{"id":6174,"date":"2023-04-25T12:42:11","date_gmt":"2023-04-25T12:42:11","guid":{"rendered":"https:\/\/www.indifi.com\/blog\/?p=6174"},"modified":"2024-09-26T11:02:32","modified_gmt":"2024-09-26T11:02:32","slug":"what-is-nbfc-and-different-nbfcs-in-india","status":"publish","type":"post","link":"https:\/\/www.indifi.com\/blog\/what-is-nbfc-and-different-nbfcs-in-india\/","title":{"rendered":"What is Non Banking Finance Companies? A Complete Guide\u00a0"},"content":{"rendered":"<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2023\/04\/What-is-NBFC--500x223.jpg\" alt=\"What is NBFC?\" class=\"wp-image-12990\" width=\"838\" height=\"374\" srcset=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2023\/04\/What-is-NBFC--500x223.jpg 500w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2023\/04\/What-is-NBFC--768x343.jpg 768w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2023\/04\/What-is-NBFC--1536x686.jpg 1536w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2023\/04\/What-is-NBFC--2048x914.jpg 2048w\" sizes=\"(max-width: 838px) 100vw, 838px\" \/><\/figure><\/div>\n\n\n<p><\/p>\n\n\n\n<p>These days, there is a growing buzz around Non Banking Finance Companies. Knowing\u00a0what is an NBFC\u00a0and its purpose will help you understand the basic idea of these financial institutions. Continue reading to dig deeper into the concept of the NBFC. You will also learn more about its history and scope, and the different types of NBFCs.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_67_1 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.indifi.com\/blog\/what-is-nbfc-and-different-nbfcs-in-india\/#What_Are_Nonbank_Financial_Companies\" title=\"What Are Nonbank Financial Companies?\">What Are Nonbank Financial Companies?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.indifi.com\/blog\/what-is-nbfc-and-different-nbfcs-in-india\/#History_of_Non_Banking_Finance_Companies_in_India\" title=\"History of Non Banking Finance Companies in India\">History of Non Banking Finance Companies in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.indifi.com\/blog\/what-is-nbfc-and-different-nbfcs-in-india\/#Main_Attributes_of_NBFCs\" title=\"Main Attributes of NBFCs\">Main Attributes of NBFCs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.indifi.com\/blog\/what-is-nbfc-and-different-nbfcs-in-india\/#Types_of_Non_Banking_Financial_Companies\" title=\"Types of Non Banking Financial Companies\">Types of Non Banking Financial Companies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.indifi.com\/blog\/what-is-nbfc-and-different-nbfcs-in-india\/#What_is_the_Difference_Between_a_Bank_and_Non_Banking_Finance_CompaniesNBFC\" title=\"What is the Difference Between a Bank and Non Banking Finance Companies(NBFC)?\">What is the Difference Between a Bank and Non Banking Finance Companies(NBFC)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.indifi.com\/blog\/what-is-nbfc-and-different-nbfcs-in-india\/#The_Takeaway\" title=\"The Takeaway&nbsp;\">The Takeaway&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.indifi.com\/blog\/what-is-nbfc-and-different-nbfcs-in-india\/#FAQs\" title=\"FAQs\">FAQs<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Are_Nonbank_Financial_Companies\"><\/span>What Are Nonbank Financial Companies?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>People often refer to certain financial institutions as NBFCs. The full form of NBFC is non-banking Financial Company \u2014 a financial service provider that is not a bank. An NBFC does not offer standard banking services such as savings accounts or check facilities. It does not hold a bank license.<\/p>\n\n\n\n<p>NBFCs provide a broad spectrum of financial products to help individuals seeking financial services like credits and hire purchases.\u00a0They are known for their customer-friendly credit services, pan-India operations, and easy online accessibility. These companies require registration under the Companies Act of 2013.