What is NBFCs?
* A NBFCs is a Company registered under the companies act, 1956 and is engaged in the business of loans, advances, acquisition of Shares/Stock/Bonds/Debentures/Securities issued by the government or local authority or other securities of like marketable nature, leasing, hire purchase, insurance business, chit business.
* 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.
Difference between Bank and NBFCs.
1. Definition.
* Banking is acceptance of deposits withdrawable by cheque or demand, NBFC cannot accept demand drafts.
* NBFCs are companies carrying financial business.
2. Scope of Business.
* Scope of the business of banks is limited to sec 16 (1) of Banking regulation act.
* There is no bar on NBFC carrying activity other than financial activity.
3. The major limitation on business.
* No Non-banking activities are carried.
* Cannot provide checking facilities
4. Foreign Investment
* Up to 74% is allowed to private sector bank.
* Up to 100% is allowed
5. Need for a license
* License norms are tightly controlled and generally it is perceived to be quite difficult to get a license for a bank.
* It is comparatively much easier to get registration as an NBFCs.
6. Regulation.
* Banking Regulation Act and RBI act lay down the stringent control over the bank.
* Much lesser control over NBFCs.
ROLE of NBFCs,
* Development of sectors like transport and infrastructure.
* Substantial employment generation.
* Help and increase wealth creation.
* Broad-based economic development.
* Major trust on semi-urban, rural areas and first-time buyers/user.
* To finance economically weaker sections.
IMPORTANCE of NBFCs.
* In the present economic environment, it is very difficult to cater to the need of society be banks alone so the role of non-banking finance companies and microfinance companies become indispensable.
* The role of NBFCs as effective financial intermediaries has been well recognized as they have inherent ability to make quicker decisions, assume greater risks, and customize their services and charges more according to the needs of the clients.
* At present, NBFCs in India have become prominent in a wide range of activities like hire purchase finance, equipment lease finance, loans, investments, etc.
* To help in developing a large number of industries as well as an entrepreneur in different sectors of different areas.
* To cover all the areas which are being untouched or uncovered by RBI or other FCIs.
TYPES of NBFCs.
* Loan company
* Infrastruct and finance company
* Investment company
* Asset finance company
* Microfinance institutions
* Infrastructure Debt Fund.
* Other
Some BIG NBFCs in India
* Birla global finance
* Cholamandalam investment & finance co. LTD
* Muthoot Finance
* first leasing company in India
* LIC housing finance
* Sundaram Finance
* CanFin homes
* Countrywide finance
* sakura capital India LTD.
* Sakura capital India LTD.
* Sharekhan
* TATA Capital
* Indiabulls home loan
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