Types of NBFCs: What You Need to Know, benefits of each type

Learn about the various types of NBFCs, including Asset Finance Companies, Loan Companies, and Microfinance Institutions. Find out how each type contributes to the economy.

1. Different Types of NBFCs? Overview

2. What are the Different Types of NBFCs? An essential component of the financial system, non-banking financial companies (NBFCs) offer a range of financial services without the need for a banking licence . NBFCs are categorised by the Reserve Bank of India (RBI) according to the services and activities they provide. It is easier to understand the many functions that NBFCs perform in the economy when one is aware of these classifications. The many NBFC types are as follows:

3. What are the Different Types of NBFCs? 1. AFC, or Asset Finance Company Physical assets that assist in economic or productive activities are the main source of funding for asset finance companies. These assets consist of industrial equipment, vehicles, and machinery. AFCs are essential in helping firms get the money they need to buy the equipment they need. 2. A company that invests (IC) The main activity of investment companies, which are NBFCs, is the acquisition of securities. To make money, they invest in a range of financial products, including as bonds, stocks, and other securities. ICs play a major role in capital formation inside the financial markets.

4. What are the Different Types of NBFCs? 3. Lending Corporation (LC) Finance Businesses do not take demand deposits; instead, they lend money and provide advances to both individuals and companies. They provide a range of lending products, such as consumer, business, and personal loans. LCs are crucial for providing credit to markets that regular banks are unable to sufficiently serve. 4. The IFC, or Infrastructure Finance Company Finance for Infrastructure Businesses concentrates their spending on infrastructure developments, such as airports, bridges, and highways. A business must have infrastructure loans that represent at least 75% of its total assets in order to be designated as an IFC. IFCs promote economic growth by aiding in the construction of vital infrastructure.

5. What are the Different Types of NBFCs? 5. CIC-ND-SI, a Systemically Important Core Investment Company Core Investment Companies do not engage in trading in the shares and securities of group companies. A firm must have assets of at least ₹100 crores and invest at least 90% of its total assets in bonds, debentures, equity shares, preference shares, debt, or loans in group companies in order to be eligible as a CIC-ND-SI. These businesses are crucial to the holding and administration of group investments. 6. Non-Banking Financial Company Infrastructure Debt Fund (IDF-NBFC) IDF-NBFCs invest mostly in the debt of infrastructure projects and raise capital through the issue of bonds. These businesses play a crucial role in supplying infrastructure projects with long-term funding, guaranteeing both their prompt completion and financial stability.

6. What are the Different Types of NBFCs? NBFCs are diverse entities catering to various financial needs across different sectors. Their classification by the RBI ensures that each type operates within a specific regulatory framework, promoting stability, transparency, and efficiency in the financial system. Understanding the different types of NBFCs helps in appreciating their unique roles and contributions to economic growth and financial inclusion. Contact Corpbiz for  NBFC Consulting & Advisory Service in India .

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