Non-Banking Financial Company: Services Provided

Non-banking financial company
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Non-bank financial companies (NBFCs) are financial institutions that

provide banking services without meeting the legal definition of a bank, i.e. one that does not
hold a banking license. Operations are, regardless of this, still exercised under bank regulation.
However this depends on the jurisdiction, as in some jurisdictions, such as New Zealand, any
company can do the business of banking, and there are no banking licenses issued.
Contents
[hide]
1 Services
provided
2 Regulation
3 Classification
4 See also
5 External links
[edit]Services provided
Non-bank institutions frequently
 act as suppliers of loans and credit facilities

 supporting investments in property
 trade money market instruments
 fund private education
 provide wealth management such as managing portfolios of stocks and shares
 underwrite stock and shares, TFCs and other obligations
 provide retirement planning
 advise companies in merger and acquisition
 prepare feasibility, market or industry studies for companies
 provide discounting services e.g., discounting of instruments
However they are typically not allowed to take deposits from the general public and have to find
other means of funding their operations such as issuing debt instruments.
[edit]Regulation
For European NBFCs the Payment Services Directive (PSD) is a regulatory initiative from the
European Commission to regulate payment services and payment service providers throughout
the European Union (EU) and European Economic Area (EEA). The PSD describes which type
of organisations can provide payment services in Europe (credit institutions (i.e. banks) and
certain authorities (e.g. Central Banks, government bodies), Electronic Money Institutions (EMI),
and also creates the new category of Payment Institutions). Organisations that are not credit
institutions or EMI, can apply for an authorisation as Payment Institution in any EU country of
their choice (where they are established) and then passport their payment services into other
Member States across the EU.
[edit]Classification
Depending upon their nature of activities, non- banking finance companies can be classified into
the following categories:
1. Development finance institutions

