As per the Companies Act 2013, Non-Banking Financial Company or NBFC is that type of company which is involved in the business of receiving Loans and Credit Facilities, Acquisition of Bonds/Stocks/Shares, Hire-Purchase, Leasing, Assets Financing,
Insurance, Currency Exchange, Peer to Peer Lending, Hedge Funds, Chit Business, etc.
NBFCs are companies registered under the Companies Act, and, regulated according to the provisions mentioned in Chapter III B of the RBI Act 1934.
The companies that are in the business of:
- loans and advances,
- investments in stock/equity/shares/bonds/debentures and other Govt securities,
- hedge funds,
- currency exchange,
- insurance business,
can become NBFCs.
But they cannot be involved in:
- agricultural activity,
- industrial activity,
- purchase/sale of any goods and services (except securities), and
- sale, purchase, or construction of the immovable property.
NBFCs provide various banking and non-banking services to their clients. They do not hold banking licenses but their functions are similar, and, therefore, regulated and supervised by RBI.
The primary business activity of the NBFCs is to raise funds from public depositors & investors and then lend further. NBFCs are the option for the banking and unregulated financial sector.
Though their financial activities are quite similar to banks, still, there are quite a few differences between the two. For example, the deposits in NBFC are not insured. Or, unlike banks, all NBFCs are not allowed to accept deposits payable on demand or issue cheques.
Because of these financial constraints, strict RBI regulations, and other reasons, the operations are sometimes difficult to keep up.
So if you are looking to sell NBFC, then the expert team of LegalRaasta for a smooth and hassle-free process.