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a href=\"https:\/\/www.indifi.com\/msme-loans?utm_source=Organic&amp;utm_medium=Blog&amp;utm_campaign=CTA_T\"><img decoding=\"async\" loading=\"lazy\" width=\"500\" height=\"91\" src=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2022\/09\/Avail-MSME-Loan-based-on-GST-Certificate-500x91.jpg\" alt=\"MSME Loan on GST\" class=\"wp-image-11981\" srcset=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2022\/09\/Avail-MSME-Loan-based-on-GST-Certificate-500x91.jpg 500w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2022\/09\/Avail-MSME-Loan-based-on-GST-Certificate.jpg 716w\" sizes=\"(max-width: 500px) 100vw, 500px\" \/><\/a><\/figure><\/div>\n\n\n<p>Also Read:- <a href=\"https:\/\/www.indifi.com\/blog\/how-nbfcs-are-changing-the-business-loan-landscape-in-india\/\">How NBFCs Are Changing the Business Loan Landscape in India?<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"History_of_Non_Banking_Finance_Companies_in_India\"><\/span>History of Non Banking Finance Companies in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A Non-Banking Financial Company (NBFC) provides several financial services comprising leasing, hire-purchases, lending, insurance, deposits, shares, and chit funds. Another term for NBFC is NBFI or Non-Banking Financial Institution. These companies do not require a full banking license to provide financial products and services.<\/p>\n\n\n\n<p>The history of\u00a0NBFC in India\u00a0dates back to the sixties. There was a need to help people access financial services, as banks could not serve them adequately. In 1964, the government introduced the concept of <a href=\"https:\/\/www.rbi.org.in\/commonperson\/English\/Scripts\/FAQs.aspx?Id=1167\" rel=\"nofollow\">NBFCs in the RBI Act<\/a>. This paved the way for establishing NBFCs in India.<\/p>\n\n\n\n<p>NBFCs evolved rapidly during the last few decades by adopting digital technologies and expanding their range of products and services. NBFC operations are similar to banks as they provide loans and financial leasing by accepting money directly or as schemes. But how are they different from banks? Let&#8217;s explore the main attributes of NBFCs, to begin with.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a href=\"https:\/\/www.indifi.com\/msme-loans?utm_source=Organic&amp;utm_medium=Blog&amp;utm_campaign=CTA_M\"><img decoding=\"async\" loading=\"lazy\" width=\"500\" height=\"91\" src=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2024\/01\/Instant-Business-Loan-in-3-Days-500x91.jpg\" alt=\"Instant Business loans for Startups\" class=\"wp-image-6695\" srcset=\"https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2024\/01\/Instant-Business-Loan-in-3-Days-500x91.jpg 500w, https:\/\/www.indifi.com\/blog\/wp-content\/uploads\/2024\/01\/Instant-Business-Loan-in-3-Days.jpg 716w\" sizes=\"(max-width: 500px) 100vw, 500px\" \/><\/a><\/figure><\/div>\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Main_Attributes_of_NBFCs\"><\/span>Main Attributes of NBFCs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NBFCs focus on the micro level. They enable small and medium-sized businesses to manage their cash and liquidity requirements. These are some of the main features of Non-Banking Financial Companies:<\/p>\n\n\n\n<ul>\n<li>The primary functions of NBFCs involve equity acquisition, stocks, loans, insurance, micro-deposits, and government-insured bonds.&nbsp;<\/li>\n\n\n\n<li>NBFCs cannot accept repayable-on-demand deposits.<\/li>\n\n\n\n<li>There is no insurance on deposits with NBFCs.<\/li>\n\n\n\n<li>Non-Banking Financial Companies cannot exceed prescribed interest rates on deposits by RBI.&nbsp;<\/li>\n\n\n\n<li>Non Banking Finance Companies &#8211; customers receive no additional benefits as incentives or gifts.<\/li>\n\n\n\n<li>RBI does not guarantee the repayment of deposits with NBFCs.<\/li>\n\n\n\n<li>An NBFC can accept or renew deposits for a period ranging between a minimum of 12 months and a maximum of 60 months.