2. Leasing companies
3. Investment companies
4. Modaraba companies
5. House finance companies
6. Venture capital companies
7. Discount & guarantee houses
Non-Banking Financial Companies
(NBFCs)
30. Recent years have witnessed significant
increase in financial intermediation by the NBFCs.
This is reflected in the proposal made by the
latest Working Group on Money Supply for a
new measure of liquidity aggregate incorporating
NBFCs with public deposits worth Rs.20 crore
and above (Box 3.1). For regulatory purposes,
NBFCs have been classified into 3 categories:
(a) those accepting public deposits, (b) those
not accepting public deposits but engaged in
financial business and (c) core investment
companies with 90 per cent of their total assets
as investments in the securities of their group/
holding/subsidiary companies. The focus of
regulatory attention is on NBFCs accepting public
deposits.
31. As per the NBFC Acceptance of Public
Deposits (Reserve Bank ) Directions, 1998, the
quantum of public deposit in respect of NBFCs
was linked to credit rating from an approved
agency so as to enable the depositor to make
informed decision. The NBFCs were also
encouraged to broad-base their resources
through borrowings from banks and financial
institutions, inter-corporate deposits/ loans,
secured bonds/debentures, etc., which were
exempted from the definition of “public deposit”.
However, the Associations of NBFCs and the
apex trade bodies brought to the notice of both
the Government and the RBI the problem of
asset-liability mismatches caused by frequent
downgrading of the credit ratings of NBFCs and
the consequent reduction in quantum of
permissible public deposits. They also suggested
that smaller NBFCs could be exempted from
the requirement of credit rating for having public
deposits upto a particular limit while larger
NBFCs could be allowed higher limits of public
deposits subject to minimum investment grade
credit rating and higher capital adequacy
requirements. The Task Force on NBFCs
appointed by the Government of India submitted
its report in October, 1998, which recommended
rationalisation of regulations for NBFCs,
improvement of the legislative framework for
protecting the interests of depositors and
development of NBFCs on sound and healthy
lines (Box 3.4). The modified regulatory
framework for NBFCs based on the
recommendations made by the Task Force
provides for the following:—
l NBFCs with net owned fund (NOF) of less
than Rs. 25 lakh (with or without credit rating)
are not entitled to accept public deposits (as
hitherto).
l The unrated and underrated (rating below the
minimum investment grade) NBFCs in the
category of equipment leasing and hire
purchase finance companies with NOF of Rs.
25 lakh and above are allowed to accept
public deposits upto 1.5 times of their NOF or
Rs. 10 crore, whichever is less, provided their
CRAR is 15 per cent or above as per their
last audited balance sheet.
l The unrated and underrated NBFCs in the
category of loan and investment companies,
irrespective of their NOF and CRAR, are not
entitled to accept public deposits (as hitherto).
l NBFCs in the category of equipment leasing
and hire purchase finance companies with
NOF of Rs. 25 lakh and above as well as
minimum investment grade credit rating can
accept public deposits four times of NOF
provided they have CRAR of not less than 10
per cent as on 31.3.1998 and shall have CRAR
of not less than 12 per cent as on 31.3.1999.
l NBFCs in the category of loan and investment
companies with NOF of Rs. 25 lakhs and above
as well as minimum investment grade credit
rating can accept public deposits not
exceeding 1.5 times of NOF provided they
have CRAR of 15 per cent or above with
immediate effect.
l NBFCs in the category of equipment and hire
purchase companies should endeavour to
increase their CRAR to 15 per cent as early
as possible
l NBFCs in the category of loan and investment
companies which do not have minimum CRAR
of 15 per cent as on date but otherwise
comply with all the prudential norms and (a)
have credit rating of AAA may accept or renew
public deposits upto the level outstanding as
at the close of business on December 18,
1998 or 1.5 times of the NOF whichever is
more subject to the condition that they should
attain CRAR of 15 per cent by March 31,
2000 and bring down the excess deposits, if
any, by December 31, 2001 and (b) have
credit rating of AA/A may accept or renew
public deposits as per the existing provisions
of Directions (0.5/1.0 time of their NOF) but
BOX 3.4
Major Recommendations of the Task Force on NBFCs
The Task Force on Non-banking Finance Companies (NBFCs) submitted its report on October 28, 1998. The
major recommendations are as under:—
l The rising number of defaulting NBFCs and the need for a quick redressal system call for change in the existing
legislative and regulatory framework for NBFCs.
l Extension of the period for attaining minimum Net Owned Funds (NOF) beyond three years (January 2000)
should be made conditional on adequate steps having been taken by the concerned NBFCs. Also, the minimum
prescribed NOF of Rs. 25 lakh be considered for upward revision.
l The Reserve Bank of India should draw up a time bound programme for disposal of applications for registration
of NBFCs and keep States informed of registration granted/rejected in respect of NBFCs in the respective
States.
l Higher CRAR of 15 per cent for NBFCs seeking public deposits without credit rating be prescribed by RBI, as
against existing 12 per cent for rated NBFCs.
l Ceilings for exposures to real estate sector and investment in capital market, especially unquoted shares, be
prescribed by the Reserve Bank of India.
l The Reserve Bank of India may stipulate 25 per cent of reserves of NBFCs to be invested in marketable
securities in addition to SLR securities already held by them.
l The following ceilings may be prescribed for public deposits in respect of different categories of NBFCs.
Type of NBFC Limit of Public Deposits
NBFC with NOF No access to public
less than Rs. 25 lakh deposits
EL/HP Company without 1.5 times NOF or Rs. 10 crore,
credit rating whichever is lower, subject to 15 per cent CRAR
EL/HP Company with 4 times NOF
investment grade credit rating
Loan/Investment Cos with 1.5 times NOF
investment Grade credit rating (Higher CRAR of 15 per cent)
l Prescription of a suitable ratio between secured and unsecured deposits for NBFCs to be preceded by measures
to ease flow of bank credit to them.
l Liquid asset ratio to be increased from existing 12.5 per cent to 25 per cent of public deposit in a phased
manner. Also, statutory provision be made to give to unsecured depositors first charge on liquid assets.
l Depositors’ grievance redressal authority with specified territorial jurisdiction be appointed by the RBI with the
help of the office of the Banking Ombudsman available in several states.
l Separate instrumentality for regulation and supervision of NBFCs be set up under the aegis of the RBI and
entrusted under one Executive Director/supervised by a Deputy Governor.
l Strengthen the off-site surveillance mechanism to identify/control NPAs; sensititve market intelligence system be
developed to trigger on site inspection, to be followed by appropriate regulatory response.
l Deposit taking by unregistered NBFCs be made a cognisable offence; State governments should set up special
investigation wings for enforcing this provisions.
l Unauthorised deposit taking by unincorporated financial intermediaries should also be made a cognisable
offence. State Governments should quickly enact legislation on the lines of the Tamil Nadu legislation.
they should attain the minimum CRAR of 15
per cent on or before March 31, 2000 as per
their audited balance sheet, failing which they
should regularise their position by repayment
or otherwise by December 31, 2001.
l The above benefit will not be available to
those companies whose CRAR is presently
15 per cent and above but slips down below
the minimum level of 15 per cent
subsequently.
l The disclosure norms for NBFCs accepting
public deposits have been widened so as to
enable depositors to make an informed
decision.
l Stipulations on prudential norms, ceiling on
interest rates, payment of brokerage on public
deposits, etc. remain unchanged.
l NBFCs have been advised not to invest more
than 10 per cent of their owned fund in land
and building except for their own use. The
ceiling on investment in unquoted shares of
companies other than their group/subsidiary
companies has been fixed at 10 per cent of
their owned fund for equipment leasing and
hire purchase finance companies and 20 per
cent of the owned fund for loan and
investment companies. A time limit of 3 years
has been given to the NBFCs to dispose off
excess of such assets, including the assets
acquired in satisfaction of their debts, wherever
company surpasses the ceiling indicated
above.
l The unincorporated bodies engaged in the
business of a non-banking financial institution
are not allowed to accept deposits except from
relatives specified and in the manner
prescribed in the provision of Section 45-S of
the RBI Act. However, such entities are now
allowed to access loans from bodies with a
corporate identity including NBFCs.
Accordingly, the deposits from (a) the
companies incorporated under the Companies
Act; (b) Corporations established under any
Statue; and (c) the Cooperative Societies
registered under any State Law, have been
exempted from the definition of 'deposit' under
the RBI Act. Individuals, firms, associations of
persons, Hindu Undivided Families and
Partnership firms may accept deposit from
the above mentioned corporate entities also
for the purpose of their financial business.
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Manual on Financial and Banking Statistics
The activities of non-banking financial companies
(NBFCs) in India have undergone qualitative
changes over the years through functional
specialisation. The role of NBFCs as effective
financial intermediaries has been well recognised
as they have inherent ability to take quicker
decisions, assume greater risks, and customise
their services and charges more according to the
needs of the clients. While these features, as
compared to the banks, have contributed to the
proliferation of NBFCs, their flexible structures
allow them to unbundle services provided by
banks and market the components on a
competitive basis. The distinction between banks
and non-banks has been gradually getting
blurred since both the segments of the financial
system engage themselves in many similar types
of activities. At present, NBFCs in India have
become prominent in a wide range of activities
like hire-purchase finance, equipment lease
finance, loans, investments, etc. By employing
innovative marketing strategies and devising
tailor-made products, NBFCs have also been able
to build up a clientele base among the
depositors, mop up public savings and command
large resources as reflected in the growth of their
deposits from public, shareholders, directors and
other companies, and borrowings by issue of
non-convertible debentures, etc. Consequently,
the share of non-bank deposits in household
sector savings in financial assets, increased from
3.1 per cent in 1980-81 to 10.6 per cent in 1995-
96. In 1998, the definition of public deposits was
for the first time contemplated as distinct from
regulated deposits and as such, the figures
thereafter are not comparable with those before.
6. NON-BANKING FINANCIAL COMPANIES
The importance of NBFCs in delivering credit to the
unorganised sector and to small borrowers at the
local level in response to local requirements is well
recognised. The rising importance of this segment
calls for increased regulatory attention and focused
supervisory scrutiny in the interests of financial
stability and depositor protection (Box 6.1).
In response lo the perceived need for better
regulation of the NBFC sector, the Reserve Bank
of India (RBI) Act, 1934 was amended in 1997,
providing for a comprehensive regulatory
framework for NBFCs. The RBI (Amendment) Act,
1997 conferred powers on the RBI to issue
directions to companies and its auditors, prohibit
deposit acceptance and alienation of assets by
companies and initiate action for winding up of
companies. The Amendment Act provides for
compulsory registration with the RBI of all
NBFCs, irrespective of their holding of public
deposits, for commencing and carrying on
business of a non-banking financial institution;
minimum entry point norms; maintenance of a
portion of deposits in liquid assets; and creation
of reserve fund and transfer of 20 per cent of
profit after tax but before dividend annually to
the fund. Accordingly, to monitor the financial
health and prudential functioning of NBFCs, the
RBI issued directions to companies on:
acceptance of public deposits; prudential norms
like capital adequacy, income recognition, asset
classification, provisioning for bad and doubtful
assets, exposure norms and other measures.
Directions were also issued to the statutory
auditors to report non-compliance with the RBI
Act and regulations to the RBI, and Board of
Directors and shareholders of the NBFCs.
Box 6.1: An Overview of Regulation of NBFCs
(1) Mission
To ensure that
_ the financial companies function on healthy
lines,
these companies function in consonance
(3) Basic Structure of Regulatory and
Supervisory Framework
Prescription of prudential norms akin to those
applicable to banks,
Submission of periodical returns for
the purpose of off-site surveillance,
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6.1. Non-Banking Financial Entities
Regulated by the RBI
The developments in the NBFC sector in terms
of policies and performance during 2001-02 and
for the subsequent periods (to the extent
information is available) are discussed in the
subsequent paragraphs.
Non-banking financial entities partially or wholly
regulated by the RBI include: (a) NBFCs
comprising equipment leasing (EL), hire purchase
finance (HP), loan (LC), investment (1C) (including
primary dealers3 (PDs)) and residuary nonbanking
(RNBC) companies; (b) mutual benefit
financial company (MBFC), i.e. nidhi company;
(c) mutual benefit company (MBC), i.e. potential
nidhi company; (d) miscellaneous non-banking
company (MNBC), i.e. chit fund company (Table
6.1).
Box 6.1: An Overview of Regulation of NBFCs (Concld.)
with the monetary policy framework, so that
their functioning does not lead to systemic
aberrations,
the quality of surveillance and supervision
exercised by the RBI over the NBFCs keeps
pace with the developments in this sector.
comprehensive regulation and supervision
of Asset liability and risk management
system for NBFCs,
(2) Amendments to the Reserve Bank of
India (RBI) Act, 1934
RBI Act was amended in January 1997
providing for, inter alia.
Entry norms for NBFCs and prohibition of
deposit acceptance (save to the extent
permitted under the Act) by unincorporated
bodies engaged in financial business,
Compulsory registration, maintenance of
liquid assets and creation of reserve fund,
Power of the RBI to issue directions to an
NBFC or to the NBFCs in general or to a
class of NBFCs.
Comprehensive regulation and Supervision
of deposit taking NBFCs and limited
supervision over those not accepting public
deposits.
Supervisory framework comprising (a) on-site
inspection (CAMELS pattern) (b) off-site
monitoring through returns (c) market
intelligence, and (d) exception reports by
statutory auditors,
Punitive action like cancellation of Certificate
of Registration (CoR), prohibition from
acceptance of deposits and alienation of assets,
filing criminal complaints and winding up
petitions in extreme cases, appointment of the
RBI observers in certain cases, etc.
Co-ordination with State Governments to curb
unauthorised and fraudulent activities, training
programmes for personnel of NBFCs, State
Governments and Police officials.
(4) Other steps for protection of
depositors’ interest
Publicity for depositors’ education and
awareness, workshops / seminars for trade and
industry organisations, depositors’ associations,
chartered accountants, etc.
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6.2. Registration
In terms of the RB1 Act, 1934, registration of
NBFCs with the RBI is mandatory, irrespective
of whether they hold public deposits or not. The
amended Act (1997) provides an entry point
norm of Rs. 25 lakh as the minimum net owned
fund (NOF), which has been revised upwards to
Rs.2 crore for new NBFCs seeking grant of CoR
on or after April 21, 1999. Certain types of
financial companies, viz., insurance companies,
housing finance companies, stock broking
companies, chit fund companies, companies
notified as ‘nidhis’ under Section 620A of the
Companies Act, 1956 and companies engaged
in merchant banking activities (subject to certain
conditions), however, have been exempted from
Table 6.1: Types of Non-Banking Financial Entities (Regulated by RBI)
Non-Banking Financial Entity Principal Business
1. Non-Banking Financial Company In terms of the Section 45-l(f) read with Section 45-i(c) of the RBI
Act, 1934, as amended in 1997, their principal business is that
of receiving deposits or that of a financial institution, such as
lending, investment in securities, hire purchase finance or
equipment leasing.
(a) Equipment leasing company (EL) Equipment leasing or financing of such activity.
(b) Hire purchase finance company (HP) Hire purchase transactions or financing of such transactions.
(c) Investment company (1C) Acquisition of securities. These include Primary Dealers (PDs) who
deal in underwriting and market making for government securities.
(d) Loan company (LC) Providing finance by making loans or advances, or otherwise for
any activity other than its own; excludes EL/HP/Housing Finance
Companies (HFCs).
(e) Residuary non-banking company Company which receives deposits under any scheme or
(RNBC) arrangement by whatever name called, in one lump-sum or in
instalments by way of contributions or subscriptions or by sale of
units or certificates or other instruments, or in any manner. These
companies do not belong to any of the categories as stated above.
II. Mutual Benefit Financial Company Any company which is notified by the Central Government as a
(MBFC) i.e., Nidhi Company Nidhi Company under section 620A of the Companies Act, 1956
(1 of 1956)
III. Mutual Benefit Company A company which is working on the lines of a Nidhi company
(MBC), i.e., potential Nidhi company but has not yet been so declared by the Central Government,
has minimum net owned fund(NOF) of Rs.10 lakh, has applied
to the RB1 for CoR and also to Department of Company Affairs
(DCA) for being notified as Nidhi company and has not
contravened directions/ regulations of RBI/DCA.
IV. Miscellaneous non-banking company Managing, conducting or supervising as a promoter, foreman or
(MNBC), Managing, Conducting or agent of any transaction or arrangement by which the company
supervising as a promoter, foreman enters into an agreement with a specified number of subscribers
ori.e., Chit Fund Company that every one of them shall subscribe a certain sum in
instalments over a definite period and that every one of such
subscribers shall in turn, as determined by tender or in such
manner as may be provided for in the arrangement, be entitled
to the prize amount.
253
the requirement of registration under the RBI
Act, as they are regulated by other agencies.
Accordingly, as at the end of March 2006, RBI
received 38214 applications of which 13873 were
approved and 24134 were rejected. The rest of
the applications are pending at different stages
of processing. Of the total approvals, only 434
companies have been permitted to accept/ hold
public deposits. Moreover, all NBFCs holding
public deposits, whose applications for Certificate
of Registration (CoR) have been rejected or CoRs
have been cancelled, have to continue repaying
the deposits on due dates and dispose of their
financial assets within three years from the date
of rejection of application/ cancellation of
certificate or convert themselves into nonbanking
non-financial companies within the
same period.
6.3. Supervision
The RBI has instituted a strong and
comprehensive supervisory mechanism for
NBFCs. The focus of the RBI is on prudential
supervision so as to ensure that NBFCs function
on sound and healthy lines and avoid excessive
risk taking. The RBI has put in place a four
pronged supervisory framework based on:
i. On-site inspection;
ii. Off-site monitoring supported by state-ofthe
art technology;
iii. Market intelligence; and
iv. Exception reports of statutory auditors of
NBFCs.
The thrust of supervision is based on the asset
size of the NBFC and whether it accepts/ holds
deposits from the public. The system of on-site
examination put in place during 1997 is
structured on the basis of assessment and
evaluation of CAMELS (Capital, Assets,
Management, Earnings, Liquidity, and Systems
and Procedures) approach and the same is akin
to the supervisory model adopted by the RBI for
the banking system. Market intelligence system
is also being strengthened as one of the
important tools of supervision. This process of
continuous and on-going supervision is expected
to facilitate RBI to pick up warning signals,
which can result in triggering supervisory action
promptly. The returns being submitted by the
NBFCs arc reviewed and re-looked at intervals
to widen the scope of information so as to
address the requirements either for supervisory
objectives or for furnishing the same to various
interest groups on the important aspect of the
working of these companies. The companies not
holding public deposits arc supervised in a
limited manner with companies with asset size
of Rs.100 crore and above being subjected to
annual inspection and other non-public deposit
companies by rotation once in every 5 years.
The exception reports, if any, from the auditors
of such companies coupled with adverse market
information and the sample check at periodical
intervals are the main tools for monitoring the
activities of such companies vis-à-vis the RBI
regulations.
6.4. Policy Developments
The RBI introduced a number of measures to
enhance the regulatory and supervisory
standards of this sector, to bring them on par
with commercial banks over a period of time.
The regulatory norms, applicable to NBFCs are
presented in Box 6.2. Regulatory measures
adopted during the year aim at aligning the
interest rates in this sector with the rates
prevalent in the rest of the economy, tightening
prudential norms, standardising operating
procedures and aligning the RBI’s regulations
with the requirements of the amended
Companies Act.
Directions applicable to NBFCs
The RBI has issued comprehensive deposit
acceptance and asset side regulations as under
for the NBFCs.
While all the prudential norms are applicable to
public deposit accepting/holding NBFCs only,
some of the regulations are applicable to nondeposit
accepting companies.
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Box 6.2: Regulatory Norms and Directions for NBFCs A. Important Statutory Provisions of
Chapter III B of the RBI Act as applicable to NBFCs
Sr.No. Subject Particulars
1. Certificate of Registration No company, other than those exempted by the RBI, can
commence or ea the business of non-banking financial institution
without obtaining a CoR RBI. The pre-requisite for eligibility for
such a CoR is that the NBFC f have a minimum NOF of Rs. 25
lakh (since raised to Rs. 2 crore on and April 21, 1999 for any
new applicant NBFC). The RBI considers grant CoR after satisfying
itself about the company’s compliance with the c enumerated in
Section 45-1A of the RBI Act
2. Maintenance of Liquid Assets NBFCs have to invest in unencumbered approved securities,
valued at a not exceeding current market price, an amount which,
at the close of business on any day, shall not be less than 5.0
per cent but not exceeding 25.0 per cent specified by RBI, of the
deposits outstanding at the close of business on the working day
of the second preceding quarter.
3. Creation of Reserve Fund Every non-banking financial company shall create a reserve fund
and transfer thereto a sum not less than 20.0 per cent of its net
profit every year as disi in the profit and loss account and before
any dividend is declared. Such fund to be created by every NBFC
irrespective of the fact whether it accepts] deposits or not. Further,
no appropriation can be made from the fund ft purpose without
prior written approval of RBI.
(1) Deposit Acceptance Related Regulations
1 Ceiling on quantum of public Loan and investment companies - 1.5 times of NOF if the company
deposits has NOF of Rs. 25 lakh, minimum investment grade (MIG) credit
rating, complies with all the prudential norms and has CRAR of
15 per cent.Equipment leasing and hire purchase finance
companies - if company has NOF of Rs. 25 lakh and complies
with all the prudential norms.
i. with MIG credit rating and 12 per cent CRAR - 4 times of
NOF
ii. without MIG credit rating but CRAR 15 per cent or above -
1.5 times of NOF, or Rs. 10 crore, whichever is less.
2 Investment in liquid assets NBFCs - 15 per cent of outstanding public deposit liabilities as
at the close of business on the last working day of the second
preceding quarter, of which
i. not less than 10 per cent in approved securities and
ii. not more than 5 per cent in term deposits with scheduled
commercial banks.
Directions for investments by RNBCs were rationalized in June
2004 with a view to reducing the overall systemic risk in the
financial sector and safeguarding the interest of the depositors.
In this regard the following roadmap was prescribed:
a) From the quarter ended June 2005 and onwards, RNBCs were
permitted to invest only to the extent of 10% of the Aggregated
Liabilities to Depositors (ALDs) as at the second preceding
quarter or one time of their Net Owned Funds, whichever is
255
lower, in the manner which in their opinion of the company
is safe as per approval of its Board of Directors.
b) From the quarter ended June 2006 onwards, this limit would
stand abolished and RNBCs would not be permitted to invest
any amount out of ALDs as per their discretion. However, to
avoid strain, in complying with 100% directed investments
by companies, the same had been modified to 95% of ALD
up to March 31, 2007 and 100% of ALD thereafter. These
liquid asset securities are required to be lodged with one of
the scheduled commercial banks or Stock Holding Corporation
of India Ltd.. or a depository or its participant (registered
with SEB1).Effective October 1, 2002, government securities
are to be necessarily held by NBFCs either in Constituent’s
Subsidiary General Ledger Account with a scheduled
commereial bank or in a demat account with a depository
participant registered with SEBI.These securities cannot be
withdrawn or otherwise dealt with for any purpose other than
repayment of public deposits.
3 Period of Deposits No demand deposits
NBFCs – 12 to 60 months
RNBCs – 12 to 84 months
MNBCs (chit Funds) – 6 to 36 months
4 Ceiling of deposit rate NBFCs, MNBCs and Nidhis - 11.0 per cent per annum (effective
March 4,2003)
RNBCs - Minimum interest of 4.0 per cent on daily deposits and
6.0 per cent on other than daily deposits.Interest may be paid or
compounded at periods not shorter than monthly rests.
5 Advertisement methodology for Every company which accepts deposits by advertisement has to
acceptance of deposits/public comply with the advertisement rules prescribed in this regard,
deposits the deposit acceptance form should contain certain prescribed
information ,issue receipt for deposits and maintain a deposit
register. etc.
6 Submission of returns All NBFCs holding or accepting public deposits have to submit
periodical returns to RBI at Quarterly, half yearly and annual
intervals.
(2) Prudential Norms applicable to only those NBFCs which are accepting/holding public deposits
1 Capital to Risk Assets Ratio The NBFCs holding/accepting public deposits are required to
(CRAR) maintain CRAR as under:
i. Equipment leasing companies/hire purchase finance
companies (with MIG credit rating) 12 percent
ii. Equipment leasing companies/hire purchase finance
companies (without MIG credit rating) 15 percent
iii. Loan/investment companies 15 percent
iv. RNBCs 12 per cent
CRAR comprises – tier I and tier II capitalTo be maintained on a
daily basis and not merely on the reporting dates.Tier I Capital –
core capital or NOF but includes compulsorily convertible
preference shares (CCPS) as a special case for CRAR purposes.Tier
II Capital – all quasi-capital like preference shares (other than
CCPS) subordinated debt, convertible debentures, etc.Tier III
256
Capital not to exceed tier I capitalGeneral provisions and loss
reserves not to exceed 1.25 per cent of the risk – weighted
assets.Subordinated debt issued with original tenor of 60 months
or more.
2 Restrictive norms Acceptance of public deposits not allowed if the prudential norms
are not complied with fully.
Any NBFC defaulting in repayment of the matured deposits
prohibited from creating any further assets until the defaults are
rectified
Investments in real estate, except for own use, restricted to 10
per cent of the owned fund.Investments in unquoted shares
restricted as under:EL/HP Companies 10 percent of owned
fund
Loan/investment companies 20 per cent of owned
fund
No further investments in real estate or unquoted shares in case
of excess position held till its regularisation.
Sufficient adjustment period allowed - further extension on merits
of each case.
3 Credit/investment concentration Single borrower exposure limits credit - 15 percent of owned
norms fund
Investments - 15 percent of owned
fund
Single group of borrower exposure 25 percent of owned
limits credit - fund
Composite (credit and investments) exposure limits
Single borrower 25 percent of owned
fund
Single group of borrowers 40 percent of owned
fund
_ Exposure norms also applicable to own group companies and
subsidiaries.
_ Includes all forms of credit and credit related and certain
other receivables as also off balance sheet exposures.
_ Debentures/bonds to be treated as credit for the purpose of
prudential norms but as investments for the purpose of
balance sheet and compliance with investment obligations.
4 Reporting System: Half yearly Half-yearly returns to be submitted as at the end of March and
return September every year,
_ Time allowed for submission - 3 months from the due date,
_ The return to be certified by the statutory auditors of the
company. However, it need not wait for audit and the figures
furnished therein could be the unaudited figures but must
be certified by auditors
(3) Prudential Norms applicable to all NBFCs irrespective of whether they accept/hold public deposits or not
1 Income Recognition Norms The recognition of income on the NPA is allowed on cash basis only.The
unrealised income recognised earlier is required to be reversed.
257
2 NPA norms Recognition of income on accrual basis before the asset becomes
NPA as under:Loans and Advances: Upto 6 months and 30 days
past due period (past due period done away with effect from March
31, 2003) Lease and Hire Purchase Finance: 12 months
3 Restrictive Norms Loans against own shares not allowed
4 Policy on demand/call loans Companies to frame a policy for demand and call loans relating
to cut-off date for recalling the loans, the rate of interest,
periodicity of such interest, periodical reviews of such performance,
etc.
5 Accounting Standards All the Accounting Standards and Guidance Notes issued by
Institute of Chartered Accountants of India (ICAl) are applicable
to all NBFCs in so far as They are not inconsistent with the
guidelines of RBI.
6 Accounting for investments All NBFCs to have a well defined investment policy.
Investments classified into two categories - (1) long term and (ii)
current investments.
Long term investments to be valued as per Accounting Standard,
issued by ICAI.
Current investments to be classified into - (a) quoted and (b)
unquoted.
Current quoted investments to be valued at lower of cost or market
value.
Block valuation permitted - Notional gains or losses within the
block permitted to be netted - but not inter-block, net notional
gains to be ignored but notional losses to be provided for.
Valuation norms for current unquoted investments are as under:
i. Equity shares (at lower of cost or break up value or fair value)
ii. Re I/- for the entire block of holding if the balance sheet of
the investee company is not available for the last two years
iii. Preference shares at lower of cost or face value
iv. Government securities at carrying cost
v. Mutual Fund units at net asset value (NAV) for each scheme
and
vi. Commercial paper (CP) at its carrying cost
7 Asset Classification All forms of credit (including receivables) to be classified into four
categories -
_ Standard asset
_ Sub-standard asset
_ Doubtful asset
_ Loss asset
8 Provisioning for Non-Performing Standard assets - No provisionSub-
Assets – Loans and Advances standard assets- 10 per cent of outstanding balance
Doubtful assets - on unsecured portion 100 per cent and on
secured portion 20, 30 and 50 per cent depending on the age of
the doubtful assets
Loss asset - 100 per cent of the outstanding
258
9 Provisioning for Non-Performing _ Unsecured portion to be fully provided for
Assets – Equipment Lease and _ Further provisions on net book value (NBV) of EL/HP assets
Hire Purchase accounts _ Accelerated additional provisions against NPAsNPA for 12
months or more but less than 24 months 10 per cent of
NBVNPA for 24 months or more but less than 36 months 40
per cent of NBVNPA for 36 months or more but less than 48
months 70 per cent of NBVNPA for 48 months or more 100
per cent of NBVValue of any other security considered only
against additional provisions.Rescheduling in any manner will
not upgrade the asset upto 12 months of satisfactory
performance under the new terms.Repossessed assets to be
treated in the same category of NPA or own assets - option
lies with the company.
10 Risk – Weights and Credit _ Risk - weights to be applied to all assets except intangible
Conversion factors assets.
_ Risk - weights to be applied after netting off the provisions
held against relative assets.
_ Risk - weights are 0, 20 and 100.
_ Assets deducted from owned fund like exposure to subsidiaries
or companies in the same group or intangibles to be assigned
0 per cent risk - weight.
_ Exposures to all-India financial institutions (AIFIs) at 20 per
cent risk -weight and all other assets to attract 100 per cent
risk - weights.
_ Off-balance sheet items to be factored at 50 or 100 and then
converted for risk - weight.
11 Disclosure requirements 1. Every NBFC is required to separately disclose in its balance
sheet the provisions made as outlined above without netting
them from the income or against the value of assets.
2. The provisions shall be distinctly indicated under separate
heads of accounts as under:
i. provisions for bad and doubtful assets; and
ii. provisions for depreciation in investments.
3. Such provisions shall not be appropriated from the general
provisions and loss reserves held, if any, by the NBFC.
4. Such provisions for each year shall be debited to the profit
and loss account. The excess of provisions, if any, held under
the heads general provisions and loss reserves may be written
back without making adjustment against them.
5. Nidhis and Chit Fund companies exempted.
6.5 Interest Rates
Keeping in view interest rates prevalent in the
financial sector, the ceiling on interest rates on
deposits payable by NBFCs, including chit fund
companies and nidhi companies, was reduced
from 16 per cent per annum to 14 per cent per
annum effective April 1, 2001 and further to 12.5
per cent per annum effective November 1, 2001
and further to 11% effective from March 2003.
6.6. Classification of NBFCs as Equipment
Leasing and Hire Purchase Finance
Companies
In response to representations from NBFCs, it
was decided to include loans and advances
against hypothecation of automobiles, aircrafts
and ships registered with the specified
authorities in the aggregate of equipment leasing
and hire purchase assets for the purpose of
259
classification of an NBFC into equipment leasing
and hire purchase finance company.
6.7. Alignment of the RBI’s Regulations
with Companies (Amendment)
Act, 2000
Changes were effected in the RBI directions to
NBFCs to align with those contained in the
Companies Act, 1956, as amended by the
Companies (Amendment) Act, 2000. Accordingly,
all NBFCs were advised to report to the Company
Law Board the defaults, if any, in repayment of
matured deposits or payment of interest to small
depositors within 60 days of such default. In
addition to NBFCs with asset size of Rs.50 crore
and more, those with paid up capital of not less
than Rs.5 crore have to constitute Audit
Committees. Such committees would have the
same powers, functions and duties as laid down
in Companies Act, 1956. Moreover, some NBFCs,
which were hitherto private limited companies
holding public deposits, have now become public
limited companies under the Companies Act.
Such NBFCs have to approach the RBI after
obtaining a fresh certificate of incorporation from
the Registrar of Companies, for change of name
in the CoR to reflect their status as public limited
companies.
6.8. Liquid Asset Securities of NBFCs
Effective from October 1, 2002, all NBFCs should
necessarily hold their investments in government
securities either in Constituent’s Subsidiary
General Ledger Account (CSGL) with a scheduled
commercial bank or Stock Holding Corporation
of India Ltd. (SHCIL) or in a dematerialised
account with depositories [National Securities
Depository Ltd. (NSDL)/ Central Depository
Services (India) Ltd. (CDSL)] through a depository
participant registered with SEBI. The facility of
holding government securities in physical form,
therefore, stands withdrawn. Government
guaranteed bonds, which have not been
dematerialised may be kept in physical form till
such time these are dematerialised. Only one
CSGL or a dematerialised account can be opened
by any NBFC. In case the CSGL account is
opened with a scheduled commercial bank, the
account holder has to open a designated funds
account (for all CSGL related transactions) with
the same bank. In case the CSGL account is
opened with any of the non-banking institutions
indicated above, the particulars of the designated
funds account (with a bank) should be intimated
to that institution. The NBFCs maintaining the
CSGL/designated funds accounts will be required
to ensure availability of clear funds in the
designated funds accounts for purchases and of
sufficient securities in the CSGL account for
sales before putting through the transaction. No
further transactions in government securities
should be undertaken by NBFCs with any broker
in physical form with immediate effect. All further
transactions of purchase and sale of government
securities have to be compulsorily through
CSGL/demat account. Government securities
held in physical form were to be dematerialised
by October 31, 2002.
6.9. Accounting Standards
In terms of Accounting Standard (AS) 19
(Accounting for Leases) issued by the Institute
of Chartered Accountants of India (ICAI), it was
clarified that (i) the prudential norms applicable
to hire purchase assets would, mutatis mutandis,
be applicable to the financial leases written on
or after April 1, 2001 and (ii) the leases written
up to March 31, 2001 would continue to be
governed by the prudential norms relating to
leased assets, as hitherto.
6.10. Statutory Auditors
NBFCs have to reiterate in their letter of
appointment to statutory auditors their statutory
responsibility to report directly to the RBI the
violations, if any, of the provisions of the RBI
Act or Directions issued thereunder, noticed by
them in the course of their audit.
6.11. Prudential Regulation
Some NBFCs were granting demand/call loans
with an open period or without any stipulation
regarding the rate of interest and servicing,
resulting in problems of compliance with
prudential norms relating to income recognition,
asset classification and provisioning in respect
of such loans. Accordingly, guidelines were
issued to obviate such difficulties and to ensure
that all such loans are appropriately classified
and the position of NPAs are truly reflected in
the financial statements of NBFCs. The concept
260
of ‘past due’ would be done away with in respect
of the definition of NPA for NBFCs effective from
March 31, 2003, which would be reflected in
the half-yearly return on prudential norms and
the balance sheet as on March 31, 2003. In
terms of NBFCs Directions on Prudential Norms,
the NBFCs accepting/holding public deposits
have to ensure maintenance of minimum
prescribed capital to risk-weighted assets ratio
(CRAR) at all times. The format for the report of
the auditors has accordingly been amended. In
order to obviate the probability of applying
divergent yardsticks for identification of potential
threat of non-recoverability of loans, RBI has
prescribed objective criteria for classification of
assets as loss assets.
6.12. Submission of Returns by NBFCs
Several NBFCs have been lax in timely
submission of the returns to the RBI. Action has
been contemplated against such NBFCs - initially
those with public deposits of Rs.50 crore and
above - for non-submission of returns. The action
may include imposing penalties as provided in
the RBI Act, 1934 as also launching court
proceedings against the errant companies,
besides considering rejection/ cancellation of the
CoR. A list of returns submitted by NBFCs is
presented in Annex 6.1.
6.13. Protection of Depositors’ Interest
With a view to protecting the interest of
depositors, it was decided to issue press
advertisements in cases where winding up
petitions filed by the RBI have been admitted in
Court and provisional liquidators have been
appointed or where criminal complaints have
been filed by the RBI and summons have been
issued by the Court.
6.14. Asset Liability Management
Based on the guidelines issued in July 2001,
effective March 31, 2002 asset liability
management system in all NBFCs with public
deposits of Rs. 20 crore and above as also NBFCs
with asset size of Rs. 100 crore and above has
been made operational. Instructions were also
issued to the effect that the first return as on
September 30, 2002, should be submitted by
the NBFCs to the RBI latest by October 31, 2002.
Why is NBFC a House Divided unto Itself?
Arijit Chakraborty - ALG India Law Offices
INBFC’s (Non Banking Financial Companies) are reported periodically to be under the RBI (Reserve Bank of India) lens for one reason or
the other. Under the circumstances, any effort by RBI to rationalize the regulatory framework of NBFC’s is highly welcome. Of particular
concern to RBI appears to be the exposure of those NBFC’s that even while not accepting deposits from the public are still raising resources
banks and financial institutions and diverting to the stock market. The evolution of RBI as the banking sector regulator to also being the
regulator for NBFC’s has not been well planned. A particularly manifest evidence of this is the confusion in legislation and in policy
reflected in the multiplicity of overlapping and irrational classifications of the various types of NBFC’s. The most apt illustration of this is
the fact that whereas the ‘Reserve bank of India Act 1934’ does itself define the term NBFC, there is a different definition of the same term
viz. NBFC in the ‘Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1988’ that the RBI itself
has issued under sections 45 J, 45K, 45M and 45MA of the aforesaid Act of 1934. Why has RBI made NBFC a house divided unto itself by
adopting an incongruous definition of an already defined term in its own parent statute?
NBFC under the RBI Act

