Types of NBFCs

We can define NBFCs (Non-banking Financial Company ) as it is incorporated under the Companies Act, 1956 that is engaged in the provision of borrowings, the profitability of equity approved by Governmental leadership or even other cash equivalents of a like disposition, renting, recruitment, insurance work, but does not provide any institution whose primary business is agriculture, industrial activity, purchase or sale of real estate. We can define NBFCS (non-banking financial company) as a company that receives payments at all under the strategy or adjustment in one cash payment or installment payments by the manner of donations or in any other form.

Following are the different types of NBFCs

Deposit Accepting NBFCs can be registered, as can Non-Deposit Accepting NBFCs.NBFCs with assets of Rs.100 crore or more are considered systematically important. The various types of NBFCs have been named this way because they can impact the country’s financial stability.

We can define NBFCs expansion and growth by classification of NBFCs, which are predestined to target specific sectors/classes. The deposits and the type of business activity performed are used to classify NBFCs.

They can be further classified into the following eight categories underneath the broad categories of Deposit Accepting and Non-Accepting NBFCsNBFCs. 

• Investment and Credit Company NBFC

An ICC-NBFC is a financial institution that conducts resource finance, the provision of finance, whether through borrowers or somehow, for just about any interaction beyond its own, and the procurement of securities as of its primary business. And it is not one of the other types of NBFCs defined by the RBI in any of its Guidelines. UTI AMC, ICICI AMC, and BIRLA SUN LIFE AMC are some example of NBFC Investment and credit companies 

• Infrastructure Finance Company NBFC

We can define NBFCS that invests roughly 3/4 of its cash holdings in infrastructure loans. Does indeed have a lower limit Net Owned Fund of Rs.300 crore and a credit rating of at least “A” or similar. A CRAR, along with at least 15%, is required. GMR Infrastructure Limited and Hindustan Construction Company are two examples of NBFC infrastructure finance companies. 

• Systemically Core Investment Company NBFC

This type of NBFC that accepts public funds and has an asset size of Rs. 100 crore or more, somehow doesn’t exchange in its equity investments, interest payments, or lending in holding company unless through column sale for the objective of dilution or disinvestment, and retains at least 90% of its overall assets in the form of an investment portfolio, stocks, debt, or loans in group companies, with at least 60% invested in equity shares or those that are compulsorily convertible. 

• Infrastructure Debt Fund NBFC

We can define NBFCS IDFs which use Bonds to raise money for long infrastructure projects. The bonds are issued in different currencies and have a minimum maturity of 5 years for investors. It makes things simpler for long-term debt to flow into infrastructure projects. IFC-NBFCs can only sponsor IDF-NBFCs.

• Micro-finance Institution NBFC: 

we can define NBFCS-MFI as an ND-NBFC (Non-Deposit Inclusive NBFC) with at least 85% of its assets in the form of qualifying purchases which meet specific essential criteria, such as a loan distributed to a borrower with a rural household annual earnings of but no more than Rs. 60,000 or an urban as well as semi-urban household total revenue of not more than Rs. 1,20,000, and the amount owed wasn’t much more than Rs. 35,000 in the first cycle and Rs Bandhan Financial Service Ltd and Ujjivan Financial Service are two examples.

• Factors Types NBFC:

In India, this type of NBFC is uncommon. Of this kind companies usually procure loans or advances from lenders at a steep discount and then modify the debtor’s reimbursement manager to ensure an easy peace agreement while accruing a small profit. A financial institution’s regular lending even against protection of accounts receivable, etc., is omitted.

• Mortgage Company NBFC: 

MGCs as financial intermediaries with at least 90% of their revenue coming from refinance confirmation. Rest assured, at least 90% of the overall income comes from down payments, and the organization or net owned fund is worth Rs. 100 crores.

• Non-operative Financial Holding Company NBFC 

It is a specific sort of NBFC in which the promoters establish a new bank. It is a wholly owned non-operative investment consulting firm by the company. The RBI has given approval in accordance with the applicable regulatory framework. To maintain or establish a financial institution, as well as to provide new banking services.

Conclusion

We can define NBFCS as businesses that are registered. under the Companies Act of 1956 and the provisions of Section 45-IA of the RBI Act of 1934. NBFCs provide banking services without reaching the strict definition of a bank, like wanting to hold a banking license. With the growing emphasis on cost inclusion, NBFCs have emerged as important financial intermediaries, particularly for the confined and retail sectors. The role of NBFCs in the financial system have previously been investigated by various committees appointed by RBI. To keep up with the system’s changes, RBI has indeed been modifying its governance and monitoring guidelines on a regular basis.