NBFC Full Form

What is the full form of NBFC?

The full form of NBFC is the Non-Banking Financial Companies. NBFC is a business registered under the Companies Act of 1956 that engages in the business of advances and loans, acquisition of securities/stocks/shares/debentures/bonds issued by the local authorities, government or other marketable securities of a like nature including leasing, hire-purchase, chit business, and insurance business. It excludes agriculture related institutions whose main line of business is that of agriculture activity and industrial activity. A non-banking financial company also receives deposits under any scheme or arrangement on a single occasion, in installments through contributions, or in any other way as its primary activity.

Eligibility Criteria for an NBFC for Registration With RBI

The following conditions must be fulfilled by a business that is established under the Companies Act of 1956 to create an NBFC as defined in Section 45 IA of the Reserve Bank of India (RBI) Act of 1934:

• It must be registered as per Section 3 of the Companies Act of 1956.

• It must have a minimum net fund of Rs. 2 crores. For specialized NBFCs, the minimum net-owned fund requirement could be different.

NBFCs that are Exempt from RBI Registration.

• Core investment and merchant banking firms

• Companies associated with stock-broking

• Housing Finance Corporations

• Companies linked to venture capital business

• Insurance companies having an Insurance Regulatory and Development Authority (IRDA) registration certificate

• Chit fund and Nidhi companies (that abide by the act)

Requirements to Incorporate an NBFC

Along with fulfilling the basic eligibility criteria, the company must have the following:

• One-third of the members of the Board of Directors must have financial expertise.

• The business's CIBIL data ought to be clear.

• A comprehensive five-year business plan is required of the corporation.

• The business must abide by Foreign Exchange Management Act (FEMA) regulations as well as capital compliance criteria.

Difference between a bank and NBFC

i. Demand deposits are not accepted by NBFCs.

ii. Because NBFCs are not the components of the payment and settlement system.

iii. NBFC depositors do not have access to the Deposit Insurance, unlike banks.

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