NBFC Full Form | What is the Full Form of NBFC

NBFC Full Form - Non-Banking Financial Companies

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  Non-Banking Financial Companies

Non-Banking Financial Companies

  • NBFC stands for Non-Banking Financial Companies.
  • It refers to financial institutions that provide banking services without having a banking license or without fulfilling the legal definition of a bank.
  • These institutions are incorporated or registered under the businesses Act, 1956 and do business as a non-banking financial organization as defined under Section 45-IA of the RBI Act, 1934.
  • An NBFC is especially engaged within the business of loans, acquisition of shares, stocks, bonds issued by the govt , insurance business, chit fund business, and more.
  • A corporation whose main business is said to agriculture activity, industrial activity, sale, purchase/construction of immovable property can't be an NBFC.
  • The major difference between NBFC and bank is that in a Bank we will deposit money and withdraw it once we need it, but NBFC doesn't accept deposits and don't provide you the facility to withdraw money once you need it.
  • Deposits in NBFC aren't treated as savings they're basically future deposits or premiums, e.g., the premium you buy your LIC policy, insurance policy, etc.

Examples of NBFC

  • Insurance companies which are regulated by IRDA
  • Merchant Banking companies, stockbroking companies, risk capital fund which are regulated by SEBI
  • Housing finance companies, which are regulated by NHB (National Housing Bank)
  • Chit fund companies, which are defined in clause (b) of section 2 of the Chit Funds Act, 1982, and are regulated by the government
  • Nidhi companies, which are notified under section 620A of the businesses Act, 1956, and are regulated by the company ministry.

Eligibility of an NBFC for registration with RBI

  • A company registered under the businesses Act, 1956 and willing to start out a business of non-banking financial organization as defined under Section 45 IA of the RBI Act, 1934 is required to fulfil the following conditions:
    • It should be registered under Section 3 of the businesses Act, 1956.
    • It should own a minimum net fund of Rs. 2 crore. However, the need of minimum net owned fund for specialized NBFCs could also be different.

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