The Non-Banking Financial Company, or NBFC is an institution that provides financial services to both urban and rural customers. The company’s mission is to promote financial inclusion by offering the general public a range of financial products and services. If unsure of your NBFC’s complete form, read for some helpful information. There are also many resources available for general knowledge about NBFCs.
Non-Banking Financial Company
A Non-Banking Financial Company (NBFC) is a company that does not conduct any banking activity. Its main activities are acquiring and selling stocks and shares of other companies. It may also engage in the insurance and chit-fund business. The Ministry of Corporate Affairs (MCA) regulates this type of business.
An NBFC is required by law to maintain its liquid assets in the dematerialized form at its registered office, and it may entrust these securities in another location only with the permission of the RBI. These liquid assets must be used to pay off the depositors. Since these funds are not linked directly to deposits, they are not eligible for Deposit Insurance.
A Non-Bank Financial Corporation (NBFC) is a company that does not operate like a bank. They must raise funds from other sources. Many of them use a process known as alternative lending. They can either lend money directly to customers or work with investors to generate funds.
A Non-Bank Financial Corporation is an organization that offers different types of financial services to consumers. These organizations do not have banking licenses and generally refrain from accepting public demand deposits. They are also referred to as non-bank financial institutions or shadow banks. They provide various financial services, including loans, mortgages, credit cards, and stock acquisition.
An NBFC license is required by law to operate as a financial institution. The Reserve Bank of India supervises these entities. The government’s regulatory framework places the interests of depositors, who place their money in these institutions first. The RBI’s Deposit Insurance and Credit Guarantee Corporation (DICGC) provides insurance to depositors up to a specific limit.
Before applying for an NBFC license, entrepreneurs should meet specific criteria. These include having net-owned funds of at least Rs. 2 crores, having one director from the same field, and having a good CIBIL score. To apply for an NBFC license, entrepreneurs should fill out an application form on the RBI website and submit the required documents.
NBFC regulatory framework
NBFCs are now subject to an extensive statutory and regulatory framework. These frameworks are intended to improve the financial system’s stability by reducing the sector’s risks. The RBI has introduced a framework that divides the sector into three tiers: the base, middle, and upper layers. These layers are based on the risk profile, organizational structure, and corporate governance of the NBFC. All three tiers will be subject to different types of regulatory requirements.
One significant change in the regulatory framework pertains to the appointment of Chief Compliance Officers (CCOs). The role of CCOs in NBFCs is to oversee compliance with regulatory frameworks. They must be appointed for a fixed tenure of not less than three years. However, the CCO can be removed or transferred before the tenure expires. The CCO must be chosen from among the senior executives of the NBFC. This means that he or she should be two levels above the CEO.