Introduction

RBI amendment act 1997 was the amendment edition of RBI act, 1934. For better regulation in the sector of NBFC, Rbi modified some of the rules. RBI act amendment can control these companies, their audits, deposit acceptance, assets etc. Under the RBI amendment act 1997, section 45 A, NBFCs can actively do business.

What is NBFC?

The NBFCs or Non-Banking Financial Companies financial institutions that act as a bank. Though they function as a bank, they don’t have a banking license and amendment to the RBI act. Such companies can be in action doing banking operations, but they have limitations. These financial institutions do not provide traditional banking services such as saving accounts or readily available funds.

NBFC Highlights:

NBFC or Non-Banking Finance Company can provide the services like a bank. As a financial institution, NBFCs have certain limitations with amendments to the RBI Act. They can not clench their banking license.

Insurance companies, Mortgage lenders, Investment Banks belong to the NBFC categories. Apart from them, Hedge funds, Money market funds are considered the NBFC.

The biggest reason for these companies’ expansion is that they can better meet credit demands than banks.

Operations by NBFCs:

Under the companies act 1956, the services provided by NBFCs salient features are-

  • Lending loans and advancements
  • Investments in stocks, bonds, equity, debentures, and government securities
  • Chit -funds and lease
  • Any kind of insurance business
  • currency exchange
  • P2P lending
  •  Those companies involved with agriculture or product buying and selling do not belong to NBFCs

Government NBFCs

There are several governments. NBFCs such as theses who fall within the ambit of RBI Regulations and RBI act amendment. There are so many operations which are done by NBFCs as discussed above such as Under the companies act 1956, the services provided by NBFCs are- Lending loans and advancements, investments in stocks, bonds, equity, debentures, and also government securities, Chit -funds and lease, Any kind of insurance business, salient features currency exchange, P2P lending.                                                                                   We are not discriminating between the NBFCs on their basis of ownership. But to exempt the govt companies as conforming to section 617. The companies act has applicability to the provision of the RBI Act relating to maintenance of the liquid asset. However, the statutory registration requirements for these govt companies are under section45- IA of the RBI Act, 1956 shall continue.

Additional Terms and Conditions for grant of certificate of Registration:

  1. Instances have been brought to the notice of some NBFCs changing their name, such as adding infected tags, which gives a view of taking advantage of the capital market sentiments. The change in their name is into the principal business of the NBFC becoming non-financial, thereby affecting its eligibility under section 45-IA (4). Any violation of these acts, including cancellation of the registration certificate, is already guaranteed.
  2. Submission of information on Permanent.
  3. Account Numbers (PAN) allotted by I.T.
  4. Department in respect of all the Directors of NBFCs.

The main functions of RBI

Here are some of the main functions of RBI, such as

  • Issue of Bank Notes

  • Banker to Government

  • Lender of Last Resort

  • Controller of Credit

  • Custodian of cash reserves of commercial banks

  • Custodian of currency’s foreign currency reserves

  • Central clearance and accounts settlement

These are some of the main features of RBI, which needs to be remembered every time.

What is the processor to issue notes by the RBI?

One of the most important responsibilities of the RBI is to issue notes, as the RBI has the sole responsibility to issue the currency. Except for the one rupee note issued by the Ministry of Finance.

The concentration of the notes issue function with the reserve bank has several advantages.

  1. The uniformity in issuing notes.

  2. The state supervision becomes possibly effective.

  3. It becomes very easier to control and regulate credit in accordance.

  4. The faith of the public is kept at the paper currency.

 Conclusion:

RBI circulates some guidelines for NBFCs and banks to regulate the financial system well. Certain acts come under RBI Act 1934. There are also certain sections and clauses. Salient features: For any kind of bank exams and other competitive exams, it is very crucial to understand them all. In this article, we have shared various information regarding this topic, RBI amendment Act, RBI act amendment and RBI salient features in detail.