Different types of NBFC’s in India

Overview

NBFC means Non-Banking Financial Company. NBFC includes insurance companies, huge stock –Broking Company or companies which provide loans for vehicle, homes, machinery, and aircraft or even sometimes for your mobile phones also. You must have heard the name of Bajaj finserv, the company which provides financial assistance for tangible goods like AC, Mobile, fridge etc.

In crisp, NBFC registration provides you a diverse range of specific financial services without offering traditional banking facilities. India is the only country in the world which permits license in ten different type of NBFC to the Financial Institution.

Basic Category of NBFC

NBFC’s are broadly classified in –

1. Terms of liabilities in Deposit and Non- Deposit Accepting NBFCs
    
2. Size and Systematically important and other Non-Depositing Holding  Companies
    
3. Kind of activity of the company

Hence, there are ten different types of NBFCs companies that are discussed below –

1. Asset Finance Company

It is a financial institution that facilitates the service of financing the various assets for individuals and the businesses which include machinery, heavy industrial equipment, production and farming equipment and large power generators.

The income arising from there from should not less be than the 60% of its total assets. UTI AMC, ICICI AMC, BIRLA SUN LIFE AMC are few examples of asset management company.
 

2. Investment Company

It is a financial institution whose principal business is the acquisition of securities. In a simple term, these companies take money from the public which invested in various securities and financial products.

Thereafter, company deducts its operational cost from the earned profit and later distribute to shareholders. Bajaj Alliance General Insurance Company, IDFC, HDFC mutual fund are examples of some Investment company.

3. Loan Company

Loan Company as its name states is a financial institution which offers loan for various purposes other than of the AMC which also includes the Housing Finance Firms.

LIC finance ltd, PNB Housing Finance Firm, HDFC are some examples of the Loan companies.

4. Infrastructure Finance Company

It is a Non- Banking Finance Company –

1. That deploys three- fourth of its total assets in infrastructure loans
    
2. That has a minimum  Net Owned Fund of 300crores
    
3. That has minimum ‘A’ credit rating or equivalent
    
4. CRAR of 15%

Few examples are GMR infrastructure ltd, Hindustan Construction Company.

5. Systematically Important Core Investment Company

It is a Non- Banking Finance Company –

1. That deploys 90% of its total assets in the form of investment in shares, stocks, debt or loan group company.
    
2. Out of 90%, 60% should be invested in equity shares or those which compulsorily converted later in equity shares.
    
3. Does not carry any activity referred in section 45(c) or 45(f) of RBI act 1934.
    
4. That accepts public funds

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6. Infrastructure Debt Fund

IDFs raise resources through bonds for long-term infrastructure projects. The bonds are issued in multiple currencies to ensure that have they had a five –year maturity for investors.  

7. Microfinance Company

People in the urban, semi-urban or rural area of India need financial help to start their business and fulfill other requirements but they are hesitant to seek the help from banks because of the formalities which need to fulfill to get the required money.

Now, here the microfinance company come out, they provide financial help to these underprivileged people. Bandhan Financial Service Ltd, Ujjivan Financial service are few examples.

8. NBFC (Factor)

These types of NBFCs in India are low. These companies usually buy loans at a much discounted rate from lenders and after that, they adjust repayment table of the debtor to ensure facile settlement adding small profit.

9. Mortgage Company

It is a financial institution where -

• At least 90% of the business turnover is of mortgage guarantee or
   
• At least 90% of the gross income is from mortgage guarantee business or
   
• Net owned Fund is 100 crores

 

10. Non- operative Financial Holding Company

It is a separate category of NBFCs which is wholly owned Non-operative financial holding company permitted to set up or hold the bank as well as another financial service with the permission of RBI under applicable regulatory prescription.

Conclusion

We have just explained the few NBFC companies on the basis of their activity and in case you have any doubt, then please email us at info@hubco.in.