What are Non-bank financial companies (NBFCs) ?

Defination:
  • Non-banking financial companies, or NBFCs, are financial institutions that provide banking services, but do not hold a banking license. 
  • These institutions are not allowed to take deposits from the public depending on the jurisdiction. Nonetheless, all operations of these institutions are still covered under banking regulations.
  • They do offer all sorts of banking services, such as loans and credit facilities, retirement planning, money markets, underwriting, and merger activites. 
  • The number of non-banking financial companies has expanded greatly in the last several years as venture capital companies, retail and industrial companies have entered the lending business.
  • A company can only call itself a bank if it is a registered as such with the nation's central bank.
NBFCs have been divided into two categories. 
  • 1. Category 'A' companies (NBFCs accepting public deposits or NBFCs-D)
  • 2. Category 'B' companies (NBFCs not raising public deposits or NBFCs-ND
  • These institutions typically are restricted from taking deposits from the public.