Today we will discuss what is the NBFC full form in banking. NBFC full form in banking sector is a much-discussed word in banking.
The NBFC full form in banking is “Non-Banking Financial Company“. NBFC full form in banking refers to financial institutions that offer banking services without having a banking license or without complying with the bank’s legal definition of a bank.
A Non-Banking Financial Company (NBFC) is registered under the Indian Companies Act 2013. NBFCs are involved in the business of loans and advances, acquisition of shares, bonds, stock, hire-purchase, insurance business and chit-fund business. NBFCs do not include agriculture activity, industrial activity, sale/purchase/construction of the immovable property, purchase or sale of any goods (other than securities).
Top10 NBFC company in India-
Power Finance Corporation Limited
Shriram Transport Finance Company Limited
Bajaj Finance Limited
Mahindra & Mahindra Financial Services Limited
Muthoot Finance Ltd
HDB Finance Services
Tata Capital Financial Services Ltd
L & T Finance Limited
Aditya Birla Finance Ltd
Details about NBFC full form in banking-
NBFCs can offer banking services, such as loans and credit facilities, foreign exchange, retirement planning, money markets, subscription and merger activities. The main difference between NBFC and the bank is that, in a bank, you can deposit money and withdraw it when you need it, but NBFC does not accept deposits and does not offer the facility of withdrawing money when the depositor needs it. NBFC deposits are not treated as savings, they are basically long-term deposits. NBFC examples are Investment banks, mortgage lenders, money market funds, insurance companies, hedge funds, private equity funds, and P2P lenders.
Types of NBFCs:-
1) Asset Finance Company is a company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic activity, such as automobiles, tractors, lathe machines, generator sets, earthmoving and material handling equipment, 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 therefrom is not less than 60% of its total assets and total income respectively.
2) Investment Company means any company that is a financial institution carrying on as its principal business acquiring securities.
3) Loan Company means any company that is a financial institution carrying on as its principal business providing finance whether by making loans or advances or otherwise for any activity other than its own but does not include an Asset Finance Company.
4) Infrastructure Finance Company is a non-banking finance company
a) which deploys at least 75 per cent of its total assets in infrastructure loans,
b) has a minimum Net Owned Funds of `300 crore,
c) has a minimum credit rating of ‘A ‘or equivalent,
d) a CRAR of 15%
5) Systemically Important Core Investment Company(CIC-ND-SI) is an NBFC carrying on the business of acquisition of shares and securities which satisfies the following conditions:-
a) it holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, debt or loans in group companies;
b) its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its Total Assets;
c) it does not trade in its investments in shares, debt or loans in group companies except through block sale for dilution or disinvestment;
d) it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies;
e) Its asset size is `100 crore or above, and
f) It accepts public funds.
6) Infrastructure Debt Fund-Non- Banking Financial Company (IDF-NBFC) is a company registered as NBFC to facilitate long-term debt flow into infrastructure projects. IDF-NBFC raise resources through the issue of Rupee or Dollar denominated bonds of minimum 5-year maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs.
7) NBFC-Factor is a non-deposit taking NBFC engaged in the principal business of factoring. The financial assets in the factoring business should constitute at least 50 per cent of its total assets and its income derived from the factoring business should not be less than 50 per cent of its gross income.
8) Mortgage Guarantee Company are financial institutions for which at least 90% of the business turnover is mortgage guarantee business or at least 90% of the gross income is from mortgage guarantee business and the net owned fund is Rs. 100 crore.
Powers of the Reserve Bank-
The Reserve Bank has been given the powers under the RBI Act, 1934 to register, lay down policy, issue directions, inspect, regulate, supervise and exercise surveillance over NBFCs that meet the 50-50 criteria of principal business.
The Reserve Bank can penalize NBFCs for violating the provisions of the RBI Act or the directions or orders issued by RBI under the RBI Act. The penal action can also result in RBI cancelling the Certificate of Registration issued to the NBFC, or prohibiting them from accepting deposits and alienating their assets or filing a winding-up petition.