What is the full form of NBFC?
The NBFC full form is the Non-Banking Financial Companies. It refers to institutions that provide financial services without a banking license or without meeting the legal criteria of a bank. As defined in Section 45-IA of the RBI Act of 1934, these businesses are registered under the Companies Act of 1956 and operate as non-banking financial institutions.
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- An NBFC is largely engaged in lending, stock, equity acquisition, insurance, government-issued bond, chit fund, and many more businesses.
- A business whose primary activities involve agriculture, the sale, purchase, or building of real estate, industrial production, retail sales, etc.
- The major distinction between NBFC and banks is that we can withdraw or deposit cash at any time in a bank, however NBFC does not permit withdrawals or deposits at any time.
- NBFC deposits are not regarded investments in the same way that health insurance premiums or LIC policies are. It consists only of long-term premiums and deposits.
NBFC’s Requirement for RBI certification:
A corporation formed under the Companies Act, of 1956 and desiring to commence a non-banking organization business, as described in Section 45 IA of the RBI Act of 1934, must satisfy the following requirements:
- According to Section 3 of the 1956 Companies Act, it must be disclosed.
- It should have a minimum net worth of 2 crores of rupees. However, the criteria for a minimum net-owned fund can vary between NBFCs.
Few instances of NBFC
- National Housing Bank-supervised housing finance companies (NHB).
- State-controlled chit fund companies as stated in Section 2 of Section (b) of the Chit Funds Act of 1982.
- Stock brokerage firms, merchant banks, and SEBI-governed venture capital financing.
- Nidhi’s businesses are registered under section 620A of the Companies Act, 1956, and supervised by the Ministry of Corporations.
