NBFC’s
MADE BY-
PRIYA TIWARI
SUDHANSHU GOYAL
INTRODUCTION
• NBFC is a company registered under the
Companies Act 1956.
• It is also registered under RBI Act-1934,u/s 45
1(A).
• Engaged in the business of loans, leasing,
hire-purchase, chit-business etc.
DEFINITION
Non-Banking Financial Companies(NBFCs) are financial
institutions that provide banking services without
meeting the legal definition of a bank , i.e. one that
does not hold a banking license. However this
depends on the jurisdiction, as in some jurisdictions,
such as New Zealand, any company can do the
business of banking, and there are no banking licenses
issued.
PURPOSE OF CREATION OF NBFC
• Banks-Financial Institution-reached the major
section of every country of the world.
• Still there are some rural , underprivileged and
underserved sections in each of the nations.
• Requirement of the services of some financial
institutions which could cater to their needs.
• Lead to the creation of the NBFC.
NBFC IS DIFFERENT FROM BANK
• A NBFC can’t accept demand deposits.
• A Bank interact with customers directly while a NBFC
interacts with Banks and Government.
• Banks-covered major section of the nation-but still
some under-served sections exist-need for financial
institutions for them-NBFCs CAME INTO PICTURE.
• NBFC COVERS SOME UNENTERTAINED AREAS LIKE-
• -EQUIPMENT LEASING
• -LOANS
• -CHIT-FUNDING etc.
TYPES OF NBFC’s
TYPES
NBFC’s as described by RBI-
• EQUIPMENT-LEASING COMPANY;
• HIRE-PURCHASE COMPANY;
• LOAN COMPANY;
• INVESTMENT COMPANY;
LOAN COMPANY
Loan company means a company which is a
financial institution carrying on as it’s principal
business for providing finance whether by
making loans or advances or otherwise for any
activity but does not include an equipment
leasing company or a hire-purchase finance
company.
HIRE-PURCHASE COMPANY
• Hire purchase (frequently abbreviated to HP) is the legal
term for a contract developed in the United Kingdom.
• In cases where a buyer cannot afford to pay the asked
price for an item of property as a lump sum But, can
afford to pay a percentage as a deposit, a hire-purchase
contract allows the buyer to hire the goods for a monthly
rent.
• ‡When sum equal to the original full price plus interest
has been paid in equal installments.
• ‡the buyer may then exercise an option to buy the goods
at a predetermined price (usually a nominal sum) or
return the goods to the owner.
INVESTMENT COMPANY
An investment company is a company whose
main business is holding securities of other
companies purely for investment purposes. The
investment company invests money on behalf
of its shareholders who in turn share in the
profits and losses.
EQUIPMENT FINANCE COMPANY
EQUIPMENT LEASE –
An agreement that specifies the rights and
obligationsbetween a lessor (who owns equipment)
and a lessee (to whom the lease gives certain rights
to possess and use the equipment).
• Obtaining the use of machinery, vehicles or other
equipment on a rental basis.This avoids the need to
invest capital in equipment.
• Ownership rests in the hands of the financial
institution or leasing company,while the business has
the actual use of it.
ROLES PLAYED BY NBFC
• Suppliers of loans and credit.
• Trading money market instruments.
• Underwrite stocks and shares.
• Education loans.
• Advice Companies.
• Portfolio Management of stocks and shares.
• Provide discounting services.
FINAL WORDS
CONCLUSION
• The future of the Non-Banking Financial Companies
would depend largely on their performance in the
present slowdown.
• It will be a deciding factor for their future scope
and role in the emerging global financial markets.
• In the PRESENT SCENARIO, it is very essential for
them to come up with best of customer services
round-the-world because this is the basic strength
of this sector.
• They need to explore all possible opportunities but
also need to strengthen their BASICS too!!!
