Dear Aspirants, As per the reference from the previous SBI/IBPS and other bank exams, we have to study more about Banking terms and technology used and existing now. For that the Team IG will provide to you the study materials for Banking Awareness on daily basis. Here today we provide you with the study notes on “Non Banking Financial Company”, get benefitted by the information provided.
A Non Banking Financial Company provides Banking services to People without holding a Bank license. It is a company registered under the Companies Act, 1956 of India, engaged in the business of loans and advances, acquisition of shares, stock, bonds hire-purchase, insurance business or chit business.
But it does not include any institution whose principal business includes agriculture, industrial activity or the sale, purchase or construction of immovable property.
In 1972, Banking Commission recommended Uniform Chit Fund Legislation to whole country. Reserve Bank of India prepared Model Bill to regulate the conduct of chit funds and referred to study group under the Chairmanship of James S. Raj.
Dr Manmohan Singh, former Governor of RBI appointed committee in December 1982 under the Chairmanship of ‘Prof. Sukhamoy Chakravarty’ to review functioning of monetary system in India.
NBFCs perform functions similar to that of banks but there are a few differences between them. They are:
The NBFC is a financial institution which carries out the following operations as their principle business.
Some of the important regulations relating to acceptance of deposits by NBFCs are as under:
An AFC is a company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic, such as automobiles, tractors, lathe machines, cranes, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines. Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising there from is not less than 60% of its total assets and total income respectively.
IC means any company which is a financial institution carrying on as its principal business the acquisition of securities
LC means any company which is a financial institution carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own but does not include an Asset Finance Company.
Infrastructure finance companies which has followings,
IDF-NBFC is a company registered as NBFC to facilitate the flow of long term debt into infrastructure projects. IDF-NBFC raises resources through Multiple-Currency bonds of minimum 5-year maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs.
NBFC Factors has principle business of factoring. Factoring is a financial transaction and a type of debtor finance. In the factoring business the financial assets should constitute at least 75% of its total assets and its income derived from factoring business should not be less than 75% of its gross income.
Gold loan NBFCs witnessed an upsurge in Indian financial market, owing mainly to the recent period of appreciation in gold price and consequent increase in the demand for gold loan by all sections of society, especially the poor and middle class to make ends meet. Though there are many NBFCs offering gold loans in India, about 95 per cent of the gold loan business is handled by three Kerala based companies, viz., Muthoot Finance, Manapuram Finance and Muthoot Fincorp.
Growth of gold loan NBFCs eventuating from various factors including Asset Under Management (AUM), number of branches, and also the number of customers etc. Growth of gold loan NBFCs occurred both in terms of the size of their balance sheet and their physical presence that compelled to increase their dependence on public funds including bank finance and non-convertible debentures.
Residuary Non-Banking Company is a class of NBFC which is a company and has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner and not being Investment, Asset Financing, Loan Company. These companies are required to maintain investments as per directions of RBI, in addition to liquid assets.
This post was last modified on December 27, 2017 1:35 pm