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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. Nonetheless, all operations of these institutions are still covered under banking regulations NBFCs offer most sorts of banking services, such as loans and credit facilities, private education funding, retirement planning, trading in money markets, underwriting stocks and shares, TFCs(Term Finance Certificate) and other obligations. These institutions also provide wealth management such as managing portfolios of stocks and shares, discounting services

e.g. discounting of instruments and advice on merger and acquisition activities. 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. Non-bank institutions also frequently support investments in property and prepare feasibility, market or industry studies for companies.

However they are typically not allowed to take deposits from the general public and have to find other means of funding their operations such as issuing debt instruments.

Based on their Liability Structure,
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).

NBFCs-D are subject to requirements of Capital adequacy, Liquid assets maintenance, Exposure norms (including restrictions on exposure to investments in land, building and unquoted shares), ALM discipline and reporting requirements; In contrast, until 2006 NBFCs-ND were subject to minimal regulation.

Since April 1, 2007, non-deposit taking NBFCs with assets of `1 billion and above are being classified as Systemically Important Non-Deposit taking NBFCs (NBFCs-ND-SI), and prudential regulations, such as capital adequacy requirements and exposure norms along with reporting requirements, have been made applicable to them.

The asset liability management (ALM) reporting and disclosure norms have also been made applicable to them at different points of time. Depending upon their nature of activities, non- banking finance companies can be classified into the following categories :

  1. Development finance institutions
  2. Leasing companies
  3. Investment companies
  4. House finance companies
  5. Venture capital companies
  6. Discount & guarantee houses
  7. Corporate development companies