{"id":2574,"date":"2021-07-13T18:55:33","date_gmt":"2021-07-13T13:25:33","guid":{"rendered":"https:\/\/www.goseeko.com\/blog\/?p=2574"},"modified":"2026-01-21T14:13:42","modified_gmt":"2026-01-21T08:43:42","slug":"what-is-non-banking-financial-institutions-companies","status":"publish","type":"post","link":"https:\/\/www.goseeko.com\/blog\/what-is-non-banking-financial-institutions-companies\/","title":{"rendered":"What is Non-banking financial institutions\/companies?"},"content":{"rendered":"\n

Non-banking financial companies (NBFCs) are those institutions which are non-banking in nature. Initially, The Reserve Bank of India Act, 1934 amended on 1 December 1964 by Reserve Bank Amendment Act, 1963. Moreover, in this new ‘Chapter III-B’ introduced to Regulate ‘Deposit Accepting’ NBFCs. Further, these are registered as company under the Companies Act, 1956. However, they are engaging in the business of loans and advances, acquisition of shares\/stock\/bonds\/debentures\/securities. Moreover, Government or local authority issues such marketable securities. For example, the business of a nature like leasing, hire purchase, insurance business and chit business. <\/p>\n\n\n\n

\"NBFCs\"<\/figure>\n\n\n\n

Therefore, some of the silent features of non banking financial companies are as-<\/p>\n\n\n\n

1. Heterogeneous<\/h2>\n\n\n\n
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  1. Initially, these are heterogeneous in nature. The services provided by each NBFCs are not identical with each other.<\/li>\n<\/ol>\n\n\n\n

    2. Regulations<\/h2>\n\n\n\n

    Secondly, the RBI, SEBI, SCRA, IRDA, Ministry of corporate affairs etc. regulates the non banking financial companies. <\/p>\n\n\n\n

    3. Gap filler<\/h2>\n\n\n\n

    Additionally, it supplements the role of banks by filling the gaps where the banks unable to access. <\/p>\n\n\n\n

    4. Promotes investment and savings<\/h2>\n\n\n\n

    Furthermore, NBFC promotes saving an investment in the economy by protecting consumer interest.<\/p>\n\n\n\n

    5. Capital formation<\/h2>\n\n\n\n

    Lastly, it facilitates capital formation in the economy by mobilizing the funds from surplus sectors to deficit sectors. <\/p>\n\n\n\n

    There are some apparent restrictions to NBFC issued by RBI mainly as given below:<\/p>\n\n\n\n

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    1. Firstly, NBFC company should keep away from accepting demand deposits from any sources.<\/li>\n\n\n\n
    2. Secondly, it can’t issue cheques drawn on itself.<\/li>\n\n\n\n
    3. Further, NBFC Company can’t form part of the payment and settlement system.<\/li>\n\n\n\n
    4. Finally, epositors of a NBFC company cannot have facilities like deposit insurance scheme.<\/li>\n<\/ol>\n\n\n\n

      Further, some of the significant role of NBFC in Indian economy are<\/p>\n\n\n\n

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      • Mobilization of Resources – It converts savings into investments<\/li>\n\n\n\n
      • Capital Formation – Aids to increase capital stock of a company<\/li>\n\n\n\n
      • Provision of Long-term Credit and specialised Credit<\/li>\n\n\n\n
      • Aid in Employment Generation<\/li>\n\n\n\n
      • Help in development of Financial Markets<\/li>\n\n\n\n
      • Helps in Attracting Foreign Grants<\/li>\n\n\n\n
      • Lastly, it helps in Breaking Vicious Circle of Poverty by serving as government’s instrument<\/li>\n<\/ul>\n\n\n\n
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