29 May 2009
A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business, but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property.
A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (residuary non-banking company).
Difference between an NBFC and a Bank-
(i) a NBFC cannot accept demand deposits (demand deposits are funds deposited at a depository institution that are payable on demand -- immediately or within a very short period -- like your current or savings accounts.) (ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and (iii) deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.
01 June 2009
An NBFC can be defined as Private Company registered under the Companies Act, 1956 which is a financial institution and carrying on business by obtaining a license to function as an NBFC from the RBI. Financial institution can be defined as a non banking institution which carries on any of the following activities as its business or as a part of its business –
a. Financing in any form be it loans, advances or otherwise for any activity other than its own. b. Engage in the acquisition of shares, stocks, bonds, debentures or other securities issued by a government or local authority or any other marketable securities of a company, etc. c. Provides for hiring or delivers any goods to a hirer under a Hire Purchase Agreement. d. Insurance business. e. Chit Fund business. f. Collects under a scheme or arrangement otherwise of any sort monies by way of subscription or instruments and otherwise and distributes by way of awarding prices or gifts whether in cash or kind, or in any other manner to the persons from whom money has been collected or to any other person.
But does not include any institution which carried on as its principal business-
a. Agricultural operations. b. Industrial activity. c. The purchase or sale of any goods other than securities or of providing any services. d. Real estate developers provided that the income of such institution shall not arise from financing similar institutions.
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