Under section 45-I(a) of the RBI Act,1934 ‘business of non banking financial institution ’, is defined in terms of the business of a financial
institution and NBFC.
Sec: 45-I(a) : "business of a non-banking financial institution" means carrying on of the business of a financial institution referred to in clause
(c) and includes business of a non-banking financial company referred to in clause (f);]
The Act defines ‘Financial Institution’ (FI) u/s 45-I(c) as
"financial institution" means any non-banking institution which carries on as its business or part of its business any of the following
activities, namely :-
(i) the financing, whether by way of making loans or advances or otherwise, of any activity other than its own;
(ii) the acquisition of shares, stock, bonds, debentures or securities issued by a government or local authority or other marketable securities of
a like nature;
(iii) letting or delivering of any goods to a hirer under a hire-purchase agreement as defined in clause (c) of section 2 of the Hire-Purchase
Act, 1972 (26 of 1972);
(iv) the carrying on of any class of insurance business;
(v) managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the
time being in force in any State, or any business, which is similar thereto;
(vi) collecting, for any purpose or under any scheme or arrangement by whatever name called monies in lump sum or otherwise, by way of
subscriptions or by sale of units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or
disbursing monies in any other way, to persons from whom monies are collected or to any other person,
The definition of FI uses the definition of a Non Banking Institution. (NBI) and NBI has been defined under the Act as follows:
Sec.45-I(e) : "non-banking institution" means a company, corporation or co-operative society.
‘NBFC’, itself is defined under sec. 45-I(f) of the Act, as under
Sec. 45-I(f): ) "non-banking financial company" means-

(i) a financial institution which is a company;
(ii) a non banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or
arrangement or in any other manner, or lending in any manner;
(iii) such other non-banking institution or class of such institutions, as the bank may, with the previous approval of the Central Government
and by notification in the Official Gazette, specify.]
An analysis of forgoing provisions reveals that except for specifically notified categories, a company that is a FI, or a NBI receiving deposits,
alone would qualify as an NBFC. A further reading of the definitions of FI and NBI reveals that for a company to be an NBFC it should
either carry on any of the businesses as enumerated in (i) to (vi) of Sec. 45-I(c) or it should otherwise receive public deposits in any manner.
Regulatory Framework of NBFC’s

Section 45-IA of the Act requires registration of NBFC with RBI and maintenance of minimum NOF.
Sec 45-IA : (1) Notwithstanding any thing contained in this chapter or any other law for the time being in force, no non-banking financial
company shall commence or carry on the business of non-banking financial institution without-
(a) obtaining a certificate of registration issued under this chapter ; and
(b) having the net owned fund of twenty-five lakh rupees or such other amount, not exceeding two hundred lakh rupees, as the Bank may, by
notification in the official Gazette, specify ;
(2) Every non-banking financial company shall make an application for registration to the Bank in such form as the Bank may specify.
RBI is entrusted with the responsibility of regulating and supervising NBFC by virtue of powers vested in Chapter IIIB and by sections 45J,
45K and 45 MA of the RBI Act, 1934 (2 of 1934). The regulatory and supervisory objective is to;
# ensure healthy growth of financial companies;
# ensure that these companies function as a part of the financial system within the policy framework, in such a manner that their existence
and functioning do not lead to systematic aberration; and that
# the quality of surveillance and supervision exercised by the Bank over the NBFCs is sustained by keeping pace with developments that take
place in this sector of the financial system.
Accordingly, the RBI has issued directions from time to time. Of particular relevance to NBFCs is the APD direction, where the RBI has
adopted another definition of NBFC.
NBFC under Acceptance of Public Deposits (Reserve Bank) Directions, 1998 (APD Directions)
Para 2(1)(xi) of APD directions defines NBFC as
Non-banking financial company means only the non-banking institution which is a loan company or an investment company or a hire-
purchase finance company or an equipment leasing company or a mutual benefit financial company.
The terms used in the above cited provisions are also defined in the APD directions, as under:
Loan company [ para 2(1)(viii) of APD directions]

Loan company means a company which is a financial institution carrying on as it’s principal business the providing of finance whether by
making loans or advances or otherwise for any activity other than its own but doesnot include an equipment leasing company or a hire-
purchase finance company.
Investment company [ para 2(1)(vi) of APD directions]

Investment Company is a company which is a financial institution carrying on as it’s principal business the acquisition of securities.
Hire-purchase Finance Company [ para 2(1)(iv) of APD directions]

any company which is a financial institution carrying on as its principal business the activity of hire purchase transactions.
Equipment Leasing Company [ para 2(1)(ii) of APD directions]

means a company which is a financial institution carrying on as it’s principal business, the activity of leasing of equipment.
Mutual Benefit Financial Company [ para 2(1)(ix) of APD directions]

means a company which is a financial institution notified by The Central Government under section 620A of The Companies Act 1956
Each category of above notified companies is an NBFC for the APD Directions. As per the definition given in the APD directions, these
companies are a kind of ‘financial institution’. APD directions do not define financial institution. Therefore ‘financial institution’ mentioned
under the APD directions imports its meaning from the definition in section 45-I(c) of the RBI Act. This is consequent to Para 2(2) of APD
direction which states
Words or expressions used but not defined herein are defined in The Reserve Bank of India Act, 1934 (2 of 1934), or in Companies Act,
1956 (1 of 1956) [ or Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions 1998 or Residuary Non-Banking
Companies (Reserve Bank) Directions, 1987], shall have the same meaning as assigned to them in those Acts
As a consequence, each of these four categories of NBFC’s under the APD Directions are also within the statutory meaning under the Act of
the term NBFC. Thus, NBFC’s under the APD Directions are a subset of the NBFC’s under the Act.
Comparison of the two definitions

APD directions cater to a certain type of NBFCs. It is not clear as to why RBI has chosen to define NBFC in a way different from the
definition in the RBI Act. It is clear that NBFC as defined in the APD directions is subsumed fully in the statutory definition of NBFC in the
Act. In this scenario, it would have been easy and simple enough for the RBI to refer to the statutory definition of NBFC as in the Act and
then narrow it down for its purposes. In framing of the APD directions, RBI defines NBFC’s anew and thereupon goes on to identify
subcategories such as Loan company , Investment company, Hire-purchase, Finance company or Equipment leasing company and Mutual
benefit financial company, so as to attract different paragraphs of the Directions. Needless confusion has been created by RBI as it would
have been simpler easier and more rational to use the definition already available in the Act

NBFC Registration in India
The reserve bank of India regulates the working and operations of NBFC within the framework of the Reserve
Bank of India Act, 1934 and the directions issued by it under the act. According to RBI act, NBFC is Non-
banking financial company, which is registered under the Companies Act, 1956 of India and is engaged in the
business of loans and advances, acquisition of shares/ debentures /stock/bonds/securities issued by government
or local authority.
Under the Act, it is compulsory for a NBFC to get itself registered with the RBI as a deposit taking company.
This NBFC registration authorizes it to conduct its business as an NBFC. For the registration with the RBI, a
company incorporated under the Companies Act, 1956 and eager of commencing business of non-banking
financial institution, should have a minimum net owned fund of Rs 25 lakh.The NBFC registration in India
involves submission of an application by the company in the prescribed format along with the compulsory
documents for RBI's consideration. If the bank is satisfied that the conditions enumerated in the RBI Act, 1934
are fulfilled, it issues a 'Certificate of Registration' to the company. Only those NBFCs holding a valid
Certificate of Registration can hold public deposits. The NBFCs accepting public deposits should comply with
the Non-Banking Financial Companies Acceptance of Public Deposits Directions, 1998, as issued by the
bank.
Business Query Form
NBFC Registration Requirements
Non-banking financial companies (NBFCs) are fast emerging as an important segment of Indian
financial system, which is a heterogeneous group of institutions performing financial
intermediation in a variety of ways, like accepting deposits, leasing, making loans and advances
and hire purchase. NBFC registration requires the name, address and the documents to be
submitted to RBI by NBFCs for obtaining certificate and Registration from RBI.
Non Banking Finance Companies(NBFC) have emerged as the most preferred vehicle
for MFI’s in India and most of the MFI’s intend to convert into aNBFC in the coming
years.To better understand what NBFC’s are we are posting the FAQ’s about
NBFC’s from the RBI Website
The information given in the FAQ is of general nature for the benefit of
depositors/public and the clarifications given do not substitute the extant regulatory
directions/instructions issued by the Bank to the NBFCs.
Reserve Bank of India
Frequently Asked Questions on NBFCs
QUES -1 What is a Non-Banking Financial Company (NBFC)?

ANS -1 A Non-Banking Financial Company (NBFC) is a company registered under the
Companies Act, 1956 and is engaged in the business of loans and advances, acquisition
of shares/stock/bonds/debentures/securities issued by Government or local authority
or other securities of like marketable nature, leasing, hire-purchase, insurance business,
chit business but does not include any institution whose principal business is that of
agriculture activity, industrial activity, sale/purchase/construction of immovable
property.
A non-banking institution which is a company and which has its principal business of
receiving deposits under any scheme or arrangement or any other manner, or lending in
any manner is also a non-banking financial company (Residuary non-banking
company).
QUES 2. NBFCs are doing functions similar to banks. What is difference
between banks & NBFCs ?
ANS 2. NBFCs are doing functions akin to that of banks; however there are a few
differences:
(i) an NBFC cannot accept demand deposits; (ii) an NBFC is not a part of the payment
and settlement system and as such an NBFC cannot issue cheques drawn on itself; and
(iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is
not available for NBFC depositors unlike in case of banks.
QUES-3. Is it necessary that every NBFC should be registered with RBI?
ANS 3. In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC
should be registered with RBI to commence or carry on any business of non-banking
financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934.
However, to obviate dual regulation, certain categories of NBFCs which are regulated by
other regulators are exempted from the requirement of registration with RBI
viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies
registered with SEBI, Insurance Company holding a valid Certificate of Registration
issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act,
1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or
Housing Finance Companies regulated by National Housing Bank.
QUES 4. What are the different types of NBFCs registered with RBI?
ANS 4. Originally, NBFCs registered with RBI were classified as:
(i) equipment leasing company; (ii) hire-purchase company; (iii) loan company; (iv)
investment company.
However, with effect from December 6, 2006 the above NBFCs registered with RBI have
been reclassified as
(i) Asset Finance Company (AFC) (ii) Investment Company (IC) (iii) Loan Company
(LC)
AFC would be defined as any company which is a financial institution carrying on as its
principal business the financing of physical assets supporting productive/economic
activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and
material handling equipments, moving on own power and general purpose industrial
machines. Principal business for this purpose is defined as aggregate of financing
real/physical assets supporting economic activity and income arising therefrom is not
less than 60% of its total assets and total income respectively.
The above type of companies may be further classified into those accepting deposits or
those not accepting deposits.
QUES 5. Updated on February 10, 2009 What are the requirements / is the

procedure for registration with RBI?
ANS 5. A company incorporated under the Companies Act, 1956 and desirous of
commencing business of non-banking financial institution as defined under Section 45
I(a) of the RBI Act, 1934 should have a minimum net owned fund of Rs 25 lakh (raised
to Rs 200 lakh w.e.f April 21, 1999).
NBFC & MFI in India
From Wikipedia, the free encyclopedia
This article is an orphan, as few or no other articles link to it.
Please introduce links to this page from related articles;suggestions are
available. (February 2009)
To comply with Wikipedia's guidelines, the introduction of this article
may need to be rewritten. Please discuss this issue on the talk page and
read the layout guide to make sure the section will be inclusive of all
essential details. (September 2009)
This article may require copy editing for grammar, style, cohesion,
tone or spelling. You can assist by editing it. (November 2008)
NBFC means Non-banking financial company.[1] A non-banking financial company (NBFC) is a

company registered under the Companies Act, 1956 of India and is engaged in the business of
loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by
government or local authority or other securities of like marketable nature, leasing, hire-
purchase, insurance business, chit business, but does not include any institution whose
principal business is that of agriculture activity, industrial activity, sale/purchase/construction of
immovable property.[2]
Contents
[hide]
1 Difference between NBFCs & Banks

2 MFI
3 MFIs go for NBFC licences
4 Exemptions granted to NBFCs engaged in microfinance
activities
5 MFIs & SHG-Bank linkage programme
6 RBI relaxes norms for NBFCs
7 MFIs of India
8 References
[edit]Difference between NBFCs & Banks

NBFCs are doing functions akin to that of banks; however there are a few differences:
(i) an NBFC cannot accept demand deposits;

(ii) an NBFC is not a part of the payment and settlement system and as such an NBFC cannot
issue cheque drawn on itself; and
(iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not
available for NBFC depositors unlike in case of banks.
[edit]MFI
Microfinance institutions, also known as MFIs[3], offer financial services to undeserved,

impoverished communities.
[edit]MFIs go for NBFC licences

An Increasing number of microfinance institutions (MFIs) are seeking non-banking finance
company (NBFC) status from RBI to get wide access to funding, including bank finance.[4]
[edit]Exemptions granted to NBFCs engaged in microfinance

activities
The Task Force on Supportive Policy and Regulatory Framework for Microfinance set up
by NABARD in 1999 gave various recommendations. Accordingly, it was decided to exempt
such NBFCs which are engaged in (i) micro financing activities, (ii) licensed under Section 25 of
the Companies Act, 1956 and (iii) which are not accepting public deposits from the purview of
Sections 45-IA (registration), 45-IB (maintenance of liquid assets) and 45-IC (transfer of profits
to Reserve Fund) of the RBI Act, 1934.[5]
[edit]MFIs & SHG-Bank linkage programme

