A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 which is engaged in the business of loans and advances, acquisition of shares/ bonds/ stocks/securities/debentures issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, chit business, insurance business but does not include any institution whose principal business is that of industrial activity, agriculture activity, sale or purchase of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. NBFCs are those companies which are not a proper uniform bank and don't hold a banking license, but provide a variety of helpful and supportive services to borrower, investors and public deposits in selected sectors of business.
The most preferred are for NBFC registration is finance and leasing, investment fund, hire-purchase, insurance business, an instrument of capital and money market, commercial and industrial loans & advances, deposits, etc.
NBFC can raise funds from the public, directly or indirectly, and can freely lend them to ultimate spenders. The minimum tenure to accept deposits is 12 months (1 year), and the maximum period consists of 60 months (5 years). NBFC advance loans to the various small, wholesale, and retail traders as well as self-employed persons. NBFC is very popular due to attractive interest rates on the investors’ deposits.
A Non Banking Financial Company is a company incorporated under the Companies Act, 2013 or The Companies Act 1956 which is engaged in financial activities comparable to that of a bank.
The working and operating of NBFCs are regulated by the Reserve Bank of India (RBI) within the framework of the Reserve Bank of India Act. Section 45-IA provides that no NBFC shall commence or carry on the business of a Non- Banking Financial Institution without obtaining a Certificate of NBFC Registration which can only be issued by the Reserve Bank of India. Easy to register and Easy Compliances
To accept public deposits, NBFCs should follow all the terms and conditions, and rules and regulations prescribed in the Non-Banking Financial Companies Acceptance of Public Deposits Directions, 1998.