The classification based on authorization to take deposits:
Type-1: Deposit-taking (NBFC-D)
Type-2: Non-deposit taking (NBFC-ND)
The classification based on their activities:
Asset Finance Company (AFC):
If the primary business of the company is to finance the assets of a firm, such as machines, automobiles, generators, material equipment, industrial machines, etc., then it is called an “Asset Finance Company”.
Investment Company (IC):
These companies deal primarily in securities.
Loan Companies (LC):
The main business for these companies is to grant loans and advances. These loans are not for asset acquisition, but other purposes, such as working capital finance, etc.
Infrastructure Finance Company (IFC):
The companies falling under this category possess at least Rs.300 Crores and deploy 75% of their total assets in infrastructure loans. These companies must also have a credit rating A or above and CRAR of 15%.
Systematically Important Core Investment Company (CIS-ND-SI):
In case a company owns assets worth Rs.100 crores or more and has deployed 90% of it’s assets in debt instruments or loans in group companies, then it is considered as CIS-ND-SI. Of the 100%, 90% should be invested in equity shares.
Infrastructure Debt Fund (IDF-NBFC):
The investment of these companies is primarily in the infrastructure sector. These funds are crucial, as it is difficult to obtain funds of such amounts.
You could either register this as a trust or a company.
In case it’s a trust, then it would be a mutual fund which comes under SEBI regulations. It will then be called “IDF-MF”.
And if it is a company, then it would be under RBI regulations. Then it will be called as IDF-NBFC.
Mutual benefit financial company:
This is a type of company, whose main aim is to enable it’s members to pool their money with a pre-calculated investment objective. The sources of these funds are share capital & deposits from it’s members and the general public.
Micro Finance Institution (NBFC-MFI):
This is a non-deposit taking NBFC that has at least 85% of it’s assets in the form of microfinance.
Housing Finance Company
In the Memorandum of Association of these companies, there is a clause of housing finance mentioned. These provide mid-term capital loans to individuals or firms. Due to their less stringent regulations and flexibility, these companies are a much better alternative to commercial banks.
Core Investment Company
These are the business companies which conducts the business of acquisition of securities and shares. These companies hold 90% of their assets in the form of bonds, equity shares, and preference shares. Also, these companies need to invest at least 60% in equity shares.