In a joint fact-finding study on microfinance conducted recently by Reserve Bank and a few
major banks, the following observations have been made:
(i) Some of the microfinance institutions (MFIs) financed by banks or acting as their
intermediaries/partners appear to be focusing on relatively better banked areas, including areas
covered by the SHG-Bank linkage programme. Competing MFIs were operating in the same
area, and trying to reach out to the same set of poor, resulting in multiple lending and
overburdening of rural households.
(ii) Many MFIs supported by banks were not engaging themselves in capacity building and
empowerment of the groups to the desired extent. The MFIs were disbursing loans to
thenewly formed groups within 10–15 days of their formation, in contrast to the
practice obtaining in the SHG - Bank linkage programme which takes about 6–7 months
for group formation / nurturing / hand holding. As a result, cohesiveness and a sense of
purpose were not being built up in the groups formed by these MFIs.
(iii) Banks, as principal financiers of MFIs, do not appear to be engaging them with regard
to their systems, practices and lending policies with a view to ensuring better
transparency and adherence to best practices. In many cases, no review of MFI operations
was undertaken after sanctioning the credit facility.[6]
[edit]RBI relaxes norms for NBFCs

NBFCs (Non Banking Finance Companies)registered with the Reserve Bank of India may take
up insurance agency business on fee basis and without risk participation and the need to seek
the bank's approval.
In a notification issued, the RBI said such NBFCs should obtain permission from the Insurance
Regulatory and Development Authority and comply with the IRDA regulations for acting as
"composite corporate agent with insurance companies.[7][8]
[edit]MFIs of India
Magazine Forbes ,has named seven microfinance institutes of India in the list of world's top 50
microfinance institutes.
Bandhan, as well as two other Indian MFIs—Microcredit Foundation of India (ranked 13th) and
Saadhana Microfin Society (15th) - have been placed even above Bangladesh-based Grameen
Bank, which along with its founder Mohammed Yunus was awarded Nobel Prize last year.
Besides Bandhan, Microcredit Foundation of India and Saadhana Microfin Society, other Indian
entries include Grameen Koota (19th), Sharada's Women's Association for Weaker Section
(23rd), SKS Microfinance Private Ltd (44th) and Asmitha Microfin Ltd (29th).[9][10]
MFIs go for NBFC licences for better access to

funds
An Increasing number of microfinance institutions (MFIs) are seeking non-banking finance company
(NBFC) status from RBI to get wide access to funding, including bank finance. This is happening at a
time when banks are looking to increase their exposure to microcredit.
In addition, MFIs and NGOs are looking at broad-basing their sources of funds. These include
raising funds through equity investments, debt funds, external commercial borrowings (ECBs),
venture capital funds, grants and contributions.
In the last couple of months, the central bank has granted fresh licences to around 10 such
organisations. MFIs such as Biswa in the East, Grameen Kuta in Bangalore, Bandhan in West
Bengal have already received NBFC licences from RBI, while start-up institutions like Ujivan in
Bangalore and Opportunity International in Chennai have also been granted approvals.
Following the crisis in Andhra Pradesh wherein the state government had asked local MFIs to close
down operations as they competed with the state lending programme called Velagu, banks are
becoming increasingly skeptical to lend to non-NBFC MFIs.
An NGO and an MFI could operate in the form of a trust, registered under the Commissioner of
Trusts and Charity or a Section 25 company, registered with the Registrar of Companies or else an
NBFC under RBI norms.
It cannot have access to public deposits and cannot lend more than Rs 50,000 to a single
borrower/group of borrowers. Mathew Titus, Sadhan's executive director, said, "Banks find it difficult
to lend to MFIs in the absence of sufficient collateral. Hence, they ask MFIs to widen their capital
base, which is possible only by transforming themselves into NBFCs.”
Also, with MFIs ramping up their scalability, they will also need to increase their capital base so that
costs per borrower are lowered. The central bank tightened the noose on banks lending to NBFCs in
its latest set of guidelines but industry sources feel that this is unlikely to have an impact on banks
funding NBFCs functioning as MFIs.
This is because not many banks would have breached their lending limits. As per the recent
guidelines, the exposure of a bank to a single NBFC cannot exceed 10% of the bank’s capital funds
as per its last audited balance sheet.
Having an NBFC status, according to Veena Mankar, director of Mumbai-based urban MFI,
Swadhaar Finaccess, will allow them to be regulated by RBI rather than facing accountability issues
from other quarters. Corporate governance norms also lend a great deal of transparency and
credibility to the prospective lending institutions, she added.
When MFIs don the role of an NGO, there is a sizeable limitation to accessibility of capital. The other
option proposed by MFIs and NGOs is to buy out those NBFCs which are not functioning virtually
but still have their licences. Here again, MFIs need to be careful of promoters' credentials and other
risks involved.
Sandeep Farias, vice-president and country director of Unitus, said most MFIs are looking to acquire
those NBFCs which were established prior to 1999 because they can benefit from lower cost of
acquisition. These companies need to have a capital base of Rs 25 lakh, whereas the ones set up
after 1999 will invite a minimum capital requirement of Rs 2 crore.
Also, with Ujivan procuring a licence within 50 days of putting in an application, it shows signs of RBI
being more proactive in this regard. Previously, RBI had notified that companies would need to
provide a 90-day notice prior to acquiring an NBFC. However, this time limit has now been reduced
to 30 days.
Financial sector and Banking:
Continuing reforms in the banking sector were aimed at improving the efficiency and financial
strength of commercial banks. Aggregate deposits of the scheduled commercial banks stood at dols
1.48 billion in IFY1997-98, an increase of 15.1 percent.
Net profits of commercial banks

Net profits of scheduled commercial banks rose sharply from dols 24 million in 1995-96 to1.2 billion
in 1996-97, an increase of 387 percent. Much of the increase was due to marking government
securities to market prices, following significant declines in prevailing interest rates. Three public
sector banks received capital restructuring loans from the government totaling dols 68 million in
1997-98, enabling those banks to reach a capital adequacy ratio of 8 percent.
Autonomy package
In November 1997, the Indian government announced an autonomy package for financially stronger
public sector banks to help them compete more efficiently in a liberalized environment and to
accelerate credit creation. Eleven banks qualified for the autonomy package.
The criteria for administrative autonomy are:

 capital adequacy of at least 8 percent;
 net non-performing assets of less than 9 percent;
 minimum net owned funds of more than dols 2.5 million (Rs 100 crore);
 and a net profit for the last three years.
 Banks that meet the four criteria will be given operational freedom in most administrative
matters.
RBI norms for NBFC's
The RBI has relaxed its norms for non-bank finance companies (NBFCs) with regard to taking
deposits from the public. It has allowed equipment leasing and hire-purchase finance companies
with investment-grade ratings to access public deposits, raised the ceiling on the amount of public
deposits these NBFCs may accept and extended the deadline for full compliance on its regulations
by two years, until December 2000. The financial viability of many NBFCs continues to be of concern
to the government and RBI regulators. There is considerable consolidation activity in this sector as
NBFCs adjust to the tougher standards they are being required to meet.
WTO negotiations on financial services:

India made a number of new commitments in the WTO Financial Services agreement concluded in
Geneva in December 1997. These modest commitments will come into effect in January 1999.
Major features of India's offer include:

 granting most favored nation (MFN) status to all foreignbanks and financial services
companies (including insurance),
 dropping a previous MFN exemption on banking;
 granting 12 new bank branch licenses per year to foreign banks (up from the present
commitment of 8 per year);
 ifting the 10 percent ceiling on reinsurance by Indian insurance companies;
 allowing 51 percent foreign investment in financial consulting, factoring, leasing,venture
capital, merchant banking and non-banking finance companies.
Insurance sector
In addition, 49 percent foreign equity will be allowed in stock brokerages; and foreign financial
services companies, including banks, will be allowed to invest venture capital in India up to 51
percent of a company's equity.Insurance.
Legality
As part of his 1998-99 budget presentation to Parliament on June 1, the Finance Minister announced
his intention to open the insurance sector to competition from Indian private sector companies. He
also proposed to convert Insurance Regulatory Authority (IRA) into an independent, statutory body.
Both actions will require Parliament to adopt new legislation, including amendments to two Acts
which reserve life insurance and general insurance for government owned monopolies.
Foreign insurance companies

The government has not yet clarified whether foreign insurance companies will be allowed to
participate as minority joint venture partners when the sector is opened up. Many observers believe
that the government will allow foreign participation to compensate for a lack of capital and expertise
among likely participants in the Indian private sector.
LIC and GIC

The government has granted substantial operational autonomy to the Life Insurance Corporation
(LIC) and General Insurance Corporation (GIC), both of which have monopoly positions in their
respective sectors under current law. LIC can now appoint fund managers/investment advisors both
in India and abroad and is allowed to invest 60 percent of its insurance funds in approved market
investments. New measures also provide more lenient investment norms, permission to trade in
securities subject to prescribed limits and more delegation of operational powers to the
four general insurance subsidiaries of GIC.
Capital Account Convertibility

The Tarapore Committee report on Capital Account Convertibility, released in June 1997,
recommended a three-year time-frame for complete capital account convertibility of the rupee. The
Committee set out the following preconditions for full convertibility:
 reduction of the fiscaldeficit to 3.5 percent of GDP by 1999-2000;
 an average inflation rate of 3-5 percent for the period 1997-2000;
 complete deregulation of all interest rates in 1997-98;
 a reduction in the cash reserve ratio (CRR) to about 3 percent;
 reduction in the level of banks' non-performing assets from an estimated 13.7 percent of total
loans in March 1997 (actual NPAswere 17.8 percent of total loans) to 5 percent in 1999-2000; and
 the adoption of a transparent exchange rate policy by 2000.
There is a general consensus in government and business community that India should not move to
capital account convertibility until these conditions have been met, lest India suffer the kind of
currency crisis which hit other Asian countries in 1997.
What is a Non-Banking Financial Company?
Non-banking financial company is an obscure term for many people. Let's understand what
a non-bank financial company in detail is and understand functions associated with it. Non-
bank financial companies (NBFCs) are referred as the fiscal organizations which grant
banking services but nowhere acts like an authorized bank. NBFCs do not possess a banking
certificate. Still, it processes and practices are implemented as per the bank bylaw. Hence,
NBFCs practices as a bank with no bank regulation. Nonetheless, this relies on the
authority, for instance in New Zealand, any corporation can carry out the trade of banking,
and requires no banking certificates.
NBFCs offer various types of services which may be financially useful. Non-bank
organizations often operate as loan brokers and credit services and helps investments in
assets and belongings. NBFCs deals in capital market instruments and finances private
edification. It also helps in assets administration such as handling portfolios of stocks and
shares and covering stock and shares, and other responsibilities and retirement planning.
NBFCs suggest corporations in union and achievement organize feasibility, studies market or
industry for companies and reducing services such as cut rate of instruments.
On the other hand, NBFCs are characteristically not permitted to acquire down payments
from the common people. Hence they are required to stumble on different ways of financial
supporting their processes, for instance supplying liability instruments.
A non- banking investment corporation can be categorized into the following groups
depending upon their characteristic of actions which are development investment
organizations, rental corporations, investment business, modaraba companies, house
business companies, venture capital companies, and discount & assurance addresses.
What are functions of NBFC?
functions of non banking financial companies
 9 months ago
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Best Answer - Chosen by Voters
A non-banking financial company (NBFC) is a company registered under the Companies
Act, 1956 and is engaged in the business of loans and advances, acquisition of
shares/stock/bonds/debentures/securities issued by government or local authority or other
securities of like marketable nature, leasing, hire-purchase, insurance business, chit
business, but does not include any institution whose principal business is that of agriculture
activity, industrial activity, sale/purchase/construction of immovable property.
A non-banking institution which is a company and which has its principal business of
receiving deposits under any scheme or arrangement or any other manner, or lending in
any manner is also a non-banking financial company (residuary non-banking company).
NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?
NBFCs are doing functions akin to that of banks, however there are a few differences:
(i) a NBFC cannot accept demand deposits (demand deposits are funds deposited at a
depository institution that are payable on demand -- immediately or within a very short
period -- like your current or savings accounts.)
(ii) it is not a part of the payment and settlement system and as such cannot issue cheques
to its customers; and
(iii) deposit insurance facility of DICGC is not available for NBFC depositors unlike in case
of banks.
Is it necessary that every NBFC should be registered with RBI?
In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be
registered with RBI to commence or carry on any business of non-banking financial
institution as defined in clause (a) of Section 45 I of the RBI Act, 1934.
However, to obviate dual regulation, certain category of NBFCs which are regulated by
other regulators are exempted from the requirement of registration with RBI viz. venture
capital fund/merchant banking companies/stock broking companies registered with Sebi,
insurance company holding a valid certificate of registration issued by IRDA, Nidhi
companies as notified under Section 620A of the Companies Act, 1956, chit companies as
defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or housing finance companies
regulated by National Housing Bank.
What are the different types of NBFCs registered with RBI?
The NBFCs that are registered with RBI are:
(i) equipment leasing company;

(ii) hire-purchase company;
(iii) loan company;
(iv) investment company.
With effect from December 6, 2006 the above NBFCs registered with RBI have been
reclassified as
(i) Asset Finance Company (AFC)

(ii) Investment Company (IC)
(iii) Loan Company (LC)
AFC would be defined as any company which is a financial institution carrying on as its
principal business the financing of physical assets supporting productive / economic activity,
such as automobiles, tractors, lathe machines, generator sets, earth moving and material
handling equipments, moving on own power and general purpose industrial machines.
Principal business for this purpose is defined as aggregate of financing real/physical assets
supporting economic activity and income arising therefrom is not less than 60% of its total
assets and total income respectively.
The above type of companies may be further classified into those accepting deposits or
those not accepting deposits.
Besides the above class of NBFCs the Residuary Non-Banking Companies are also
registered as NBFC with the Bank.
Category of NBFC
Ceiling on public deposits
AFCs maintaining CRAR of 15% without credit rating
AFCs with CRAR of 12% and having minimum investment grade credit rating 1.5 times of
NOF or Rs 10 crore whichever is less
4 times of NOF
LC/IC with CRAR of 15% and having minimum investment grade credit rating 1.5 times of
NOF
Presently, the maximum rate of interest a NBFC can offer is 11%. The interest may be paid
or compounded at rests not shorter than monthly rests.
The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months
and maximum period of 60 months. They cannot accept deposits repayable on demand.
The RNBCs have different norms for acceptance of deposits which are explained elsewhere
in this booklet.
What are the salient features of NBFCs regulations which the depositor may note at the
times of investment?
Some of the important regulations relating to acceptance of deposits by NBFCs are as

under:
i) The NBFCs are allowed to accept/renew public deposits for a minimum period of 12
months and maximum period of 60 months. They cannot accept deposits repayable on
demand.
ii) NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time
to time. The present ceiling is 11 per cent per annum. The interest may be paid or
compounded at rests not shorter than monthly rests.
iii) NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.
i

The Year 2009 for Non Banking Financial Companies in
India

January 11, 2010 14:28 IST

A developing economy like India always craves for financial resources. Demand for
credit is great and often organized traditional financing institutions (like banks and
financial institutions) do not meet such demand thus creating a space for other types of
financing. Money lender is an age old institution filling such space. Opening up of
economy gave a further boost to the demand for credit. At this juncture, NBFCs (Non-
Banking Financial Company), which basically were better organized money lenders
happened in large number. A NBFC is a company that is engaged in the business of
loans and advances, acquisition of shares/stock/bonds/debentures/securities, leasing,
hire-purchase, insurance business and chit business. NBFCs do not include any
institution whose principal business is that of agriculture activity, industrial activity,
sale/purchase/construction of immovable property.

NBFCs in India have played a useful role in financing various sectors of the economy,
particularly those that have been underserved by the banks. In fact, many banks are
forming NBFCs to take advantage of their greater flexibility in dealing with customers.
There are, of course, some persistent problems for NBFCs, apart from deposit-taking.
These relate to flexible handling of their capital issues. Both SEBI and the RBI need to
revisit their case for relaxations with sympathy, especially since they are rated and
supervised. These specific relaxations are more a matter of confidence-building.

