What are the Types of NBFCs?
Non-Banking Financial Companies ("NBFC") have come into prominence post the pandemic and the start-up boom in the country, largely because NBFCs provide seamless and prompt lending services. Different types of NBFCs are registered with the Reserve Bank of India ("RBI") under specific categories. It is essential for businesses to identify whether their operations fall under the ambit of NBFCs, and to ensure compliance with existing and upcoming RBI guidelines and regulations. In the event of non-compliance, a company will be subjected to heavy penalties, which can also hamper its regular operations and flow of revenue. This article elaborates on these categories of NBFCs.
NBFCs are categorised into the following, on the basis of:
1. Liability
On the basis of liability, NBFCs are categorised into deposit-accepting NBFCs and non-deposit-accepting NBFCs.
2. Asset Size
Non-deposit-accepting NBFCs, on the basis of the size of their assets, are further categorised into:
- Systemically Important NBFCs, with asset size more than Rs. 500 crores; and
- Non-Systemically Important NBFCs, with asset size less than Rs. 500 crores.
3. Nature of Activity
On the basis of the activities carried out by an NBFC, there are various types of NBFCs functioning in the country, including asset finance companies, investment companies, loan companies, infrastructure finance companies, microfinance institutions and housing finance companies, amongst others, each governed by its own specific regulatory requirements.
Conclusion
These numerous institutions aid the process of advancing loans to individuals and companies. This, in turn, provides borrowers with the capacity to expand their business and operations, thereby promoting overall development. NBFCs are very flexible with their lending models, and the sector majorly contributes to easy access to funds.
Disclaimer: The content of this article is intended to provide general guidance on the subject matter. Specialist advice should be sought about your specific circumstances.