NBFCs belong to a category of companies and are established under the Companies Act, 2013. They are granted the NBFC License by the “Reserve Bank of India (RBI)”.
NBFCs are intermediaries, which are engaged in providing finances as their primary business. They accept deposits, lend finance, and play a vital role in channelizing the limited financial resources into infrastructure development and create chances of earning. They complement the organized banking sector by attending to the ever-increasing financial needs of the corporate sector, delivering credit to the unorganized sector, and small unbanked borrowers.
However, they cannot be involved in agricultural activity, industrial activity, sale, purchase, or construction of immovable property.
The financial services provided by NBFCs include “Disbursement of loans, acquisition of stocks/shares/ bonds” etc. NBFCs focus on loans and advances, acquisition of shares, bonds, debentures, stocks, securities issued by the government/local authority or other similar marketable securities, leasing, insurance business, hire-purchase, etc.