Non-Banking Financial Institutions in India
Explore the world of Non-Banking Financial Institutions (NBFCs) in India, their functions, types, advantages, and disadvantages. Learn about the differences between NBFCs and commercial banks, their regulatory frameworks, and the role they play in the financial markets and institutions. Discover the key features and regulations governing NBFCs, providing insights for M.Com IVth Semester students studying Financial Markets and Institutions.
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Study Material for M. Com IVth Semester Students. Subject: Financial Markets and Institutions Topic: Non Banking Financial Institutions Prof. Rajeev Prabhakar, Department of Commerce, DDU Gorakhpur University, Gorakhpur
NON BANKING FINANCIAL INSTITUTIONS
INTRODUCTION NBFC stands for Non-Banking Financial Company. In India, NBFCs are registered under the Companies Act, 1956. The number of non-banking financial companies has expanded considerably after the industrial, retail and venture capital companies entered the lending business. Some of the NBFCs operating in India are NABARD, PFCL, Infrastructure Development Finance Company Limited, Shree Global, Reliance Capital, Shriram Transport Finance, Muthoot Finance, LIC Housing Finance and RECL.
FUNCTIONS OF NBFCS Provides Banking services to People without holding a Banklicense. An NBFC cannot accept DemandDeposits. An NBFC is not a part of the payment and settlement system and assuch. An NBFC cannot issue Cheques drawn onitself. Deposit insurance facility of the Deposit Insurance and Credit Guarantee Corporation isnot available for NBFC depositors, unlikebanks. An NBFC is not required to maintain Reserve Ratios (CRR, SLRetc.) An NBFC cannot indulge Primarily in Agricultural, Industrial Activity, Sale-Purchase, Construction of ImmovableProperty. Foreign Investment allowed up to100%.
ADVANTAGES OF NBFCS Lenient conditions for getting a loan in comparison to traditional banks Approve smaller loan sizes Borrower evaluation based on known history of the business
DISADVANTAGES OF NBFCS An NBFC cannot accept demand deposits as it falls within the realm of activity of commercial banks. An NBFC is not a part of the payment and settlement system and as such an NBFC cannot issue cheques drawn on itself. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors unlike in case of banks.
COMMERCIAL BANK V/S NBFC Cheque can be issued Cheque can t be issued Less rate of interest High rate of interest Regulated by BRA and RBI Hold a varieties of assets Regulated by SEBI, companies Act, RBIetc Hold one type of asset
TOP 10 NBFC IN INDIA RELIANCE CAPITAL L&T FINANCE LIMITED MAHINDRA & MAHINDRA FINANCIAL SERVICES LIMITED (MMFSL) SUNDARAM FINANCE SHRIRAM TRANSPORT FINANCE COMPANY LIMITED LIC HOUSING FINANCE LIMITED INDIABULLS HOUSING FINANCE LIMITED POWER FINANCE CORPORATION LIMITED BAJAJ FINSERV HDFC
