BM Module-4 Cont.

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8/8/2019 BM Module-4 Cont. http://slidepdf.com/reader/full/bm-module-4-cont 1/13 Non-Banking Financial Company (NBFC) Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956. It is engaged in the business of loans, securities, insurance, chit funds etc. They also provide products/services that includes margin funding, leasing and hire purchase, corporate loans, investment in nonconvertible debentures, IPO funding, small ticket loans, venture capital etc.

Transcript of BM Module-4 Cont.

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Non-Banking Financial Company (NBFC)

Non-Banking Financial Company (NBFC) is a

company registered under the Companies Act,

1956. It is engaged in the business of loans,

securities, insurance, chit funds etc. They alsoprovide products/services that includes margin

funding, leasing and hire purchase, corporate loans,

investment in nonconvertible debentures, IPO

funding, small ticket loans, venture capital etc.

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NBFC¶s

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Some of the prominent NBFCs in Indiaare:

Infrastructure Development FinanceCorporation (IDFC)

Rural Electric Corporation ( REC)

Industrial Finance corporation of India (IFCI )

GE Capital

Till March 2009 there were 12,739 NBFCsout of which 336 NBFCs were permitted to

accept public deposits.

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NBFCs are different from Banks

NBFCs cannot accept demand deposits

(Demand deposits are funds deposited in aninstitution, that are payable immediately ondemand e.g.: Savings account, Currentaccount etc)

A NBFC cannot issue cheques, to their customers and is not a part of the paymentand settlement system

Deposit insurance facility of Deposit Insurance

Credit Guarantee Corporation (DICGC) is notavailable for NBFC depositors

They are allowed to accept/renew publicdeposits for a minimum period of 12 months

and maximum period of 60 months.

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CONT.

They cannot offer interest rates higher than the

ceiling rate prescribed by RBI from time to time.

(Currently the ceiling rate is 12.5%)

They cannot offer gifts/incentives or any other 

additional benefit to the depositors.

They should have minimum investment grade credit

rating, from the credit rating agencies.

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3. The NBFCs are allowed to accept/renew public

deposits for a minimum period of 12 months andmaximum period of 60 months. They cannot

accept deposits repayable on demand.

4. NBFCs cannot offer interest rates higher than

the ceiling rate prescribed by RBI from time totime. The present ceiling is 12.5 per cent per  

annum. The interest may be paid or compounded

at rests not shorter than monthly rests.

5. NBFCs cannot accept deposits from NRI except

deposits by debit to NRO account of NRI provided

such amount do not represent nward remittance or 

transfer from NRE/FCNR account.

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Cont.

6. NBFCs withnet owned fund (NOF) of less

than Rs. 25 lakhs (with or without credit

rating) are not entitled to accept public

deposits.

7. Evaluation of the quality of management in

respect of the promoters/directors is taken

into consideration while giving allowance for taking public deposits.

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Eligibility Criteria for Starting NBFC

Initial Procedure

The Start up NBFC should be incorporatedunder the Companies Act, 1956.

It should be registered with RBI, under Section 45-I of the RBI Act, 1934

The company is required to submit the

application for registration in the prescribedformat along with necessary documents for RBI's consideration. RBI then issuescertificate of registration after satisfying itself 

that the conditions as enumerated in Section

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Cont.

After downloading the EXCEL based

application form, data should be keyed in, it

can be uploaded in the RBI's Secure website

https://secweb.rbi.org.in. Once uploaded, thecompany will get a CoR (Company Application

Reference Number). Subsequently, the

company should take the hard copy of the

same with the supported documents andsubmit it to the concerned regional office.

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Cont.

Certain category of NBFCs like Venture CapitalFund/Merchant Banking Companies/Stock BrokingCompanies etc need not be registered with RBI they

are governed by SEBI. Insurance companies holding a valid certificate of 

registration are regulated by IRDA.

Housing finance companies regulated by National

Housing Bank.

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Indigenous Bankers

Money Lenders

Chit Funds

Nidhis

Loan Companies

Finance Brokers

UNORGANISED SECTOR OF THE MONEY

MARKET

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Nationalization And Social

Responsibilities of Banking

Achievements:

Increase in banks and number of branches.

Increase in bank deposits.

Increase in bank credit Priority sector lending.

Reduction in regional imbalances in banking

facilities.

Increase in rural and semi urban branches

Class banking to mass banking

Social banking

Development banking