Non banking financial companies Important details about NBFCs.Non banking financial companies are the Companies which are established under company act 1956. These companies deal in the financial business and lending of money and investing. It does not accept any deposit and it also acts as a financial asset and contributes to the financial inclusion.
Here are some of the important details about the NBFCs which the candidates need to know for their upcoming examination. All those who will qualify the exam will next be called for the personal interview process. Many times questions are asked form the Non banking financial entities and candidates should have the basic idea about the NBFC. Various small banks and private sector banks were earlier working as Non banking financial companies which were later converted to banks. Here are some details about NBFC.
NBFC working and its details
Its principal business is lending, investments in various types of shares / stocks /bonds / debentures / securities, leasing, hire-purchase, insurance business, chit businesses. Also one of its main task is to accept deposits under any scheme or arrangement in one lump sum or in installments.
NBFCs whose asset size is of Rs.100 cr or more as per last audited balance sheet are considered as systemically important NBFCs. The idea behind such classification is that the activities of such NBFCs will have a bearing on the financial stability in our country.
The Reserve Bank of India regulates and supervises Non-Banking Financial Companies which are into the business of (i) lending (ii) acquisition of shares, stocks, bonds, etc., or (iii) financial leasing or hire purchase. Also The Reserve Bank can penalize NBFCs for violating the provisions of the RBI Act or the directions or orders issued by RBI under RBI Act. The penal action can also res-ult in RBI cancelling the Certificate of Registration issued to the NBFC, or prohibiting them from accepting deposits and alienating their assets or filing a winding up petition.
Some important functions of NBFCs
Below are some important functions and operations which are carried out by Non banking financial companies.
- NBFC cannot accept demand deposits
- NBFCs do not form part of the payment and settlement system and cannot issue cheques drain on itself
- deposit ins trance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks