Non-banking financial company

A Non-Banking Financial Company (NBFC) is a financial institution that provides banking services but does not have a banking license. These institutions are thus not allowed to accept demand deposits from the public. An NBFC is generally a company that is involved in the business of acquiring shares, debentures, bonds, securities issued by government, marketable securities, stocks and others but does not include an institution involved in agricultural activity, industrial activity, sale and purchase of goods other than securities and services. It is registered under the Companies Act, 2013 (earlier Companies Act, 1956) and RBI Act, 1934 under section 45 – IA.

NBFCs act as a bridge between the depositors and the borrowers. It has nowadays become an alternative for banking services and the financial sector due to their ability to provide financial solutions to society.


Here are some highlighting features of NBFC:

The NBFCs are allowed to accept public deposits for a minimum of 12 months and a maximum of 60 months but are not allowed to accept demand deposits.

NBFCs cannot offer interest rates more than the ceiling rate approved by RBI.

It is not allowed to offer any gift, incentive or additional benefit to the customers.

It offers a wide range of financial services including insurance, loans for homes, machinery, etc.

Provides credit facilities, credit loans and encourage investments

Helps in the development of the financial market


Although bank and NBFC provides financial solutions to their customers yet some features are different in them. These features include:


Below given are the NBFCs which are registered with RBI.

Assets Finance Company

Infrastructure Finance Company

Infrastructure Debt Fund

Investment Company

Loan Company

Microfinance Institution

Systematically Important Core Investment Company

Functions of NBFC

NBFCs perform various functions for the welfare of the society as well as for economic development. Some of them are:

Accept deposits in the form of various schemes (lump sum amount or multiple installments)

Finance economical weaker sections of the society

Help in wealth creation and movement of funds

Better standard of living

Generate employment opportunities

Help in the economic development of the country

Improve the transportation sector

Make a huge contribution to the state exchequer


NBFC usually provides two types of services – related to lending and related to deposits. These services include:

1. Hire Purchase Services: Hire purchase means buying the goods on installments. Under this, NBFC helps the individuals in their hire purchase transactions and financing of such activities.

2. Rural Financing: it includes providing finance to rural people for farm loans, small vehicles, farming equipment, and tools, etc.

3. Retail Financing: in this, NBFC provides short term funds for a loan against some security in the form of gold, shares, property, etc. This is generally provided for consumption purposes.

4. Trade Finance: it includes providing finance to dealers, vendors or distributors for meeting their working capital requirements, and other business loans.

5. Infrastructural Funding: under this, a major portion of funds are lent for maintaining infrastructure such as flyovers, ports, roads, railways, etc.

6. MSME financing: MSME forms a major part of the economy, thus NBFC helps MSME in raising funds for their small businesses.


To get an NBFC registered, it is necessary to fulfill below-given conditions:

Registration: The Company must be registered under section 3 of the Companies Act, 2013

Qualification: At least one-third of the directors must have 10+ years’ experience in fiancé and must be employed as a full-time director

Business plan: the company must have a detailed and ready operation plan for the next 5 years

Net owned fund: there must be equity paid-up share capital of at least Rs 2 Crore. It must not include preference share capital. The premium on share and reserves can be included.

Loan credit history: It must have a good CIBIL score of the company, its directors and members. There must not be any write off on the repayment of the loan to NBFC or Bank

FDI compliance: the company must comply with the FEMA Act (if any foreign investment is estimated)


To register your company as an NBFC, there are some documents which are compulsory to be submitted with RBI. These documents include:

Certified copy of Certificate of Incorporation (CoI)

Latest KYC details

Net worth certificate of directors, members, and Company

Qualification proofs of the directors and the members

Company details – PAN, GST number, address of the company

Bank account details having at least 2 crore deposit and well audited for the last 3 years

Banker’s report

Board resolution

Underwriting model

Information and technology policy

Complete plan of the organization


There are some compliances which are compulsory for NBFCs. These are:

CIC registration

C-KYC registration

CERSAI registration

Adoption of Fair Practice Code

FIU – IND registration

COSMOS registration

Secretarial compliances

Compliance of KYC Anti-money Laundering

Filing NBS – 9 on COSMOS


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