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Investor: Session 18 - Non Banking Financial Institutions

This document outlines the key differences between banks and non-banking financial institutions (NBFCs) in India. It defines an NBFC as a non-banking company that provides financial services like financing, securities acquisition, hire purchase, insurance, and more. NBFCs supplement banks by providing a more flexible structure and range of services. The document discusses the types of NBFCs and their registration and regulation process. It concludes by classifying NBFCs according to the RBI into asset finance companies, investment companies, and loan companies based on their principal business activities.

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Pavan Parashar
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86 views10 pages

Investor: Session 18 - Non Banking Financial Institutions

This document outlines the key differences between banks and non-banking financial institutions (NBFCs) in India. It defines an NBFC as a non-banking company that provides financial services like financing, securities acquisition, hire purchase, insurance, and more. NBFCs supplement banks by providing a more flexible structure and range of services. The document discusses the types of NBFCs and their registration and regulation process. It concludes by classifying NBFCs according to the RBI into asset finance companies, investment companies, and loan companies based on their principal business activities.

Uploaded by

Pavan Parashar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Investor

Session 18 Non Banking Financial Institutions

Outline
Difference between banking and non-bankig companies Types of NBFCs Registration and Regulation Classification of NBFCs

Banks vs NBFCs
Banks
Take Deposits Demand Deposits Issue cheques Borrow from RBI

NBFCs

X
X

What is a NBFC?
A company which carried on as its business or part of its business the following activities:

- financing - acquisition of securities - hire purchase - insurance - chit fund - mutual benefit company
But does not include a company which carries on as its principal business: - agricultural operations, - industrial activities - Sale and purchase of goods - providing of services - purchase, sale and construction of immovable property

Role and Types of NBFCs


Supplement the role of banks More flexible structure than banks Provide a range of services

-Types: : Hire purchase finance company : Investment company : Mutual Benefit Financial Company (MBFC) : Equipment Leasing Company : Miscellaneous Non banking Co. (MNBC) : Residuary Non-banking company (RNBC) : Housing Finance Companies : Insurance companies : Stock broking companies : Merchant banking companies : Primary Dealers

Registration and Regulation

Microfinance Company?

Classification of NBFCs
As per RBI from Dec. 2006, the classification is as : Asset finance companies Investment companies Loan companies

Asset finance companies: any 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, earth moving and material handling equipments, 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.

Classification of NBFCs

Classification of NBFCs
Investment companies: A NBFC which satisfies the following: (i) 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; (ii) 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; iii) it does not trade in its investments in shares, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment; iv) it does not carry on any other financial activity 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.

Classification of NBFCs
Loan companies : means any company which is a financial institution carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own but does not include an equipment leasing company or a hire-purchase finance company

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