<\/li>\n<\/ul>\n\n\n\n<p>NBFC meaning in banking\u00a0service does not cover your ability to open current or savings accounts. You cannot deposit and withdraw deposits from a Non-Banking Financial Company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Non_Banking_Financial_Companies\"><\/span>Types of Non Banking Financial Companies<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Broadly, there are two types of\u00a0NBFC in India:\u00a0deposit-accepting and non-deposit-accepting companies. The following are the main NBFCs according to their nature of financial services:<\/p>\n\n\n\n<ul>\n<li><strong>Nidhis<\/strong>: These are mutual benefit finance companies that allow the pooling of funds to achieve specific investment objectives.<\/li>\n\n\n\n<li><strong>Loan Companies<\/strong>: LCs focus primarily on providing advances or loans.<\/li>\n\n\n\n<li><strong>Asset Finance Companies<\/strong>: AFCs help businesses finance physical assets such as agriculture or industrial equipment.<\/li>\n\n\n\n<li><strong>Investment Companies<\/strong>: ICs deliver services for the acquisition of securities.<\/li>\n\n\n\n<li><strong>Infrastructure Finance Companies<\/strong>: IFCs position a minimum of 75 percent of their assets to provide infrastructure loans.<\/li>\n\n\n\n<li><strong>Hire Purchase Companies<\/strong>: These institutions support hire purchase transactions.<\/li>\n\n\n\n<li><strong>Housing Finance Companies<\/strong>: These NBFCs carry out the principal business of providing loans to construct&nbsp;houses.<\/li>\n\n\n\n<li><strong>Chit Funds Companies<\/strong>: These non-banking financial companies operate chit schemes, i.e. they accept periodic deposits over a fixed period from a definite number of subscribers.\u00a0<\/li>\n<\/ul>\n\n\n\n<p>Also Read:- <a href=\"https:\/\/www.indifi.com\/blog\/government-business-loan-schemes-for-msmes-in-india\/\">MSME Scheme \u2013 Best Government Business Loan Schemes for MSMEs<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Difference_Between_a_Bank_and_Non_Banking_Finance_CompaniesNBFC\"><\/span>What is the Difference Between a Bank and Non Banking Finance Companies(NBFC)?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term non-banking financial company means that these companies are not banks. However, most activities of NBFCs are like banks except for some main differences. These are a few highlights of NBFC Vs Bank services on various parameters:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Parameters<\/strong><\/td><td><strong>NBFCs<\/strong><\/td><td><strong>Banks<\/strong><\/td><\/tr><tr><td><strong>Broad meaning<\/strong><\/td><td>Financial services companies require no banking licenses.<\/td><td>Government-authorized institutions require a banking license.<\/td><\/tr><tr><td><strong>Legal compliance<\/strong><\/td><td>Companies Act, 2013<\/td><td>Banking Regulation Act, 1949<\/td><\/tr><tr><td><strong>Eligibility of foreign investment<\/strong><\/td><td>Eligible for 100 percent foreign investment.<\/td><td>Eligible for up to 74 percent foreign investment.<\/td><\/tr><tr><td><strong>Reserve funds<\/strong><\/td><td>Not mandatory<\/td><td>Mandatory<\/td><\/tr><tr><td><strong>Availability of insurance on deposits<\/strong><\/td><td>Not available<\/td><td>Available<\/td><\/tr><tr><td><strong>Credit creation<\/strong><\/td><td>NBFCs cannot create credit.<\/td><td>Banks can create credit.<\/td><\/tr><tr><td><strong>Transactional services<\/strong><\/td><td>No transactional services are available.<\/td><td>Provide diverse transactional services.<\/td><\/tr><tr><td><strong>Payment and settlement cycle<\/strong><\/td><td>Do not take part in the payment and settlement cycle.<\/td><td>Banks are part of payment and settlement cycles.<\/td><\/tr><tr><td><strong>Purpose of deposits<\/strong><\/td><td>NBFCs accept deposits as security.<\/td><td>Banks accept a deposit as their primary function. These are payable to depositors on demand.<\/td><\/tr><tr><td><strong>Cash Reserve Ratios and Statutory Liquidity Ratios<\/strong><\/td><td>Maintenance of CLR and SLR is not mandatory.<\/td><td>Banks must maintain CLR and SLR.