NON BANKING FINANCIAL COMPANIES (NBFCS)

Non-banking financial institutions (NBFIs), engaged in varied financial activities are part of the Indian financial system providing a range of financial services. NBFCs are incorporated under the Companies Act, 1956. NBFCs can be classified into two broad categories, viz., (i) NBFCs accepting public deposit (NBFCs-D) and (ii) NBFCs not accepting/holding public deposit (NBFCs-ND). Residuary Non-Banking Companies(RNBCs) are another category of NBFCs whose principal business is acceptance of deposits and investing in approved securities. In the interest of depositors, RBI has evolved a regulatory framework the salient features of which are outlined below for the guidance of depositors.

1. NBFCs holding CoR for accepting Public Deposits
2. Non-Deposit taking Systemically Important (NBFC-ND-SI) companies registered with RBI
3. NBFCs not accepting Public Deposits other than NBFC-ND-SI registered with RBI
4. Companies whose Certificate of Registration (CoR) has been cancelled
5. Non-Banking Financial Companies – Micro Finance Institutions (NBFC-MFIs)
6. List of Infrastructure Debt Fund (NBFC-IDF) registered with RBI
7. NBFC-Factors registered with RBI
8. Core Investment Companies (CICs) registered with RBI
9. Asset Finance Companies (NBFC-AFCs) registered with RBI
10. Infrastructure Finance Companies (NBFC-IFCs) registered with RBI
11. NBFC- Peer to Peer (P2P) registered with RBI
12. Deposit accepting NBFCs registered with RBI that have been prohibited from accepting deposits under Section 45 MB of RBI Act,1934
13. Asset Reconstruction Companies (ARCs) registered with RBI
14. Investment and Credit Companies (NBFC-ICC) registered with RBI

NOTE: The Department of Non-Banking Supervision (DNBS) is entrusted with the responsibility of regulation and supervision of Non-Banking Financial Companies (NBFCs) under the regulatory – provisions contained under Chapter III B and C and Chapter V of the Reserve Bank of India Act, 1934.

The Regulatory and Supervisory Framework of the Reserve Bank provides for, among other things, registration of NBFCs, prudential regulation of various categories of NBFC, issue of directions on acceptance of deposits by NBFCs and surveillance of the sector through off-site and on-site supervision. Deposit taking NBFCs and Systemically Important Non-Deposit Accepting Companies are subjected to a greater degree of regulation and supervision. The focus of regulation and supervision is three fold, viz., a) depositor protection, b) consumer protection and c) financial stability.

The Reserve Bank has also been empowered under the RBI Act 1934 to take punitive action which includes cancellation of Certificate of Registration, issue of prohibitory orders from accepting deposits, filing criminal cases or winding up petitions under provisions of Companies Act in extreme cases.

Source: RBI

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