What is non- banking finance companies

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A non banking financial company is a company registered under the companies act, engaged in the business of loans and advances, acquisition of share/stock/ bonds/ debenture /securities issued by the government for local authority or other marketable security of a like nature, leasing, hire purchase, insurance Business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase /construction of immovable properties.

A non banking institution which is a company and has principal business of receiving deposit under any scheme for arrangement in one lump sum or in installment by way of contribution or in any other manner, is also on non banking financial company (Residuary non banking company).

Nbfc lend and make investment and hence their activities are akin to that of banks; however there are few differences such as:

- Nbfc cannot accept demand deposit.

- Nbfc do not form part of the payment and settlement system and cannot issue cheque drawn on itself.

- Deposit insurance facility of deposit insurance and credit guarantee corporation is not available to deposit of nbfc's, unlike in the case of bank.


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