The Year 2009 - Not so promising for NBFCs:
The major class of NBFCs, the Asset Financing NBFCs reported a fall in growth this
year. The fall in demand for loans from the automobile sector and increased levels of
asset quality slippages, have reduced the profit growth of most non-banking financial
services (NBFC) players.
Bajaj Auto Finance, Cholamandalam DBS Finance, Sundaram Finance, M&M Financial
Services and Shriram Transport Finance, the five prominent NBFCs, have aggregately
seen net profit grow by 32 per cent over FY08. The profit picture may look skewed due
to much higher profit growth registered by Shriram (57 per cent) and Bajaj (64 per
cent). Chola DBS saw a decline in profit growth (-28%).
The automobile slowdown that became pronounced between October 2008 and March
2009 may have negative effects on the NBFCs’ books for the next couple of quarters.
However, the Reserve Bank’s recent relaxation in asset repossessing norms may benefit
the NBFCs. An auto sector revival (supported by encouraging sales data in over the last
couple of months) may boost the disbursements of loans.
Change in policies - the need of the hour:
FDI policy
Given the recent economic turmoil, the FDI regulations in the NBFC space might need
a little bit of fine tuning. Under the existing FDI policy, investment in an NBFC is
permitted subject to $50 million capitalisation to be brought within a period of 24
months.
Considering the overall slowdown, the sector could do well with contracting this cap to,
say, $30 million or by extending the period to, say, 36 months. This might encourage
flow of capital in NBFCs. Further, the list of 18 permitted activities falling under the
automatic route does not include investment activity; investment advisory activities are
however included. It is urged that investment activity be also included, as it is anyway
a permitted classification under the RBI regulations.
Parity with banks
One of the most repeated pleas of NBFCs on the direct taxes front is the issue of parity
with banks and housing finance companies in the areas of allowing provision on non-
performing assets as a deduction. This provision, made in accordance with the
prudential norms of the RBI, can be claimed as a deduction for tax purposes under
Section 36(1)(viia) of the Income-Tax Act, subject to overall limits. The banking
industry is independently representing that these limits be freed.
Similarly, income deferred in respect on non-performing assets of NBFCs is unjustly

subject to tax on the basis of ‘accrual’. However, banks in general are well protected by
Section 43D of the I-T Act. This dichotomy is drawing the attention of the courts,
including the apex court. A concrete solution is clearly an amendment to the tax laws to
ensure parity.
Tax deduction at source (TDS) is an effective machinery to collect taxes in advance,

also results in litigation. Interest paid to an NBFC on borrowings is subject to a 22.44
per cent tax deduction at source. Banks, cooperative societies, public financial
institutions, etc., are given shelter under Section 194A of the I-T Act, which does not
extend to NBFCs. While tax laws provide for a nil or lower withholding, the tax
department has shown resistance in granting this relief. As a result, the yields on
lending have dropped significantly.
With some NBFCs still actively engaged in leasing of passenger cars, office equipment,
etc., the TDS on the rentals paid by the lessee to the leasing company is a dampener.
The rate of deduction in accordance with Section 194-I of the I-T Act erodes the entire
margins on the transaction.
Leasing as a product has its own sets of complexities like accounting guidelines,
deferred tax, etc., and the TDS hurdle imposed from 2007 has virtually knocked the
oxygen out of the what was a revival of sorts to this product in the recent years.
An authority for NBFCs:
The Government should come forward to set up an authority exclusively to take charge
of the development of the industry. The authority could set itself as an objective that
over a specified period of time, (say) ten per cent of financial assets (which today
would be Rs 4 lakh crore) should be under the management of NBFCs. Such an
initiative would revive the performance of NBFCs.
The year Ahead for NBFCs
As Mr. T. T. Srinivasa Raghavan, Managing Director, Sundaram Finance Ltd. pointed
out, “we fail to realize that what we need here in the financial services sector is an
Indian model, given our diversity and the fact that our challenges are very different
from anywhere else in the world. With the turn of events over the last 12-18 months, it
can be expected that we will finally realize that we must seek Indian solutions to our
challenges.”
Banks should look at their relationship with NBFCs as a wholesaler-retailer

relationship and not as competitors. While NBFCs are only a small number, if this
business model of a wholesaler-retailer evolves, it will certainly help in expanding the
reach of credit delivery to the far corners of the country, especially to the under-served
markets. The success of the last mile delivery depends on the various players working
as a continuum.
Company - Meaning
Check Out
Companies Act 1956
Practically the most credible form of business, a company is
Compare with other business
registered in accordance with the Companies Act and is a forms
separate legal entity, distinct from both its shareholders, Incorporation Requirement &
Procedure
directors and managers. The liability of the shareholders is
Management & Accounts
limited to the amount paid or unpaid on issued share capital. A
Dissolution & winding up
company has unlimited life and no limit is placed on the number
Compliances
of shareholders. The Companies Act, 1956 does, however,
How companies are taxed?
place many restrictions on the company. It must maintain certain
books of accounts, appoint an auditor and file an annual return
with the registrar of companies which includes the accounts as well as details of directors and
mortgages.
Types of Companies
There are three types of companies keeping in view their nature, which is outlined below:
1. Companies with Limited Liability

2. Companies with Unlimited Lliability
3. Company limited by Guarantees
The aforesaid companies are further classified into the following:
1. Public Limited Company

2. Private Limited Company
For some specific business purposes, Public & Private Companies takes the form of the following:
1. Producer Company
2. Non Banking Financial Company
3. Non Profit Associations
Company with Limited Liability
Companies, where the liability of its members is limited to the extent of amount unpaid on the
shares, held by them in the Company. For e.g. A has purchased 10 shares of Rs 10/each and
therefore his total liability towards the company is limited only upto Rs 1000. Generally, more than
90% of the companies are incorporated with limited liability.
Company with unlimited Liability
Company with unlimited liability is just like partnerships, where the liability of partners is unlimited
and may extend to their personal assets. In case of such companies, the liability of its member is
unlimited for the purpose of all the liabilities. This type of company is generally, not popular form of
business organization.
Company limited by Guarantees Company
where liability of its members is limited to the amount , which he had agreed at the time of
incorporation to pay on wounding up of the Company. Under this type of company, generally no
amount is put in by the members at the time of incorporation and they agree to pay the same at the
time of wounding up of the affairs of the Company.
Public Limited Company
Public Limited Company means a Company which is not a private limited Company and has a
minimum Authorized Capital of Rs 5 Lakhs. It does not carry the word `private’ in its name and also
do not have the restrictions as carried out in the private limited companies. A Private Company
which is subsidiary of Public Company also functions as Public Companies.
Basic Features are as follows:
 Minimum Authorized Capital of Rs. 5 Lakhs

 No restriction on number of members
 Shares are easily transferable.
 Can access Public in case of need of funds
Advantages:
 Better Governed due to large number of compliances

 No limit to Memberships
 More financing options in form of Public Issue or Deposits
 Better Creditworthiness
Disadvantages:
 Number of legal Compliances are too large
 Approvals of Government for large number of purposes
 Restrictions on payment of salaries and loans to Directors
 Not suitable for closely held business.
Private Limited Company
Private Limited Company means a Company formed with the word ‘private’ in its name and the
Articles of Association of whom contains the following restrictions
 Restricts the right to transfer its shares

 Limitation to the number of shareholders to 50 (excluding employees and former employees)
 Prohibition towards invitation to the public to subscribe to shares and debentures
 Prohibits acceptance of deposits from persons other than shareholders, directors and their
relatives.
 The minimum paid up capital for a private Company would be Rs. 100,000.
Advantages:
 Suitable for closely held groups

 Less Legal Formalities
 Less Government Intervention
 Better Creditworthiness
Disadvantages:
 Limited financing avenues i.e. no public offer or acceptance of deposits

 Limited Membership
Private Companies are also relieved from complying a large number of provisions of the Companies
Act, click here to see the same.
Producer Company
The Companies has prescribed separate set of provisions for companies which are engaged in
activities related to agriculture and all companies registered as per these provisions are called as
Producer Company. Producer Company can engage in any of the following activities:
 Production, harvesting, procurement, pooling handling, marketing, selling, export and import
of primary produce of the Members and services for their benefit,
 Processing including reserving, drying, distilling, brewing etc of produce of its members
 Rendering technical services, consultancy services, training, research and development and
promotion of interest of its Members,
 Generation, transmission and distribution of power, revitalization of land and water
resources, their use, conservation and communication relatable to primary produce,
 Insurance of producers or their primary produce
 Promoting techniques of mutual assistance
 Distilling packaging of produce of its Members
 Activities ancillary or incidental to any of the above activites
Any ten or more individuals, each of them being a producer or any two or more producer institutions,
or a combination of ten or more individuals and producer institutions may form a Producer Company
Producer means a person engaged in any of the activity connected with the following:
 Produce of farmers, arising from agriculture (including animal husbandry, horticulture,

floriculture, pisiculture, viticulture, forestry, forest products, re-vegetation, bee raising,
farming planation product)
 Person engaged in handloom, handicraft and other cottage industries
 By product arising from above activities
 By product arising from any activity which is ancillary to the above activity
Producer Institution means a Producer company or any other institution having only producer or
producers or producer company (s) as its member whether incorporated or not and have the objects
of producer company and which agrees to make use of services provided in articles of Producer
Company
Non Banking Financial Company
Following types of companies are called as Non Banking Financial Companies and are regulated as
per the regulations prescribed under Non Banking Financial Companies Acceptance of Public
Deposits (Reserve Bank) Directions 1998:
 Company which is financial institution carrying on as its principal business the financing of
physical assets supporting productive/economic activity such as automobiles, tractors, lathe
machines, generator sets, earth moving and material handling equipment, moving on won
power and general purpose industrial machines.
 Company which is financial institution carrying on as its principal business the providing if
finance whether by making loans or advances or otherwise for any activity other than its own.
 Company which is a financial institution carrying on as its principal business the acquisition
of securities.
Non Profit Association
Under the Companies Act , 1956 you can also register a company for carrying on business , not for
the purpose of earning profit but to serve mankind at large. Such type of company is generally called
as Association not for profit or section 25 Company.
Association not for profit or section 25 company can only be formed for the purpose with the
following objectives
 For promoting commerce, art, science, religion, charity or any other useful objects ; and
 The Company prohibits payment of any dividend to its members but intends to apply its profit
and other income in promotion of its objects
It is necessary to take the approval of Government of India, to form such type of company
Due to their nature of business, the Government of India has relaxed the application of various
provisions of the Companies Act on such companies
Mahindra Group
Mahindra Group is one of the largest corporate groups of India. It is a US $4.5 billion conglomerate
with employee strength of over 40,000. The group has diverse business interests such as
automotive, farm equipments, infrastructure, information technology, hospitality, and financial
services. Mahindra Group has global presence and it is ranked amongst Forbes Top 200 list of the
World's Most Reputable Companies and in the Top 10 list of Most Reputable Indian companies.
The origins of Mahindra Group can be traced back to October 2, 1945 when Mahindra brothers J.C.
Mahindra & K.C. Mahindra joined hands with Ghulam Mohammad, and Mahindra & Mohammad was
set up as a franchise for assembling jeeps from Willys, USA. After India's independence in 1947,
Mahindra & Mohammad changed its name to Mahindra & Mahindra. Ghulam Mohammad migrated
to Pakistan post-partition and became the first Finance Minister of Pakistan. Since then, Mahindra
Group has gone from strength to strength and today it has evolved into a giant group.
Business Interests of Mahindra Group
Automotive Sector: Mahindra Group is the market leader in utility vehicles in India since inception.
Mahindra also manufactures and markets utility vehicles and light commercial vehicles, including
three-wheelers. Some of the famous automobile brands of Mahindra are: Scorpio and Bolero.
Recently, Mahindra joined hands with French automobile major Renault to enter passenger car
segment. It has launched a car called Mahindra Renault Logan.
Farm Equipment Sector: Mahindra is the largest producer of tractors in India and is among the top
five tractor brands in the world. It has its
own state-of-the-art plants in India, USA, China and Australia, and a capacity to produce 1,50,000
tractors a year.
Trade & Financial Services: Mahindra Intertrade Limited and its subsidiaries have specialized
domain knowledge in imports and exports of commodities, domestic trading, marketing and
distribution services. Mahindra Finance is one of the largest Non Banking Finance Companies in
India with an asset base of about Rs. 5000 crores. Mahindra Insurance Brokers offer Life and Non-
life Insurance plans to retail and corporate customers. Mahindra Steel Service Centre is the first
steel service centre in the organised sector in India.
Infrastructure Development: Mahindra Group has interests in real estate, special economic zones,
hospitality industry, infrastructure development, project engineering consultancy and design.
Mahindra Holidays & Resorts is the leader in the lifetime holiday market in India. Mahindra Gesco is
fastest growing Construction Company in India. Mahindra World City is developing and promoting
India's first Integrated Business City. Mahindra Acres Consulting Engineers is a multidisciplinary
engineering consultancy organization.
Information Technology: Mahindra Group entered into IT sector in 1986 when it formed a joint
venture with British Telecommunications plc. The company was called Mahindra-British Telecom.
The Company has recently changed its name to Tech Mahindra. Tech Mahindra is a leading
provider of telecommunication solution and service industry world-wide. It is India's 8th largest
software exporter.
Speciality Businesses: Mahindra Group companies such as Mahindra AshTech, Mahindra
Defence, Spares Business Unit and Mahindra Logistics are into Speciality Businesses. Mahindra
AshTech undertakes turnkey contract execution for Ash Slurry System and Travelling Water
Screens. Mahindra Defence Systems looks after the requirements of India's defence and security
forces. Mahindra Logistics provide complete logistics solutions to complex transportation needs of
clients across the world.
Major Achievements of Mahindra Group
 Mahindra & Mahindra made the first indigenous Jeep in the country in 1949.
 Fourth largest tractor company in the world.
 Largest manufacturer of tractors in India.
 Largest manufacturer of MUVs, offering over 20 models
What is a non-banking financial company (NBFC)? How does it differ from a bank? Get the
answers to these and many more questions on NBFCs.
What is a non-banking financial company (NBFC)?
A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956
and is engaged in the business of loans and advances, acquisition of
shares/stock/bonds/debentures/securities issued by government or local authority or other securities
of like marketable nature, leasing, hire-purchase, insurance business, chit business, but does not
include any institution whose principal business is that of agriculture activity, industrial activity,
sale/purchase/construction of immovable property.
A non-banking institution which is a company and which has its principal business of receiving
deposits under any scheme or arrangement or any other manner, or lending in any manner is also a
non-banking financial company (residuary non-banking company).
NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?
NBFCs are doing functions akin to that of banks, however there are a few differences:
 (i) a NBFC cannot accept demand deposits (demand deposits are funds deposited at a
depository institution that are payable on demand -- immediately or within a very short period
-- like your current or savings accounts.)
 (ii) it is not a part of the payment and settlement system and as such cannot issue cheques
to its customers; and
 (iii) deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of
banks.
Is it necessary that every NBFC should be registered with RBI?
In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered
with RBI to commence or carry on any business of non-banking financial institution as defined in
clause (a) of Section 45 I of the RBI Act, 1934.
However, to obviate dual regulation, certain category of NBFCs which are regulated by other
regulators are exempted from the requirement of registration with RBI viz. venture capital
fund/merchant banking companies/stock broking companies registered with Sebi, insurance
company holding a valid certificate of registration issued by IRDA, Nidhi companies as notified under
Section 620A of the Companies Act, 1956, chit companies as defined in clause (b) of Section 2 of
the Chit Funds Act, 1982 or housing finance companies regulated by National Housing Bank.
What are the different types of NBFCs registered with RBI?
The NBFCs that are registered with RBI are:

 (i) equipment leasing company;
 (ii) hire-purchase company;
 (iii) loan company;
 (iv) investment company.
With effect from December 6, 2006 the above NBFCs registered with RBI have been reclassified as
 (i) Asset Finance Company (AFC)

 (ii) Investment Company (IC)
 (iii) Loan Company (LC)
AFC would be defined as any company which is a financial institution carrying on as its principal
business the financing of physical assets supporting productive / economic activity, such as
automobiles, tractors, lathe machines, generator sets, earth moving and material handling
equipments, moving on own power and general purpose industrial machines.
Principal business for this purpose is defined as aggregate of financing real/physical assets
supporting economic activity and income arising therefrom is not less than 60% of its total assets
and total income respectively.
The above type of companies may be further classified into those accepting deposits or those not
accepting deposits.
Besides the above class of NBFCs the Residuary Non-Banking Companies are also registered as
NBFC with the Bank.
What are the requirements for registration with RBI?
A company incorporated under the Companies Act, 1956 and desirous of commencing business of
non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should have a
minimum net owned fund of Rs 25 lakh (raised to Rs 2 crore from April 21, 1999).
The company is required to submit its application for registration in the prescribed format alongwith
necessary documents for bank's consideration. The bank issues certificate of registration after
satisfying itself that the conditions as enumerated in Section 45-IA of the RBI Act, 1934 are satisfied.
Where one can find a list of registered NBFCs and instructions issued to NBFCs?
The list of registered NBFCs is available on the web site of Reserve Bank of India [ Get Quote ] and
can be viewed at www.rbi.org.in. The instructions issued to NBFCs from time to time are also hosted
at the above site. Besides, instructions are also issued through Official Gazette notifications. Press
releases are also issued to draw attention of the public/NBFCs.
Can all NBFCs accept deposits and what are the requirements for accepting public deposits?
All NBFCs are not entitled to accept public deposits. Only those NBFCs holding a valid certificate of
registration with authorisation to accept public deposits can accept/hold public deposits. The NBFCs
accepting public deposits should have minimum stipulated net owned fund and comply with the
directions issued by the bank.
Is there any ceiling on acceptance of public deposits? What is the rate of interest and period
of deposit which NBFCs can accept?
Yes, there is ceiling on acceptance of public deposits. An NBFC maintaining required NOF/CRAR
and complying with the prudential norms can accept public deposits as follows:
 Category of NBFC
 Ceiling on public deposits
 AFCs maintaining CRAR of 15% without credit rating
 AFCs with CRAR of 12% and having minimum investment grade credit rating 1.5 times of
NOF or Rs 10 crore whichever is less
 4 times of NOF
 LC/IC with CRAR of 15% and having minimum investment grade credit rating 1.5 times of
NOF
Presently, the maximum rate of interest a NBFC can offer is 11%. The interest may be paid or
The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and
maximum period of 60 months. They cannot accept deposits repayable on demand.
The RNBCs have different norms for acceptance of deposits which are explained elsewhere in this
booklet.
What are the salient features of NBFCs regulations which the depositor may note at the times
of investment?
Some of the important regulations relating to acceptance of deposits by NBFCs are as under:
 i) The NBFCs are allowed to accept/renew public deposits for a minimum period of 12
months and maximum period of 60 months. They cannot accept deposits repayable on
demand.
 ii) NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time
to time. The present ceiling is 11 per cent per annum. The interest may be paid or
 iii) NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.
 iv) NBFCs (except certain AFCs) should have minimum investment grade credit rating.
 v) The deposits with NBFCs are not insured.
 vi) The repayment of deposits by NBFCs is not guaranteed by RBI.
 vii) There are certain mandatory disclosures about the company in the Application Form
issued by the company soliciting deposits.
What is 'deposit' and 'public deposit'? Is it defined anywhere?
The term 'deposit' is defined under Section 45 I(bb) of the RBI Act, 1934. 'Deposit' includes and shall
be deemed always to have included any receipt of money by way of deposit or loan or in any other
form but does not include:
 amount raised by way of share capital, or contributed as capital by partners of a firm;

 amount received from scheduled bank, co-operative bank, a banking company, State
Financial Corporation, IDBI or any other institution specified by RBI;
 amount received in ordinary course of business by way of security deposit, dealership
deposit, earnest money, advance against orders for goods, properties or services;
 amount received by a registered money lender other than a body corporate;
 amount received by way of subscriptions in respect of a 'Chit'.
 Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits
( Reserve Bank) Directions, 1998 defines a ' public deposit' as a 'deposit' as defined under
Section 45 I(bb) of the RBI Act, 1934 and further excludes the following: amount received
from the Central/State Government or any other source where repayment is guaranteed by
Central/State Government or any amount received from local authority or foreign government
or any foreign citizen/authority/person;
 any amount received from financial institutions;
 any amount received from other company as inter-corporate deposit;
 amount received by way of subscriptions to shares, stock, bonds or debentures pending
allotment or by way of calls in advance if such amount is not repayable to the members
under the articles of association of the company;
 amount received from shareholders by private company;
 amount received from directors or relative of the director of a NBFC;
 amount raised by issue of bonds or debentures secured by mortgage of any immovable
property or other asset of the company subject to conditions;
 the amount brought in by the promoters by way of unsecured loan;
 amount received from a mutual fund;
 any amount received as hybrid debt or subordinated debt;
 any amount received by issuance of Commercial Paper.
Thus, the directions have sought to exclude from the definition of public deposit amount raised from
certain set of informed lenders who can make independent decision.
Are Secured debentures treated as Public Deposit? If not who regulates them?
Debentures secured by the mortgage of any immovable property or other asset of the company if the
amount raised does not exceed the market value of the said immovable property or other asset are
excluded from the definition of 'public deposit' in terms of Non-Banking Financial Companies
Acceptance of Public Deposits (Reserve Bank) Directions, 1998. Secured debentures are debt
instruments and are regulated by Securities & Exchange Board of India.
Whether NBFCs can accept deposits from NRIs?

