What is NBFC(Non Banking Financial Companies)

What is NBFC

Today we are going to discuss What is NBFC, Types of NBFC, Difference between NBFC and Bank, Services provided by NBFC, Top NBFCs in India.

One of the best ways to make money in the stock market is to select the best performing industry and start investing in that industry. If the industry is performing well, you can also create better profits from the investment. NBFC has been one of the top-performing industries in India for the last few years.

What is NBFC?

The full form of NBFC is Non-Banking Financial Companies. An NBFC is a company incorporated under the Companies Act 1956, and it is involved in the business of financial services. These companies provide financial services like loans, credit facilities, retirement planning, etc., to the clients without holding a banking license from RBI(Reserve Bank of India).

Types of NBFC

  • Investment Company: Investment companies mainly deals with stocks and their acquisition
  • Asset Finance Company: These companies provide finance to automobiles, machines, industrial machines, generators, etc
  • Loan Companies: These companies provide finance to the public.
  • Systemically Important Core Investment Company: These companies whose asset value is Rs 500 crores and above are considered systemically important NBFC. They invest 90% of their assets in stocks, debt instruments, etc.
  • Infrastructure Finance Company: These are the companies involved in the business of providing loans to the infrastructure companies. They deploy 75% of their total assets in infrastructure loans.
  • Micro Finance Institution: These companies provide small loans to individuals who do not have banking facilities.

Difference between NBFC and Bank

Without holding a banking license from RBI, NBFC provides financial services to the public.It is government authorized mediator which provide financial services to the public
It was incorporated under companies Act 1956It is incorporated under Banking Regulation Act 1949
They cannot accept demand depositThey can accept demand deposit
Foreign investment is allowed upto 100%Foreign investment is allowed up to 74% for private sector banks
Deposit Insurance is not availableBank deposits are insured up to 1 lakh 
Transaction services are not provided by NBFCTransaction services are provided by bank
NBFC no need to maintain any SLR or CRRBanks should maintain SLR(statutory liquidity ratio) and CRR(Cash Reserve Ratio) as directed by RBI

Services provided by NBFC 

Here is the list of services provided by NBFC

  • loans and advances
  • Retirement Planning
  • saving and investment plans
  • credit facilities 
  • stock services
  • acquisition of shares
  • insurance business 
  • chit fund business 

Top NBFCs (Non-Banking Financial Companies) in India

Company NameAbout CompanyMarket CapitalizationShare Price
Power Finance Corporation LimitedThe company provide financial assistance to the power sector.32209 CrRs 110.95
Shriram Transport Finance Company LimitedThe company provides financial services like commercial vehicle loans, life insurance, Business loans etc.34633 CrRs 1061.85
Bajaj Finance LimitedThe Company provide financial services like personal loans, small business loans, etc.423512 CrRs 6472.5
Mahindra & Mahindra Financial Services LimitedThe company provides financial services like mortgage loans, insurance,etc.20633 CrRs 141.05
Muthoot Finance LtdThe company provide financial services like gold loans, personal loans, money transfer, foreign exchange, etc58893 CrRs 1425.5
CholamandalamThe Company provide financial services like vehicle finance, home loans, home equity loans, etc.53681 CrRs 640.5
Sundaram Finance LimitedThe company provide financial services like car loans, commercial vehicle loans, construction equipment loan, etc1434 CrRs 73.4
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