of non-banking financial institution as defined under Section 45 I(a) of the
RBI Act, 1934 should comply with the following:
i. it should be
a company registered under Section 3 of the companies Act, 1954
ii. It should
have a minimum net owned fund of Rs 200 lakh.
Deposits in NBFC:
a) Presently, the maximum rate of interest an NBFC can offer
is 12.5%. The interest may be paid or compounded at rests not shorter than
monthly rests.
b) The NBFCs are allowed to accept/renew public deposits for
a minimum period of 12 months and maximum period of 60 months. They cannot
accept deposits repayable on demand.
c) The deposits
with NBFCs are not insured.
d) The repayment
of deposits by NBFCs is not guaranteed by RBI.
Brief about RNBC
a) Residuary
Non-Banking Company is a class of NBFC which is a company and has as its
principal business the receiving of deposits, under any scheme or arrangement
or in any other manner and not being Investment, Asset Financing, Loan Company.
b) These companies are required to maintain investments as per directions of RBI,
in addition to liquid assets.
c) The amount payable
by way of interest, premium, bonus or other advantage, by whatever name called
by a RNBC in respect of deposits received shall not be less than the amount
calculated at the rate of 5% (to be compounded annually) on the amount
deposited in lump sum or at monthly or longer intervals; and at the rate of
3.5% (to be compounded annually) on the amount deposited under daily deposit
scheme.
d) Further, a RNBC can accept deposits for a minimum period of 12 months
and maximum period of 84 months from the date of receipt of such deposit. They
cannot accept deposits repayable on demand.
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