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NBFC full form is Non-Banking Financial Companies. NBFCs are also known as nonbank financial institutions (NBFIs). These are financial institutions that though offer a range of banking services do not hold a banking license. All services that they provide are bank-like but they don’t have the power that banks hold in their functioning. An adjacent aspect of this establishment is that the banking regulations and authorisation of federal or state overseers do not apply to NBFCs. Some examples of NBFCs are insurance companies, hedge funds, P2P lenders, mortgage lenders, money market funds, and investment banks. NBFCs play an important role to help meet the credit demand that traditional banks fail to meet.
Pros and Cons of NBFCs
Table of Contents
Everything has its own pros and cons. NBFCs are no different. Though they provide substantial pros, there are also cons. Read the table below to know more.
| Pros | Cons |
| They are helpful for people as they act as an alternate source of credit. | They are absent from oversight as they are non-regulated. |
| Intermediaries are eliminated here, improving the communication channel with the clients. | The operations here are non-transparent. |
| Investors obtain high yields | The presence of a financial risk, be it towards the economy or the financial system |
History of NBFC
In the 1960s, NBFCs were established in India to meet the financial requirements of individuals who were not sufficiently addressed by banks. Because they were initially modest companies, Non-Banking Financial Companies took a long time to make an impact on the financial market. In December 1964, the RBI revised its Act 1934 to incorporate a new chapter dealing with NBFCs. As a result of this act, NBFCs would be able to operate legally in India.
Later, the Indian government appointed two committees to investigate NBFC structures and operations: the James S Raj Committee in the 1970s and the Chakravarty Committee in 1982.
NBFCs have grown tremendously in terms of operations, product and service offerings, and technology improvements during the last few decades, among other things.
Services Offered by NBFCs
The services offered by the NBFCs are:
- Credit and loan facilities
- Acquisitions and mergers advice
- Hire-purchase
- Underwriting shares
Top NBFCs in India
Which NBCs in India are on the top? The list is shared below!
- Bajaj Finance
- Bajaj Holdings
- Muthoot Finance
- Shriram Trans
- M&M Financial
- Sundaram Fin
- Motilal Oswal
- CreditAccess Grameen Limited
- Satin Credit
FAQ
No, all NBFCs in India are not private companies. They are only registered as public or private limited companies.
NBFC home loan rates may be slightly higher than banks due to costlier funding, but the difference is usually manageable.
Shriram Finance, India’s biggest retail NBFC, offers loans for vehicles, homes, businesses, gold, and more.
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