Are There Different Types Of Non-Banking Financial Companies, And How Do They Differ?

Yes, there are different types of Non-Banking Financial Companies (NBFCs)

1. Asset Finance Companies (AFCs):

Principal Business Activity: Providing finance for the purchase of physical assets such as automobiles, machinery, and equipment.

Distinguishing Feature: At least 60% of total assets should be deployed in asset financing.

2. Investment Companies (ICs):

Principal Business Activity: Investing in securities, stocks, bonds, debentures, and other marketable securities.

Distinguishing Feature: At least 90% of its total assets should be invested in the financial assets mentioned above.

3. Loan Companies (LCs):

Principal Business Activity: Providing loans and advances.

Distinguishing Feature: At least 50% of its total assets should comprise loans, advances, hire purchases, and leasing.

4. Infrastructure Finance Companies (IFCs):

Principal Business Activity: Financing infrastructure projects.

Distinguishing Feature: At least 75% of its total assets should be deployed in infrastructure loans.

5. Systemically Important Core Investment Companies (CIC-ND-SI):

Principal Business Activity: Making investments in group companies.

Distinguishing Feature: If the company meets the specified thresholds related to asset size and interconnectedness, it is designated as systemically important.

6. Microfinance Institutions (MFIs):

Principal Business Activity: Providing financial services, including small-ticket loans, to low-income individuals.

Distinguishing Feature: Focus on microfinance activities to promote financial inclusion.

7. Non-Banking Financial Company – Factors (NBFC-Factors):

Principal Business Activity: Engaging in factoring business.

Distinguishing Feature: At least 50% of its total assets should be in the factoring business.

8. Non-Banking Financial Company – Infrastructure Debt Fund (NBFC-IDF):

Principal Business Activity: Facilitating the flow of long-term debt into infrastructure projects.

Distinguishing Feature: Primarily focuses on infrastructure financing.

9. Non-Banking Financial Company – Non-Operative Financial Holding Company (NBFC-NOFHC):

Principal Business Activity: Holding the financial subsidiaries of a group.

Distinguishing Feature: Set up as a NOFHC as per regulatory guidelines.