Effective from April 24, 2004, NBFCs cannot accept deposits from NRI except deposits by debit to
NRO account of NRI provided such amount do not represent inward remittance or transfer from
NRE/FCNR (B) account.
However, the existing NRI deposits can be renewed.
Is nomination facility available to the Depositors of NBFCs?
Yes, nomination facility is available to the depositors of NBFCs. The Rules for nomination facility are
provided for in section 45QB of the Reserve Bank of India Act, 1934. Non-Banking Financial
Companies have been advised to adopt the Banking Companies (Nomination) Rules, 1985 made
under Section 45ZA of the Banking Regulation Act, 1949.
Accordingly, depositor/s of NBFCs are permitted to nominate, one person to whom, the NBFC can
return the deposit in the event of the death of the depositor/s. NBFCs are advised to accept
nominations made by the depositors in the form similar to one specified under the said rules, viz
Form DA 1 for the purpose of nomination, and Form DA2 and DA3 for cancellation of nomination
and variation of nomination, respectively.
What else should a depositor bear in mind while depositing money with NBFCs?
While making deposits with a NBFC, the following aspects should be borne in mind:
 (i) Public deposits are unsecured.

 (ii) A proper deposit receipt which should, besides the name of the depositor/s state the date
of deposit, the amount in words and figures, rate of interest payable and the date of maturity
should be insisted. The receipt shall be duly signed by an officer authorised by the company
in that behalf.
 (iii) The Reserve Bank of India does not accept any responsibility or guarantee about the
present position as to the financial soundness of the company or for the correctness of any
of the statements or representations made or opinions expressed by the company and for
repayment of deposits/discharge of the liabilities by the company.
It is said that rating of NBFCs is necessary before it accepts deposit? Is it true? Who rates
them?
An unrated NBFC, except certain Asset Finance companies (AFC), cannot accept public deposits.
An exception is made in case of unrated AFC companies with CRAR of 15% which can accept
public deposit up to 1.5 times of the NOF or Rs 10 crore whichever is lower without having a credit
rating. A NBFC may get itself rated by any of the four rating agencies namely, CRISIL, CARE, ICRA
and FITCH Ratings India Pvt. Ltd.
What are the symbols of minimum investment grade rating of different companies?
The symbols of minimum investment grade rating of the Credit rating agencies are:
Name of rating agencies : Level of minimum investment grade credit rating (MIGR)
 CRISIL: FA- (FA MINUS)

 ICRA: MA- (MA MINUS)
 CARE: CARE BBB (FD)
 FITCH Ratings India Pvt. Ltd: tA-(ind)(FD)
 It may be added that A- is not equivalent to A, AA- is not equivalent to AA and AAA- is not
equivalent to AAA.
Can a NBFC which is yet to be rated accept public deposit?
No, a NBFC cannot accept deposit without rating except an EL/HP company complying with
prudential norms and having CRAR of 15%, though not rated, may accept public deposit up to 1.5
times of NOF or Rs 10 crore whichever is less.
When a company's rating is downgraded, does it have to bring down its level of public
deposits immediately or over a period of time?
If rating of a NBFC is downgraded to below minimum investment grade rating, it has to stop
accepting public deposit, report the position within fifteen working days to the RBI and reduce within
three years from the date of such downgrading of credit rating, the amount of excess public deposit
to nil or to the appropriate extent permissible under paragraph 4(4) of Non-Banking Financial
Companies Acceptance of Public Deposits ( Reserve Bank) Directions, 1998; however such NBFC
can renew the matured public deposits subject to repayment stipulations specified above and
compliance with other conditions for acceptance of deposits.
In case a NBFC defaults in repayment of deposit what course of action can be taken by
depositors?
If a NBFC defaults in repayment of deposit, the depositor can approach Company Law Board or
Consumer Forum or file a civil suit to recover the deposits.
What is the role of Company Law Board in protecting the interest of depositors? How one can
approach it?
Where a non-banking financial company fails to repay any deposit or part thereof in accordance with
the terms and conditions of such deposit, the Company Law Board (CLB) either on its own motion or
on an application from the depositor directs, by order, the non-banking financial company to make
repayment of such deposit or part thereof forthwith or within such time and subject to such
conditions as may be specified in the order.
As explained above the depositor can approach CLB by mailing an application in prescribed form to
the appropriate bench of the Company Law Board according to its territorial jurisdiction with the
prescribed fee.
We hear that in a number of cases official liquidators have been appointed on the defaulting
NBFCs. What is their role and how one can approach them?
Official Liquidator is appointed by the court after giving the company reasonable opportunity of being
heard in a winding up petition. The liquidator performs duties of winding up and such duties in
reference thereto as the court may impose.
Where the court has appointed an official liquidator or provisional liquidator, he becomes custodian
of the property of the company and runs the day-to-day affairs of the company.
He has to draw up a statement of affairs of the company in prescribed form containing particulars of
assets of the company, its debts and liabilities, names/residences/occupations of its creditors, the
debts due to the company and such other information as may be prescribed. The scheme is drawn
up by the liquidator and same is put up to the court for approval.
The liquidator realises the assets of the company and arranges to repay the creditors according to
the scheme approved by the court. The liquidator generally inserts advertisement in the newspaper
inviting claims from depositors/investors in compliance with court orders. Therefore, the
investors/depositors should file the claims within due time as per such notices of the liquidator.
The Reserve Bank also provides assistance to the depositors in furnishing addresses of the official
liquidator.
Consumer courts play a useful role in attending to depositors problems. Can one approach
consumer forum, civil court, CLB simultaneously?
Yes, a depositor can approach any or all of the redressal authorities i.e consumer forum, court or
CLB.
Is there an Ombudsman for hearing complaints against NBFCs?
No, there is no Ombudsman for hearing complaints against NBFCs.
What are various prudential regulations applicable to NBFCs?
The Bank has issued detailed directions on prudential norms, vide Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions, 1998. The directions interalia, prescribe
guidelines on income recognition, asset classification and provisioning requirements applicable to
NBFCs, exposure norms, constitution of audit committee, disclosures in the balance sheet,
requirement of capital adequacy, restrictions on investments in land and building and unquoted
shares.
Please explain the terms 'owned fund' and 'net owned fund' in relation to NBFCs?
'Owned Fund' means aggregate of the paid-up equity capital and free reserves as disclosed in the
latest balance sheet of the company after deducting therefrom accumulated balance of loss,
deferred revenue expenditure and other intangible assets.
The amount of investments of such company in shares of its subsidiaries, companies in the same
group and all other NBFCs and the book value of debentures, bonds, outstanding loans and
advances made to and deposits with subsidiaries and companies in the same group is arrived at.
The amount thus calculated, to the extent it exceeds 10% of the owned fund, is reduced from the
amount of owned fund to arrive at 'Net Owned Fund'.
What are the responsibilities of the NBFCs accepting/holding public deposits with regard to
submission of Returns and other information to RBI?
The NBFCs accepting public deposits should furnish to RBI:
 i. Audited balance sheet of each financial year and an audited profit and loss account in
respect of that year as passed in the general meeting together with a copy of the report of
the Board of Directors and a copy of the report and the notes on accounts furnished by its
Auditors;
 ii. Statutory Annual Return on deposits - NBS 1;
 iii. Certificate from the Auditors that the company is in a position to repay the deposits as and
when the claims arise;
 iv. Quarterly Return on liquid assets;
 v. Half-yearly Return on prudential norms;
 vii. Half-yearly ALM Returns by companies having public deposits of Rs 20 crore and above
or with assets of Rs 100 crore and above irrespective of the size of deposits ;
 viii. Monthly return on exposure to capital market by companies having public deposits of Rs
50 crore and above; and
 ix. A copy of the Credit Rating obtained once a year along with one of the Half-yearly
Returns on prudential norms as at (v) above.
What are the documents or the compliance required to be submitted to the Reserve Bank of
India by the NBFCs not accepting/holding public deposits?
The NBFCs having assets size of Rs 100 crore and above but not accepting public deposits are
required to submit a Monthly Return on important financial parameters of the company. All
companies not accepting public deposits have to pass a board resolution to the effect that they have
neither accepted public deposit nor would accept any public deposit during the year.
However, all the NBFCs (other than those exempted) are required to be registered with RBI and also
make sure that they continue to be eligible to remain Registered. Further, all NBFCs (including non-
deposit taking) should submit a certificate from their Statutory Auditors every year to the effect that
they continue to undertake the business of NBFI requiring holding of CoR under Section 45-IA of the
RBI Act, 1934.
RBI has powers to cause Inspection of the books of any company and call for any other information
about its business activities.
For this purpose, the NBFC is required to furnish the information in respect of any change in the
composition of its board of directors, address of the company and its directors and the name/s and
official designations of its principal officers and the name and office address of its auditors. With
effect from April 1, 2007 non-deposit taking NBFCs with assets size of Rs 100 crore and above have
been advised to maintain minimum CRAR of 10% and shall also be subject to single/group exposure
norms.
The NBFCs have been made liable to pay interest on the overdue matured deposits if the
company has not been able to repay the matured public deposits on receipt of a claim from
the depositor. Please elaborate the provisions.
As per Reserve Bank's directions, overdue interest is payable to the depositors in case the company
has delayed the repayment of matured deposits, and such interest is payable from the date of
receipt of such claim by the company or the date of maturity of the deposit whichever is later, till the
date of actual payment. If the depositor has lodged his claim after the date of maturity, the company
would be liable to pay interest for the period from the date of claim till the date of repayment. For the
period between the date of maturity and the date of claim it is the discretion of the company to pay
interest.
Can a company pre-pay its public deposits?
A NBFC accepts deposits under a mutual contract with its depositors.
In case a depositor requests for pre-mature payment, Reserve Bank of India has prescribed
Regulations for such an eventuality in the Non-Banking Financial Companies Acceptance of Public
Deposits (Reserve Bank) Directions, 1998 wherein it is specified that NBFCs cannot grant any loan
against a public deposit or make premature repayment of a public deposit within a period of three
months (lock-in period) from the date of its acceptance, however in the event of death of a depositor,
the company may, even within the lock - in period, repay the deposit at the request of the joint
holders with survivor clause / nominee / legal heir only against submission of relevant proof, to the
satisfaction of the company.
An NBFC subject to above provisions, if it is not a problem company, may permit after the lock-in
period premature repayment of a public deposit at its sole discretion, at the rate of interest
prescribed by the Bank.
A problem NBFC is prohibited from making premature repayment of any deposits or granting any
loan against public deposits/deposits, as the case may be. The prohibition shall not, however, apply
in the case of death of depositor or repayment of tiny deposits i.e. up to Rs 10,000 subject to lock-in
period of 3 months in the latter case.
What is the liquid asset requirement for the deposit taking companies? Where these assets
are kept? Does Depositors have any claims on them?
In terms of Section 45-IB of the RBI Act, 1934 the minimum level of liquid asset to be maintained by
NBFCs is 15 per cent of public deposits outstanding as on the last working day of the second
preceding quarter.
Of the 15%, NBFCs are required to invest not less than 10% in approved securities and the
remaining 5% can be in unencumbered term deposits with any scheduled commercial bank. Thus,
the liquid assets may consist of government securities, government guaranteed bonds and term
deposits with any scheduled commercial bank.
The investment in government securities should be in dematerialised form which can be maintained
in Constituents' Subsidiary General Ledger (CSGL) Account with a scheduled commercial bank
(SCB) / Stock Holding Corporation of India Limited (SHICL). In case of Government guaranteed
bonds the same may be kept in dematerialised form with SCB/SHCIL or in a dematerialised account
with depositories [National Securities Depository Ltd. (NSDL)/Central Depository Services (India)
Ltd. (CDSL)] through a depository participant registered with Securities & Exchange Board of India
(SEBI). However in case there are Government bonds which are in physical form the same may be
kept in safe custody of SCB/SHCIL.
NBFCs have been directed to maintain the mandated liquid asset securities in a dematerialised form
with the entities stated above at a place where the registered office of the company is situated.
However, if a NBFC intends to entrust the securities at a place other than the place at which its
registered office is located, it may do so after obtaining in writing the permission of RBI. It may be
noted that the liquid assets in approved securities will have to be maintained in dematerialised form
only.
The liquid assets maintained as above are to be utilised for payment of claims of depositors.
However, deposit being unsecured in nature depositors do not have direct claim on liquid assets.
Please tell us something about the companies which are NBFCs, but are exempted from
registration?
Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies

engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi
Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been
exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934 subject to
certain conditions.
Housing Finance Companies are regulated by National Housing Bank, Merchant Banker/Venture
Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated by Securities and
Exchange Board of India, Insurance companies are regulated by Insurance Regulatory and
Development Authority. Similarly, Chit Companies are regulated by the respective State
Governments and Nidhi Companies are regulated by Ministry of Company Affairs, Government of
India.
There are some entities (not companies) which carry on activities like that of NBFCs. Are they
allowed to take deposit? Who regulates them?
Any person who is an individual or a firm or unincorporated association of individual cannot accept
deposit except by way of loan from relatives, if his/its business wholly or partly includes business
that of loan, investment, hire-purchase or leasing company or principal business is that of receiving
of deposits under any scheme or arrangement or in any manner or lending in any manner.
What is a Residuary Non-Banking Company (RNBC)? In what way it is different from other
NBFCs?
Residuary Non-Banking Company is a class of NBFC which is a company and has as its principal
business the receiving of deposits, under any scheme or arrangement or in any other manner and
not being investment, asset financing, loan company.
These companies are required to maintain investments as per directions of RBI, in addition to liquid
assets. The functioning of these companies is different from those of NBFCs in terms of method of
mobilisation of deposits and requirement of deployment of depositors' funds. However, Prudential
Norms Directions are applicable to these companies also.
We understand that there is no ceiling on raising of deposits by RNBCs, then how safe is
deposit with them?
It is true that there is no ceiling on raising of deposits by RNBCs but every RNBC has to ensure that
the amounts deposited and investments made by the company are not less that the aggregate
amount of liabilities to the depositors.
To secure the interest of depositor, such companies are required to invest in a portfolio comprising
of highly liquid and secured instruments viz. Central/State Government securities, fixed deposit of
scheduled commercial banks (SCB), Certificate of deposits of SCB/FIs, units of Mutual Funds, etc.
Can RNBC forfeit deposit if deposit installments are not paid regularly or discontinued?
No Residuary Non-Banking Company shall forfeit any amount deposited by depositor, or any
interest, premium, bonus or other advantage accrued thereon.
Please tell us something on rate of interest payable by RNBCs on deposits and maturity
period of deposits?
The amount payable by way of interest, premium, bonus or other advantage, by whatever name
called by a residuary non-banking company in respect of deposits received shall not be less than the
amount calculated at the rate of 5% (to be compounded annually) on the amount deposited in lump
sum or at monthly or longer intervals; and at the rate of 3.5% (to be compounded annually) on the
amount deposited under daily deposit scheme.
Further, an RNBC can accept deposits for a minimum period of 12 months and maximum period of
84 months from the date of receipt of such deposit. They cannot accept deposits repayable on
demand.
Procedure of NBFC Formation
A Non-Banking Financial Company (NBFC) is a company registered under the Companies

