Every Thing You Wanted To Know About Nbfcs In India

By Author: Real Estate
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NBFC companies are essentially non-banking financial companies that are either deposit taking or non-deposit taking. If the NBFC is a non-deposit taking entity it will have a suffix ND to it. In India, the non-banking financial entities have a huge significance in terms of providing economic stability. These entities, which are not banks, offer lending services which are at par with the banks. They also accept deposits from the general people but these deposits are essentially term deposits.

Services offered by non-banking financial companies

Typically, most of the NBFCs provide all kinds of banking services such as credit and loan facilities, retirement planning, underwriting stocks and shares, retirement planning and private education funding. These financial entities also provide wealth management services like portfolio management of shares and stocks, merger and acquisition activities and discounting of instruments. In the recent times, the number of non-banking financial companies has grown significantly and they have emerged as the popular lending institution for industrial and retail companies. These non-banking ...
... companies also help individuals for property investment and provide market study reports for the business organizations.

Types of NBFCs

There are different types of non-banking financial institutions and in the NBFCs in India are divided based on their function. Some of the common types of NBFC Companies India are listed below:

AFC – Asset Finance Company

The major function of these financial companies is to provide funds to industry owners for purchase of business assets like machines, automobiles, machines and material equipment.

LC - Loan Companies

The major function of this type of financial institution is to provide loans and make cash advances to the businesses. The loan offered can be used for any purpose other than buying assets like getting working capital or get funds for business expansion.

IFC – Infrastructure Finance Company

Any company that has a net worth of over Rs. 300 Crore and has more than 75% of its assets deployed in infrastructure loans it is called IFC. Another important criteria for the company to be classified as IFC are to have at least an A-credit rating or above.

IDF – Infrastructure Debt Fund

A debt fund essentially means a pool of investments in which the core holdings are fixed income investments. The IDFs, as the name suggests, are meant to infuse funds into the infrastructure segment. The significance of this type of funds is that it is only different from other types of funds but also it is difficult as compared to other types of funding because it is a huge requirement and has long term requirement.

MFI – Micro Finance Institution

MFI is a non-deposit non-banking finance company that has a minimum of 85% of its assets in the form of micro-finance. Also, the finance should be given in the form of a loan to people who have an annual income of Rs. 60,000 (for rural areas) and Rs. 120,000 (for urban areas). The loan amount must not be more than Rs. 50,000 and the maximum duration for the repayment of the loan should be more than 24 months. In addition, the loans must be provided without obtaining any collateral. Lastly, the loan repayment module is monthly, weekly or fortnightly based on the borrower’s discretion.