The full form of NBFC is the Non-Banking Financial Companies. It has to do with financial institutions that offer services without a banking licence or without meeting the requirements for a bank under the law. Such organisations operate as non-banking financial institutions, as defined by Section 45-IA of the RBI Act of 1934, and are registered under the Companies Act of 1956.
- An NBFC is primarily engaged in the lending, stock, equity acquisition, insurance, government-issued bond, chit fund, and a variety of other businesses.
- a company whose main line of business is agriculture, the sale, purchase, or building of real estate, industrial production, sales, etc.
- The main distinction between NBFC & the bank is that while we can withdraw or deposit cash in a bank when we need it, NBFC does not permit these actions when they are required.
- NBFC deposits are not regarded as investments in the same way that money put into a health insurance or LIC policy is not seen as an investment. Just long-term premiums or deposits are being made.
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NBFC’s Requirement for RBI Certification
In order to start a non-banking organisation business as defined in Section 45 IA of the RBI Act, 1934, a corporation registered under the Companies Act of 1956 must meet the following requirements:
- It must be disclosed under Section 3 of the Companies Act of 1956.
- It should have a minimum net fund of Rs. 2 crores. Even yet, different NBFCs may have different requirements for a minimum net-owned fund.