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>Also Read:- <a href=\"https:\/\/www.indifi.com\/blog\/lines-of-credit-online-lenders-vs-traditional-banks\/\">Lines of Credit: Online Lenders vs. Traditional Banks<\/a><\/p>\n\n\n\n<p>Non Banking Finance Companies and banks are separate entities with unique business models and regulatory provisions. Unlike banks, NBFCs do not require a banking license, though it performs similar operations. <\/p>\n\n\n\n<p>Here are few reasons <a href=\"http:\/\/Why Choose NBFCs Over Banks For A Business Loan In India\">why to choose NBFC over bank<\/a>?<\/p>\n\n\n\n<p>NBFCs do not provide transactional services like online payments, cash deposits, and withdrawals, unlike banks. The services by banks include cheque payments, fund remittance, credit and debit card facilities, and savings or current account services. Unlike banks, NBFCs ensure<a href=\"https:\/\/www.indifi.com\/business-loan\/nbfc-loan\"> faster loan approval<\/a> and disbursement.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Takeaway\"><\/span>The Takeaway&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Non-banking financial companies provide several financial services to small and medium companies and individuals. These companies do not require banking licenses to deliver financial products and services but need registration under the Companies Act of 2013. <\/p>\n\n\n\n<p>The primary operations of NBFCs focus on loans, equity acquisition, insurance services, government bonds, and housing finance services.<\/p>\n\n\n\n<p>Deposit-accepting and non-deposit-accepting non-banking financial companies are the main types of NBFCs. Non-banking financial companies cater to the diverse requirement of different segments of society, as banking services cannot provide comprehensive financial help. NBFCs provide the benefits of end-to-end financial services, smooth application processes, and faster loan processing.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong>Name few best non banking financial companies?<\/strong><\/p>\n\n\n\n<p>These are few names of non banking financial companies. <a href=\"https:\/\/www.indifi.com\/\">Indifi Technologies Pvt Ltd<\/a>, Indifi Capital , Bajaj Finserv, Power Finance Corporation Limited, Mahindra &amp; Mahindra Financial Service, Shriram Transport Finance Company, Muthoot Finance Ltd,<\/p>\n\n\n\n<p><strong>What are the services offer by NBFC?<\/strong><\/p>\n\n\n\n<p>Services Provided by NBFCs:<\/p>\n\n\n\n<ul>\n<li>Personal Loans<\/li>\n\n\n\n<li>Business loans<\/li>\n\n\n\n<li>Loans for buying vehicles<\/li>\n\n\n\n<li>Home Loans<\/li>\n\n\n\n<li>Loans against gold<\/li>\n\n\n\n<li>Credit Card services<\/li>\n\n\n\n<li>Small loans for low-income individuals or businesses (Microfinance)<\/li>\n\n\n\n<li>Insurance services<\/li>\n\n\n\n<li>Services for leasing and buying things in installments (hire purchase)<\/li>\n\n\n\n<li>Help with investments and managing assets<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>These days, there is a growing buzz around Non Banking Finance Companies. Knowing\u00a0what is an NBFC\u00a0and its purpose will help you understand the basic idea of these financial institutions. Continue reading to dig deeper into the concept of the NBFC. You will also learn more about its history and scope, and the different types of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[141],"tags":[],"_links":{"self":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/6174"}],"collection":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/comments?post=6174"}],"version-history":[{"count":21,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/6174\/revisions"}],"predecessor-version":[{"id":13017,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/posts\/6174\/revisions\/13017"}],"wp:attachment":[{"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/media?parent=6174"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/categories?post=6174"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.indifi.com\/blog\/wp-json\/wp\/v2\/tags?post=6174"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}