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Non-Banking Financial Company (NBFC)
Non-Banking Financial Company (NBFC) is a
company registered under the Companies Act,
1956. It is engaged in the business of loans,
securities, insurance, chit funds etc. They alsoprovide products/services that includes margin
funding, leasing and hire purchase, corporate loans,
investment in nonconvertible debentures, IPO
funding, small ticket loans, venture capital etc.
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NBFC¶s
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Some of the prominent NBFCs in Indiaare:
Infrastructure Development FinanceCorporation (IDFC)
Rural Electric Corporation ( REC)
Industrial Finance corporation of India (IFCI )
GE Capital
Till March 2009 there were 12,739 NBFCsout of which 336 NBFCs were permitted to
accept public deposits.
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NBFCs are different from Banks
NBFCs cannot accept demand deposits
(Demand deposits are funds deposited in aninstitution, that are payable immediately ondemand e.g.: Savings account, Currentaccount etc)
A NBFC cannot issue cheques, to their customers and is not a part of the paymentand settlement system
Deposit insurance facility of Deposit Insurance
Credit Guarantee Corporation (DICGC) is notavailable for NBFC depositors
They are allowed to accept/renew publicdeposits for a minimum period of 12 months
and maximum period of 60 months.
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CONT.
They cannot offer interest rates higher than the
ceiling rate prescribed by RBI from time to time.
(Currently the ceiling rate is 12.5%)
They cannot offer gifts/incentives or any other
additional benefit to the depositors.
They should have minimum investment grade credit
rating, from the credit rating agencies.
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3. The NBFCs are allowed to accept/renew public
deposits for a minimum period of 12 months andmaximum period of 60 months. They cannot
accept deposits repayable on demand.
4. NBFCs cannot offer interest rates higher than
the ceiling rate prescribed by RBI from time totime. The present ceiling is 12.5 per cent per
annum. The interest may be paid or compounded
at rests not shorter than monthly rests.
5. NBFCs cannot accept deposits from NRI except
deposits by debit to NRO account of NRI provided
such amount do not represent nward remittance or
transfer from NRE/FCNR account.
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Cont.
6. NBFCs withnet owned fund (NOF) of less
than Rs. 25 lakhs (with or without credit
rating) are not entitled to accept public
deposits.
7. Evaluation of the quality of management in
respect of the promoters/directors is taken
into consideration while giving allowance for taking public deposits.
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Eligibility Criteria for Starting NBFC
Initial Procedure
The Start up NBFC should be incorporatedunder the Companies Act, 1956.
It should be registered with RBI, under Section 45-I of the RBI Act, 1934
The company is required to submit the
application for registration in the prescribedformat along with necessary documents for RBI's consideration. RBI then issuescertificate of registration after satisfying itself
that the conditions as enumerated in Section
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Cont.
After downloading the EXCEL based
application form, data should be keyed in, it
can be uploaded in the RBI's Secure website
https://secweb.rbi.org.in. Once uploaded, thecompany will get a CoR (Company Application
Reference Number). Subsequently, the
company should take the hard copy of the
same with the supported documents andsubmit it to the concerned regional office.
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Cont.
Certain category of NBFCs like Venture CapitalFund/Merchant Banking Companies/Stock BrokingCompanies etc need not be registered with RBI they
are governed by SEBI. Insurance companies holding a valid certificate of
registration are regulated by IRDA.
Housing finance companies regulated by National
Housing Bank.
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Indigenous Bankers
Money Lenders
Chit Funds
Nidhis
Loan Companies
Finance Brokers
UNORGANISED SECTOR OF THE MONEY
MARKET
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Nationalization And Social
Responsibilities of Banking
Achievements:
Increase in banks and number of branches.
Increase in bank deposits.
Increase in bank credit Priority sector lending.
Reduction in regional imbalances in banking
facilities.
Increase in rural and semi urban branches
Class banking to mass banking
Social banking
Development banking