The Companies Act, 2013 & Related Query: HOW TO START N.B.F.C. COMPANY IN INDIA

NON BANKING FINANCING COMPANY

BACKGROUND

The non-banking financial companies (NBFCs) are those companies which do not possess proper banking licenses, like the commercial or co-operative banks, but offer a variety of very supportive and helpful services to public depositors, borrowers, and investors in some selected areas of business. Again, these NBFCs not only help them (through bridging the gap between them) for commercial or financial profits and progress, but also act as a welcome and reliable intermediary between them and the institutions in the banking and financial sector of the country. Consequently, the number of NBFCs is ever-growing in most of the fast progressing and prosperous countries of the world, inevitably including India.

AREA OF NBFCs

The usual and most preferred business areas of these NBFCs are leasing and finance, deposits, commercial and industrial loans and advances, insurance business, hire-purchasing, investment funds, instruments of the capital and money markets, chit business, and many other similar activities. Since December 2006, there exist three broad categories of NBFCs in India --- Asset Finance Companies (AFCs), Loan Companies (LCs), and Investment Companies (ICs).

TYPES OF NBFCs

NBFCs REGULATIONS IN INDIA

All various activities, transactions, and working of the NBFCs of India are regulated, supervised, and strictly controlled by the RBI, in complete accordance with the regulations and provisions which are provided in the Chapter III B of the RBI Act of 1934. NBFCs in general, are subject to the following regulations (NBFC regulations) of the RBI of India which are promulgated from time to time by this apex financial institution of the country:

NBFCs are not authorized by the law to accept demand deposits (which are liable to be demanded suddenly at any future point of time) from public depositors or investors.

NBFCs are now empowered to issue cheques to their customers for payment or settlement purposes.

The securing facility of the Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of NBFCs; and therefore, RBI does not guarantee fair and punctual repayment of the deposits by these companies.

All NBFCs are not permitted to accept conditional deposits from public depositors; only duly rated companies can do so, with recommended Minimum Investment Grade Credit (MIGC) rating.

Again, the eligible NBFCs can accept/ renew deposits for a fixed period that varies from one year to five years.

NBFCs are not allowed to provide higher or greater interest rates than the recommended ceiling rate by the RBI, at the specified point of time. At present, the maximal amount of interest any Non-Banking Financial Company of India can provide to its depositors is 12.5% per annum.

NBFCs are not permitted or privileged by the RBI to provide any extra or additional benefits/ incentives/ gifts to their customers or depositors, than those usually offered by the banks.

STATUS IN INDIA

In India also, non-banking financial companies (NBFCs) have attained high and huge reputation as vital and great complementary to the institutions in the financial and banking sector of India, for providing all-round and lavish support to public borrowers, traders, investors, and industrialists. These companies play an immensely supportive and beneficial role in between the institutions in the banking and financial sector and the public. The most common and main areas covered by the NBFCs are commercial or industrial loans and advances, public deposits, investment funds and chit business, stocks and bonds, leasing, hire-purchasing, insurance business, and a variety of other similar activities. Today, there are three broad and main categories of NBFCs in India --- loan companies, asset finance companies, and investment companies. Various requirements for the non-banking financial company registration (NBFC registration) in India.