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Non-Banking Financial Company (NBFC) is an entity that offers various banking services such as loans, asset management, and investments but does not hold a full-fledged banking license. In other words, these entities act as intermediary for credit creation, and are not subject to the same regulatory requirements as conventional banks. Unlike banks, NBFCs are not members of the payments system and do not enjoy deposit insurance and the legal protection offered to banks by the Bank Deposits Scheme.
NBFCs are able to provide certain essential services by taking deposits from the public and lending to those who need funds. They also offer a wide range of investment and wealth management services. They provide services like term financing, leasing, bill discounting, merchant banking, hire purchase, etc. They play a major role in the growth of an economy as they provide ancillary services to traditional banking. NBFCs have recently received more attention due to their ability to provide competitively priced loans, advances, and other credit products in areas where commercial banks lack presence.
NBFCs have become increasingly popular and diversified in recent years. The growth of digital technology has enabled NBFCs to provide a wider range of services in an efficient manner. This has resulted in increased competition between the NBFCs and traditional banks, as the former is able to provide loans, advances, and other credit at lower costs and with higher interest rates.
For many years, NBFCs have been operating without the same strict regulatory framework as banks, but recent developments indicate that the government is gearing up to bring more structures and controls in place. The Reserve Bank of India (RBI) has proposed certain guidelines to regulate NBFCs, including a minimum net-owned fund requirements, adherence to KYC norms and the use of proper accounting standards for them.
NBFCs are slowly playing a greater role in the financial landscape. With its growing presence and increasing reach, it is expected that more customers will avail of services offered by NBFCs. However, regulatory vigilance and strict compliance is necessary to ensure its credibility and avoid misuse of its services.
NBFCs are able to provide certain essential services by taking deposits from the public and lending to those who need funds. They also offer a wide range of investment and wealth management services. They provide services like term financing, leasing, bill discounting, merchant banking, hire purchase, etc. They play a major role in the growth of an economy as they provide ancillary services to traditional banking. NBFCs have recently received more attention due to their ability to provide competitively priced loans, advances, and other credit products in areas where commercial banks lack presence.
NBFCs have become increasingly popular and diversified in recent years. The growth of digital technology has enabled NBFCs to provide a wider range of services in an efficient manner. This has resulted in increased competition between the NBFCs and traditional banks, as the former is able to provide loans, advances, and other credit at lower costs and with higher interest rates.
For many years, NBFCs have been operating without the same strict regulatory framework as banks, but recent developments indicate that the government is gearing up to bring more structures and controls in place. The Reserve Bank of India (RBI) has proposed certain guidelines to regulate NBFCs, including a minimum net-owned fund requirements, adherence to KYC norms and the use of proper accounting standards for them.
NBFCs are slowly playing a greater role in the financial landscape. With its growing presence and increasing reach, it is expected that more customers will avail of services offered by NBFCs. However, regulatory vigilance and strict compliance is necessary to ensure its credibility and avoid misuse of its services.