Act, 1956 and is engaged in the business of loans and advances, acquisition of
shares/stock/bonds/debentures/securities issued by Government or local authority or other
securities of like marketable nature, leasing, hire-purchase, insurance business, chit
business but does not include any institution whose
principal business is that of agriculture activity, industrial activity,

sale/purchase/construction of immovable property. A non-banking institution which is a
company and which has its principal business of receiving deposits under any scheme or
arrangement or any other manner, or lending in any manner is also a non-banking financial
company (Residuary non-banking company). Section 45-IA provides that no NBFC shall
commence or carry on the business of Non- Banking Financial Institution without obtaining
a Certificate of Registration issued under this Chapter (Chapter –IIIB) and not having a Net
Owned Fund of rupees two hundred lakhs. Steps Required For Formation Of New NBFC:
Step-1 Formation of Company: The first step is to form a new Company registered under
the Companies Act, 1956. The name must reflect the character of an NBFC. Words such as
Investment, Finvest, Finstock, Finance etc. may be used as part of the name. In general, RBI
does not allow names which are not reflecting the characteristics of NBFC. Step-2 Minimum
Net Owned Fund: After the incorporation of a new company the Paid up Equity Capital of
the Company should suitably rose either at par or premium so as to attain a minimum Net
Owned Fund of Rs. 2 crores. The Capital to be raised here should be Equity Share Capital
and not Preference Share Capital. Step-3 Opening of a Bank Account: The entire sum of Rs.
2 crores should be kept in a bank in a Deposit Account free from all liens. Normally funds
are kept in Fixed Deposit. The RBI at the time of considering the application for the grant of
Certificate of Registration verifies the deposits held by the Company with the Bankers.
Step-4 Apply for Certificate of Registration to RBI alongwith Required Documents: The
NBFC Company is required to submit its application online for registration by accessing
RBI’s secured website https://secweb.rbi.org.in/COSMOS/rbilogin.do (the applicant
companies do not need to log on to the COSMOS application and hence user ids for these
companies are not required). The company can then download suitable application form
(i.e. NBFC or SC/RC) from the above website, key in the data and upload the application
form. The company would then get a Company Application Reference Number for the CoR
application filed on-line. Thereafter, the company has to submit the hard copy of the
application form (indicating the Company Application Reference Number of its on-line
application) in duplicate, along with the supporting documents as prescribed in the form, to
the concerned Regional Office. The company can then check the status of the application
based on the acknowledgement number. The Bank would issue Certificate of Registration
after satisfying itself that the conditions as enumerated in Section 45-IA of the RBI Act, 1934
are satisfied. The following documents are required to be filed alongwith the application
form: Annexure-I, Annexure-II and Annexure-III to the application. Annexure-III is
submitted in respect of all the directors of the applicant company. Certified copy of up-to-
date Memorandum and Articles of Association of the company. The Memorandum of
Association of the applicant company should have enabling clause/s for conducting of NBFI
business by the company Certified copy of Certificate of Incorporation (bearing the
signature of the Registrar of Companies) Banker’s Report in a sealed cover. A copy of the
same should be send to the General Manager, RBI, DNBS, Kolkata by the bank at the
request of the company Banker’s Reports in respect of companies in which the directors
have substantial interest as indicated against items Nos. 14 & 15 of Annexures-III.
Registration number and nature of business activities of the companies in which the
Directors have substantial interest should also be furnished Banker’s Report in respect of
group/subsidiary/holding companies if any, of the applicant company. Details of the
interest held by Directors in such companies are to be furnished Certified copy of Board
Resolution approving the submission of application for COR Certified copy of the audited
balance sheet and profit & loss account of the company for the last three years (in case of
existing companies intending to commence NBFI business) and proforma balance sheet and
profit & loss account as on the date on which the statement of capital funds and risk assets
is furnished in Annexure-II to the application is submitted. Brief history of Company along
with summary of financial for last five years Business Plan of the company for the next
three years giving details of its thrust of business, market segment and projection of
investments and income together with projected Balance Sheet and Profit & Loss Account
for the next three years. Auditors’ Certificate and extracts of Bank statement regarding
receipt of share premium, if any. Certified copy of Board Resolution that the company has
not accepted any public deposits in the past/does not hold any public deposits as on date
and will not accept the deposits in future without prior approval of the Bank Certified copy
of Board Resolution that the company has not conducted/commenced NBFI business and
also shall not conduct/commence NBFI business without obtaining Certificate of
Registration from the Bank Auditors’ Certificate to the effect that the Auditors’ Certificate to
the effect that the Company has not accepted/is not holding any public deposits as on date
and will not accept such deposits in future without prior approval of the Bank Company is
not carrying on any NBFI activity as on date Company has an NOF of Rs.200 lakh as on
date A certificate of Chartered Accountant regarding details of
group/associate/subsidiary/holding companies along with details of investments in other
NBFCs as shown in the Proforma Balance Sheet Details of Book Value of
bonds/debentures/outstanding loans and advances (including hire purchase & lease
finance) made to and deposits with § Subsidiaries § Group companies as on the Proforma
Balance Sheet (Annexure-II) duly certified by the Auditor Details of cost and market/Break
Up Value of Quoted/unquoted investments including current investments as on the
Proforma Balance Sheet (Annexure-II) duly certified by the Auditor The details of
experience of directors in NBFI business as indicated against Item No. 12 of Annexure-III
are to be submitted Name of the companies indicated against Item No. 9 of Annexure-III, in
which the directors of the applicant company are the directors, are NBFC registered with
the Reserve Bank The Declarations of the directors regarding their non-association with the
unincorporated bodies under Section 45S of the Reserve Bank of India Act, 1934 are
submitted The particulars of approval of Foreign Exchange Department (FED) if any
obtained/copies of Foreign Inward Remittance Certificates in respect of Foreign Direct
Investment if any, received by the applicant company are to be furnished A Board
Resolution to the effect that the company has formulated a Fair Practise Code and copy
whereof should be enclosed and the same would be implemented on grant of COR If
Company does not have a website it can submit information through e-mail or any other
mode through internet – a statement in this regard Documentary evidence like certified
Xerox copy of electric bill/telephone bill in the name of the applicant company. Whether the
Company is regulated by other regulators like SEBI, IRDA etc Income Tax PAN in respect
of the company as well as all the directors. Copies of Form 2,5,18,23,29 & 32 and Annual
Return filed with Registrar of Companies, West Bengal with Registrar of Companies money
receipt. In case of amalgamation with other companies, copy of High Court Order allowing
the above amalgamation together with copies of Form No 21 filed with Registrar of
Companies, West Bengal including Registrar of Companies money receipt Reason for
setting up NBFC. The current Net Owned Fund (NOF) of all the NBFCs subscribing to the
capital of the applicant company, the computation being duly certified by the Statutory
Auditor Documents called by this Deptt. In respect of § NBFCs having common Directors
with the applicant company and § subscriber/investor NBFCs, must be submitted to the
satisfaction of Company Monitoring Division Step-5 Filing of some additional Documents:
In addition to the documents required to be enclosed along with Application Form the
following should also be enclosed: Copy of Form-32 of all present directors with receipt
Copy of Form-18 of present situation of Registered Office, with receipt. Copy of Form-2
Return of allotment of Shares, with receipt. Experience Certificate or Details of Experience
of Directors, if any, in NBFC Business. Bankers Report in the format prescribed by RBI with
the request to Bank that original should be directly sent to RBI. Bankers Report of all the
Firms/Company/ Proprietorship Concern in which director holds substantial interest Board
Resolutions in the matter of Application for granting Certificate of Registration, Non-
Acceptance of Public Deposits and Non Carrying business of Non-Banking Financial
Institution without Certificate of Registration. Board Resolution adopting a Fair Practices
Code and a copy of the said Code. Declaration from Directors to give affect that they are not
associated with unincorporated bodies U/s 45-S of RBI Act, 1934 Specimen declaration is
enclosed herewith marked The application is to be filed with the Regional Office of RBI
whose jurisdiction, the registered office of the Company falls. Step-6 Granting of Certificate:
After the application is filed, the same is examined by RBI and further documents and
clarifications may be sought from time to time. Finally if RBI considers that the application
is complete in all respects and all required documents and information is furnished to its
satisfaction , it may grant Certificate of Registration to carry on the business of NBFC not
accepting public deposits or else the application is returned. It may be noted that when
applications are filed at the Regional Office, they vet the application and if everything is
found by them in order they send the same to Central Office for further examination and
approval. However if the application is not in order they send back the application and
pointing out the defects. At this stage the applicant should not be disheartened and the
defects should be cured and the application should again be filed. Finally if Central Office
approves the Application, the Regional Office will issue certificate of Registration. Post
Comment
Functions of non banking financial institutions in india?
 4 years ago
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Best Answer - Chosen by Voters
Initially, there were four different categories of companies for the purpose of acceptance of
deposits by Non Banking Financial Companies ("NBFCs") namely:
Equipment Leasing company - any financial institution which carried on the activity of
leasing equipment, as its principal business;
Hire Purchase company - any financial institution which carried on the activity of hire
purchase transactions, as its principal business;
Investment Companies - any financial institution which carried on the acquisition of

securities, as its principal business; and
Loan Companies - any financial institution which provided finance whether by making loans
or advances or otherwise for any activity other than its own but does not include an
equipment leasing company or a hire purchase finance company.
Earlier companies engaged in financing real/physical assets supporting economic activity

such as automobile, general-purpose industrial machinery etc would generally come within
the purview of "Asset Finance Companies" ("AFCs").
However, with a view to provide a separate classification for NBFCs engaged in financing
tangible assets, the Reserve Bank of India ("RBI"), has vide its circular dated 6th December
2006 now re -classified companies financing real/physical assets for productive/ economic
activity as AFCs. The remaining companies would continue to be classified as
loan/investment companies.
AFCs would accordingly be defined as "any company which is a financial institution carrying
on as its principal business the financing of physical assets supporting productive /
economic activity, such as automobiles, tractors, lathe machines, generator sets, earth
moving and material handling equipments, moving on own power and general purpose
industrial machines".
Such principal business of an AFC being that the aggregate of financing real/physical
assets supporting economic activity and income arising therefrom is not less than 60% of its
total assets and total income respectively.
Companies satisfying the above conditions would be required to approach the Regional
Office in the jurisdiction of which their registered office is located, along with the original
Certificate of Registration, issued by the Bank for recognition of their classification as AFCs.
The content of this article is intended to provide a general guide to the subject matter.
Specialist advice should be sought about your specific circumstances
Kotak Mahindra Bank

