NBFC Full Form

The term NBFC refers to a non-banking financial company. The advantages, disadvantages, features, objectives, and relevance of NBFC will be discussed here.

A Non-Banking Financial Corporation (NBFC) is a financial institution that makes advances and loans. It is based on multiple purchases of debentures, bonds, shares, and securities related to chit, insurance, leasing, and hire-purchase that are established by municipal or governmental entities.

Agriculture, selling and buying, industrial and construction operations are all excluded from NBFC engagement. Any non-banking entity that engages in the above-mentioned operations might be classified as an NBFC.

Do NBFCs Accept Deposits From NRIs?

It was once permitted for NBFCs to take deposits from non-resident Indians. Nevertheless, as of April 24, 2004, NBFCs are not permitted to accept any current deposit from anyone outside India.

They must renew it again if there is a history of transactions or previously deposited funds. Depositing any amount of money from NRIs is now completely illegal, and any NBFC caught in the act will face severe penalties.

Features Of NBFC

Non-banking financial companies have a variety of characteristics, some of which are listed below:

  • Its credit rating is below investment-grade.
  • Upon filling out the application form, the depositary must make various company disclosures.
  • Public deposits are permitted for a period ranging from 12 to 60 months, depending on the necessity and total amount.

Is there any role of RBI and does RBI guarantee the repayment of deposits made by NBFCs?

It is better known that any transaction in India is directly linked to the India’s Reserve Bank. No transaction or deposit can be done without the involvement of RBI. Same here, RBI plays a vital role in deposits made by NBFCs.

However, the RBI does not guarantee that NBFC deposits will be repaid. Always remember the following points before investing in NBFCs:

  • Before investing a large sum of money in an NBFC, consult an competent broker.
  • Always give your money to an competent broker while investing in NBFCs if at all possible.
  • Public deposits are unsecure, and there’s a good chance your privacy and money may be compromised.
  • Because the RBI does not guarantee your deposits, make sure you invest enough money to be retrieved in the event of a major fraud.

Is It Necessary For NBFCs To Register With RBI?

Before owning funds from corporations or corporations, NBFCs must register with the RBI, according to Section 45-IA. They will be given a batch code that can be utilized for transactions and deposits by the RBI.

Furthermore, it is prohibited to regulate multi-level marketing without the use of any product or service. NBCs with an asset size of more than 500 crores are regarded the most essential for a country’s economy.

All Around Any NBFC operation that is not registered with the RBI is illegal. During colonial control, the RBI Act of 1934 established a set of laws and regulations for non-banking financial companies.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top