The Bank caters to the myriad needs of Resident Individuals, NRIs and Businesses.
Established in 1985, the Kotak Mahindra group has been one of India's most reputed financial
conglomerates. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was
given the license to carry on banking business by the Reserve Bank of India (RBI). This approval
created banking history since Kotak Mahindra Finance Ltd. is the first non-banking finance company
in India to convert itself in to a bank as Kotak Mahindra Bank Ltd. Today, we are one of the fastest
growing bank and among the most admired financial institutions in India.
Our Reach
Kotak Mahindra Bank has over 245 branches and a customer base of over 8 lakhs. Spread all over
India, not just in the metros but in Tier II cities and rural India as well, we are redefining the reach
and power of banking.
Our Offerings
Know more | Hide
We cater to the myriad needs of Resident Individuals, NRIs and Businesses.
We offer complete financial solutions for infinite needs of all individual & non-individual customers
depending on the customer's need - delivered through a state of the art technology platform.
Investment products like Mutual Funds, Life Insurance, retailing of gold coins and bars etc are also
offered. The Bank follows a mix of both open and closed architecture for distribution of the
investment products. All this is backed by strong, in-house research on Mutual Funds.
Chapter V
1 Registration of NBFCs
2 Supervision of NBFCs
3 Policy Developments Relating to NBFCs
4 Implementation of Recommendations of Task Force on NBFCs (1998)
5 Business of the NBFC Sector
6 Region-wise Composition of Deposits held by NBFCs
7 Interest Rate and Maturity Pattern of Deposits with NBFCs
8 Asset Profile of NBFCs
9 Distribution of Assets of NBFCs according to Activity
10 Analysis of Borrowings by NBFCs
11 Net Owned Funds of NBFCs
12 Income Expenditure Statement of NBFCs
13 Capital Adequacy Ratio
14 Other Developments
Non-banking financial companies (NBFCs) have been the subject of focussed attention during
the nineties. In particular, the rapid growth of NBFCs, especially in the nineties, has led to a
gradual blurring of dividing lines between banks and NBFCs, with the exception of the exclusive
privilege that commercial banks exercise in the issuance of cheques (Chart V.1). Simplified
sanction procedures, orientation towards customers, attractive rates of return on deposits and
flexibility and timeliness in meeting the credit needs of specified sectors (like equipment leasing
and hire purchase), are some of the factors enhancing the attractiveness of this sector. The total
regulated deposits1 of NBFCs aggregated Rs.17,390 crore, as at end of March 1994, equivalent
to 4.0 per cent of bank deposits. The quantum of regulated deposits grew more than three-fold
and as at end-March 1997, at Rs.53,116 crore constituted 7.9 per cent of bank deposits.
5.2 In the year 1998, a new concept of public deposits meaning deposits received from public
including shareholders in the case of public limited companies and unsecured debentures/ bonds
other than those issued to companies, banks and financial institutions, was introduced for the
purpose of focussed supervision of NBFCs accepting such deposits. The amount of such public
deposits held by NBFCs, which as at end of March 1998 was Rs.23,820 crore, declined to
Rs.19,341 crore as at end of March 2000.
5.3 Owing to certain disquieting developments in the NBFC sector, the RBI Act was
amended in 1997, providing for a comprehensive regulatory framework for NBFCs. The RBI
(Amendment) Act, 1997 provides for compulsory registration with the Reserve Bank of all
NBFCs, irrespective of their holding of public deposits, for commencing and carrying on
business, minimum entry point norms, maintenance of a portion of deposits in liquid assets,
creation of Reserve Fund and transfer of 20 per cent of profit after tax annually to the Fund. The
Amendment Act also conferred powers on Reserve Bank to issue directions to companies and its
auditors, prohibit deposit acceptance and alienation of assets by companies and effect winding up
of companies.
5.4 Accordingly, the Reserve Bank issued directions to companies on acceptance of public
deposits, prudential norms like capital adequacy, income recognition, asset classification,
provision for bad and doubtful debts, exposure norms and other measures to monitor the
financial solvency and reporting by NBFCs. Directions were also issued to auditors to report
non-compliance with the RBI Act and regulations to the Reserve Bank, Board of Directors and
shareholders.
1. Registration of NBFCs
5.5 The registration is compulsory for all NBFCs, irrespective of their holding of public
deposits. The types of NBFCs regulated by the Reserve Bank are indicated in Table V.1. The
amended Act, which introduced comprehensive changes in Chapter III-B, III-C and V, provides
for an entry point norm of Rs.25 lakh as the minimum net owned fund (NOF). Subsequently, for
new NBFCs seeking registration with the Reserve Bank to commence business on or after April
21, 1999, the requirement of minimum level of NOF was revised upwards to Rs.2 crore. No
NBFC can commence or carry on business of a financial institution including acceptance of
public deposit without obtaining a Certificate of Registration (CoR) from the Reserve Bank.
Table V.1: Non-Banking Financial Entities Regulated by Reserve Bank
Non-Banking Financial Companies Principal Business
I. Non-Banking Financial Company In terms of the Section 45-I(f) read with Section 45-I(c) of the
RBI Act, 1934, as amended in 1997, their principal business is
that of receiving deposits or that of a financial institution, such
as lending, investment in securities, hire purchase finance or
equipment leasing.
Equipment leasing company (EL) Equipment leasing or financing of such activity.
Hire purchase finance company (HP) Hire purchase transaction or financing of such transactions.
Investment company (IC) Acquisition of securities and trading in such securities to earn a
profit.
Loan company (LC) Providing finance by making loans or advances, or otherwise for
any activity other than its own; excludes EL/HP/Housing
Finance Companies (HFCs).
Residuary non-banking company (RNBC) Company which receives deposits under any scheme or
arrangement, by whatever name called, in one lump-sum or in
instalments by way of contributions or subscriptions or by sale
of units or certificates or other instruments, or in any manner.
These companies do not belong to any of the categories as stated
above.
II. Mutual benefit financial company (MBFC) i.e.
Nidhi Company
Any company which is notified by the Central Government
under Section 620A of the Companies Act1956 (1 of 1956).
III. Mutual Benefit Company (MBC), i.e.,
potential Nidhi company
A company which is working on the lines of a Nidhicompany.
However, it has not yet been so declared bythe Central
Government, has minimum NOF of Rs.10 lakh, has applied to
the Reserve Bank for CoR and also to Department of Company
Affairs (DCA) for declaration as nidhi company and has not
contravened direction/ regulation of Reserve Bank/DCA
IV. Miscellaneous non-banking
company(MNBC), i.e., Chit Fund Company
Managing, conducting or supervising as a promoter, foreman or
agent of any transaction or arrangement bywhich the company
enters into an agreement with aspecified number of subscribers
that every one of them shall subscribe a certain sum in
instalments over a definite period and that every one of such
subscribers shall in turn, as determined by lot or by auction or by
tender or in such manner as may be provided for in the
arrangement, be entitled to the prize amount
5.6 The Reserve Bank received applications for CoR from 36,505 NBFCs, of which, 13,815
applications were approved and 18,355 were rejected, as at end-August 2001. Out of the total
approvals of 13,815 applications, only 776 companies have been permitted to accept public
deposits.
2. Supervision of NBFCs
5.7 The supervisory framework for NBFCs is based on three criteria, viz., (a) the size of
NBFC, (b) the type of activity performed, and (c) the acceptance or otherwise of public deposits.
Towards this end, a four-pronged supervisory strategy comprising (a) on-site inspection based on
CAMELS (capital, assets, management, earnings, liquidity, systems and procedures)
methodology, (b) computerised off-site surveillance through periodic control returns, (c) an
effective market intelligence network, and (d) a system of submission of exception reports by
auditors of NBFCs, has been put in place. The regulation and supervision is comprehensive for
companies accepting or holding public deposits to ensure protection of interests of depositors.
5.8 Companies holding or accepting public deposits are required to comply with all the
directions on acceptance of public deposits, prudential norms and liquid assets, and should
submit periodic returns to the Reserve Bank. They are supervised using all the supervisory tools
indicated above.
5.9 Companies not holding or accepting public deposits are regulated and supervised in a
limited manner. They are required to comply only with prudential norms relating to income
recognition, accounting standards, asset classification and provisioning against bad and doubtful
debts. They are less frequently inspected. Such companies are presently not required to submit
any returns to the Reserve Bank. Thus, market intelligence and auditors’ exception reports
constitute the important supervisory tools in respect of these companies.
3. Policy Developments Relating to NBFCs
(a) NBFCs Registered and Regulated by Reserve Bank
Monetary and Credit Policy Statements
5.10 The Mid-Term Review of Monetary and Credit Policy for the year 2000-01 announced in
October 2000 and the Monetary and Credit Policy for 2001-02 announced in April 2001
finetuned
the policy environment governing NBFCs. Policy changes, inter alia, included changes in
interest rate on public deposits and introduction of asset-liability management system for certain
categories of NBFCs. A half-yearly Financial Stability Review using Macroprudential Indicators
(MPI) data as relevant for NBFCs was also prepared. The chronology of major policy
developments is presented in the Annexure.
Reduction in Interest Rate on Deposits
5.11 Effective from April 1, 2001, taking into account the market conditions and changes in
other interest rates in the financial system, the maximum rate of interest that NBFCs can pay on
their public deposits was reduced from 16 per cent to 14 per cent per annum. The ceiling on
interest rate on the deposits accepted by Miscellaneous Non-Banking Companies (Chit Fund
companies) and Mutual Benefit Financial Companies (Nidhi companies) was also brought down
to 14 per cent. Effective November 1, 2001, the ceiling on rate of interest has been further
brought down to 12.5 per cent.
Issuance of Commercial Paper by NBFCs
5.12 On October 10, 2000, the Reserve Bank issued guidelines for issue of commercial paper
by companies, inter alia, exempting money received by NBFCs by issue of commercial paper
(CP) in accordance with this guidelines, from the purview of public deposits.
Asset Liability Management (ALM) System for NBFCs
5.13 The Reserve Bank announced ALM guidelines for NBFCs for effective risk management.
All NBFCs with asset size of Rs.100 crore or above or with public deposits of Rs.20 crore or
above, as per their balance sheet as on March 31, 2001, were instructed to have ALM systems in
place. These NBFCs were advised to constitute an ALM Committee, under the charge of Chief
Executive Officer or other Senior Executive and other specialist members, for formalising ALM
systems. The number of companies likely to be covered by the guidelines is about 70 and they
account for 75-80 per cent of total public deposits held by reporting NBFCs. The ALM system is
required to be implemented by NBFCs by March 31, 2002. In the case of NBFCs holding public
deposits of Rs.20 crore or above, the first ALM return, comprising of statements on structural
liquidity, short-term dynamic liquidity and interest rate sensitivity, as on September 30, 2002,
should be submitted to the Reserve Bank by October 31, 2002. NBFCs not holding public
deposits, but having asset size of Rs.100 crore or above would be advised of the supervisory
framework in due course of time. The companies have been advised to conduct trial runs during
the half-year ending September 30, 2001 and half-year beginning October 1, 2001, and report
operational difficulties in implementing the system for rectification. The Chit Funds and Nidhi
companies have, for the present, been kept out of the purview of these guidelines. NBFCs not
qualifying presently have also been advised to put in place an ALM system, as it is the
endeavour of the Reserve Bank to extend these guidelines to all NBFCs in future.
Rationalisation of the Requirement of Introduction for Depositors of NBFCs
5.14 To rationalise requirements of introduction for depositors stipulated earlier in June 2000,
it was clarified that requirement of introduction was for purpose of identification of depositors,
so that deposits are not made in fictitious names. NBFCs were advised to obtain and keep on
record copies of identification of depositors, viz., passport, ration card, election identity card,
identification by an existing depositor, as proof of identity of the prospective depositors.
Entry of NBFCs into Insurance Business
5.15 Consequent upon issue of final guidelines for entry of NBFCs into insurance business in
June 2000, the Reserve Bank permitted five NBFCs to undertake insurance business as joint
venture participants in insurance companies. Of these, while two NBFCs were granted
permission to undertake both life and general insurance business, three NBFCs were permitted to
undertake only life insurance business with risk participation. One company was permitted both
to engage in insurance agency business as well as to make strategic investment in equity of
insurance company upto 10 per cent of its owned fund. Another company was granted
permission to conduct only insurance agency business while a third company could only make
strategic investment in equity of insurance company.
Rationalisation of Returns Submitted by NBFCs
5.16 In order to improve the reporting of supervisory information and facilitate electronic
processing, the formats of all returns prescribed in terms of Directions issued under RBI Act,
submitted by the NBFCs and Chit Fund companies at quarterly, half-yearly and annual intervals
were rationalised. Such a step was also necessitated by the twin concerns of the Reserve Bank to
take expeditious steps, wherever necessary, as also to intensify off-site monitoring procedure of
the deposit-taking/ holding NBFCs. A monthly return on repayment of deposits was prescribed
for NBFCs holding public deposits, whose applications for CoR under Section 45-IA of RBI Act,
1934 were rejected or CoR was cancelled, if it was granted earlier.
Focus on Large NBFCs with Public Deposit exceeding Rs. 20 crore
5.17 For addressing supervisory concerns and for picking up early warning signals of
deterioration in financial health of companies (especially those holding a substantial quantum of
public deposits), the quarterly return for compiling monetary aggregates, calling for information
on asset-liability position from NBFCs holding public deposits of Rs.20 crore and above, was
expanded to include certain critical supervisory information. The return prescribes companies to
furnish information on net owned fund, public deposits, NPA position, credit rating, cash flow,
certain key ratios, etc. This is expected to enable closer monitoring of large NBFCs holding
public deposits of Rs.20 crore and above.
Residuary Non-Banking Companies (RNBCs)
5.18 RNBCs are a class of NBFCs which cannot be classified as equipment leasing, hire
purchase, loan, investment, nidhi or chit fund companies, but which tap public savings by
operating various deposit schemes, akin to recurring deposit schemes of banks. The deposit
acceptance activities of these companies are governed by the provisions of Residuary Non-
Banking Companies (Reserve Bank) Directions, 1987. These directions include provisions
relating to the minimum (not less than 12 months) and maximum period (not exceeding 84
months) of deposits, prohibition from forfeiture of any part of the deposit or interest payable
thereon, disclosure requirements in the application forms and the advertisements soliciting
deposits and periodical returns and information to be furnished to the Reserve Bank.
5.19 In the absence of any linkage of deposits to their NOF, to safeguard the depositors'
interests, these companies have been directed to invest not less than 80 per cent of aggregate
deposit liabilities as per the investment pattern prescribed by the Reserve Bank, and to entrust
these securities to a public sector bank to be withdrawn only for repayment of depositors. Subject
to compliance with the investment pattern, they can invest 20 per cent of aggregate liabilities or
ten times its net owned fund, whichever is lower, in a manner decided by its Board of Directors.
5.20 The RNBCs are the only class of NBFCs which are enjoined to pay a minimum rate of
interest on their deposits. The floor rate of interest for deposits are specified by the Reserve Bank
in terms of RNBC Directions, 1987. There is no upper limit prescribed for RNBCs unlike other
NBFCs, which can pay any rate of interest subject to the maximum ceiling prescribed by the
Reserve Bank. The floor interest rate payable by RNBCs was revised downwards from 6 per cent
to 4 per cent per annum (to be compounded annually) on daily deposit schemes and from 8 per
cent to 6 per cent per annum (to be compounded annually) on other deposit schemes of higher
duration or term deposits. The provisions of prudential norms were extended to RNBCs, under
the provisions of the NBFC Prudential Norms (RB) Directions, 1998 and compliance with
prudential norms is mandatory and a prerequisite for acceptance of deposits.
5.21 Monitoring and inspection of these companies, from time to time, revealed continuance
of many unsatisfactory features like non-compliance with the core provisions of the Directions,
forfeiture of the depositors' money on one pretext or the other, diversion of depositors' money to
associate concerns and/or investment in illiquid assets, violation of investment
requirements/pattern, etc., thus jeopardising the interests of depositors. The Reserve Bank was
issuing prohibitory orders on a case-by-case basis restraining erring RNBCs from accepting
deposits. Some of the ingenious promoters floated new companies and started accepting deposits
through new entities or shifted their area of operations to other States. The requirement of
compulsory registration before commencing business of RNBC and concerted action taken
against such companies has curbed such practices to a large extent.
5.22 The Reserve Bank received 106 applications for Certificate of Registration (CoR) from
NBFCs which were functioning as RNBCs by accepting deposits under some scheme or
arrangement. While 12 companies subsequently converted themselves to NBFCs, applications of
84 companies have been rejected. Ten NBFCs are still functioning as RNBCs, the total deposits
of which amounted to nearly Rs. 11,000 crore, constituting about 57.0 per cent of the total
deposits of all reporting NBFCs.
(b) NBFCs not Registered with the Reserve Bank
Mutual Benefit Companies
5.23 Mutual Benefit financial companies (Nidhis) are NBFCs notified under Section 620A of
the Companies Act, 1956 and primarily regulated by Department of Company Affairs (DCA)
under the directions / guidelines issued by them under Section 637 A of the Companies Act,
1956. These companies are exempt from the core provisions of the RBI Act viz., requirement of
compulsory registration, maintenance of liquid assets and transfer of profits to Reserve Fund.
These companies are also exempted from the core provisions of NBFC directions relating to
acceptance of public deposits. Directions relating to ceiling on interest rate, maintenance of
register of deposits, furnishing receipt to depositors and submission of returns to Reserve Bank
are however applicable to these companies.
5.24 The Government of India constituted an Expert Committee in March 2000 (Chairman:
Shri P.Sabanayagam) to examine various aspects of the functioning of the Nidhi companies and
suggest an appropriate policy framework for overall improvement of these companies. This was
done with a view to facilitate their healthy functioning and restore the confidence of the
investing public. The salient features of the recommendations of the Committee are detailed in
Box V.1.
Miscellaneous Non-Banking Companies (MNBCs)
5.25 MNBCs are mainly engaged in the Chit Fund business. The term 'deposit' as defined
under Section 45 I(bb) of the Reserve Bank of India Act, 1934 does not include subscription to
Chit Funds. The Chit Fund companies have been exempted from all the core provisions of
Chapter IIIB of the RBI Act including registration. In terms of Miscellaneous Non-Banking
Companies (RB) Directions, the companies can accept deposits upto 25 per cent and 15 per cent
of the NOF from public and shareholders, respectively, for a period of 6 months to 36 months,
but cannot accept deposits repayable on demand/notice.
5.26 The Reserve Bank only regulates the deposits accepted by these companies, but it does
not regulate their Chit Fund business, which is administered by the respective State Governments
through the offices of Registrars of Chits. The Chit Funds Act, 1982 was enacted as a Central
Act for ensuring uniformity in the provisions applicable to Chit Fund institutions throughout the
country, and all State Governments are required to frame rules for extending the provisions of
this Act to their respective jurisdictions. At present, 16 States and 6 Union Territories have
adopted the Central Act and the Reserve Bank is pursuing with the State Governments of Andhra
Pradesh, Arunachal Pradesh, Gujarat, Haryana, Kerala, Maharashtra, Mizoram and Nagaland for
early formulation of rules under the Central Act2 .
Box V.1: Recommendations of the Expert Committee on Nidhis
The Expert Committee on Nidhis, comprising members from the Government as well as the Reserve Bank,
submitted its Report to the Government on September 28, 2000. The Committee observed that although Nidhis
essentially operate on the principle of 'mutual benefit' (i.e., they accept deposits only from members and lend only to
members), given the large number of failures in this sector, the regulatory framework governing such companies
should be on the same lines as that applicable to NBFCs, without stifling the basic principle on which they are
formed or disturbing their local character. Accordingly, the regulatory framework for such companies recommended
by the Committee encompassed entry point barriers, minimum capital funds, debt-equity ratio, liquid asset
requirements, restrictions on dividend, ceiling on interest rates on deposits and loans, regulations of various
managerial aspects, disclosure norms, prudential norms, adequate supervisory framework, role of auditors and other
measures for protection of depositors' interests.
The statutory regulatory framework for Nidhis suggested by the Committee encompass the following stipulations:
I. Entry Point Norms
(i) Entry point barriers of minimum members of 500 and minimum capital fund of Rs.10 lakh,
(ii) Use of 'Nidhi' as part of the name of the company to distinguish between a NBFC and a Nidhi company,
restrictions on
opening branches by Nidhi companies,
(iii) Regulation over issue of equity and preference share capital,
II. Prudential Norms
(iv) Prudential norms on income recognition, asset classification, credit concentration, provisioning for bad and
doubtful
debts,
(v) Restrictions over voting rights and other managerial aspects including remuneration and loans to Directors,
norms for
conduct of affairs of the Board of Directors, prohibition of grant of loans to Directors, etc.
(vi) Sectoral exposure ceilings for aggregate loans against each type of collateral security,
III. Regulatory Stipulations
(vii) Ceiling on interest rates on deposits and loans,
(viii) Minimum and maximum period of deposits,
(ix) Advertisement and disclosure norms for deposit acceptance, (x) Net owned fund to deposit ratio of 1:20,
(xi) Liquid asset requirements of not less than 10 per cent of deposits,
(xii) Adequate reporting system and supervisory framework, submission of quarterly and other periodical returns by
the
Nidhis to the regulatory authority after certification by the auditor,
(xiii) Appointment of auditors by the company out of the three names suggested by the regulatory authority,
IV. Other Measures
(xiv) Dividend not to exceed 25 per cent per annum, subject to transfer of equivalent amount to the Reserve Fund,
(xv) Penal provisions for various violations, and,
(xvi) Other depositors' protection measures like contingency fund, insurance cover, if possible.
At present, Nidhis are governed under the provisions of the Companies Act in force. However, the Reserve Bank is
also empowered to issue directions in matters relating to deposit acceptance activities. The Committee, therefore,
suggested that the dual regulatory control over Nidhis should be done away with and that the sole responsibility for
regulating and supervising of Nidhis could be under the DCA, Government of India and the Reserve Bank could
tender advice from time to time. The Report is presently under consideration of the Government.
4. Implementation of Recommendations of Task Force on NBFCs (1998)
Financial Companies Regulation Bill, 2000
5.27 The Task Force constituted by Government of India (Chairman: Shri C.M. Vasudev) to
review the regulatory and supervisory framework for NBFCs and unincorporated bodies and
address the shortcomings in dealing with the investors' complaints submitted its report on
October 28, 1998. The recommendations, which have since been accepted by the Government,
can be stratified into four broad strands, according to their status of implementation, viz.,
recommendations which (a) were implemented with immediate effect (on December 18, 1998)
by modifying the existing notification/Directions; (b) required statutory amendments, (c)
required amendments to the Directions under the RBI Act, and (d) needed to be implemented
over a period of time through administrative action. The Government of India framed the
Financial Companies Regulation Bill, 2000 to implement the recommendations requiring
statutory changes, as also consolidate the law relating to NBFCs and unincorporated bodies with
a view to ensure depositor protection, (Box V.2).
State Acts for Protection of Interests of Depositors
5.28 The Task Force on NBFCs had recommended that State Governments should be
empowered to initiate penal action against those NBFCs which function illegally or accept public
deposits without any authorisation. It emphasized that such legislation should be expeditiously
enacted. As a move towards this process, Tamil Nadu Protection of Interests Depositors (in
Financial Establishments) Act, 1997, which contains penal provisions for promoters of financial
establishments defaulting on repayment of deposits and interest payments, and for attachment of
assets of defaulters to ensure payment to depositors was passed. It also provides for setting up of
special Courts to which the pending cases against financial companies could be transferred. The
Reserve Bank also advised State Governments / Union Territories to enact such legislations.
Eleven State Governments / Union Territories have since taken substantial steps in this regard.
Box V.2: Financial Companies Regulation Bill, 2000
The Government of India framed a new legislation to amend and consolidate the provisions contained in Chapter
IIIB,
III-C and V of the RBI Act, 1934 relating to the regulation and supervision of financial companies, hitherto
known as non-banking financial companies (NBFCs). This included prohibition of acceptance of deposits by
unincorporated bodies and incorporating the recommendations of the Task Force on NBFCs, which had made
certain recommendations to this effect. The salient features of the proposed legislation, which are materially
different from the corresponding provisions of RBI Act or are new provisions are as follows:
I. Basic Stipulations
(i) The draft bill has been named as 'Financial Companies Regulations Bill, 2000'. All the NBFCs will be
known as Financial Companies instead of NBFCs.
(ii) The term 'public deposit' has been defined in the Bill for the first time and the definition would mean
the same as at present in the NBFC Directions.
(iii) There would be a nine member Advisory Council for Financial Companies under the Chairmanship of
Deputy Governor, drawing on members from the representatives of Associations of Financial
Companies and other experts in related areas to advise the Reserve Bank.
(iv) NBFCs holding /accepting public deposits would be prohibited from carrying on any non-financial
business without the prior approval of the Reserve Bank and the non-financial business presently
carried on by them would have to be wound up or transferred to a subsidiary within three years. Any
other business or fee-based activity like insurance agency business, portfolio management, etc., would
require prior approval of the Reserve Bank.
II .Entry Point Norms
(v) The requirement of obtaining the CoR from the Reserve Bank would be compulsory for all financial
companies, irrespective of whether the companies accept public deposits or not. However, the nonpublic
deposit taking financial companies would require minimum owned fund of Rs.25 lakh, whereas
the public deposit taking financial companies would require minimum net owned fund (NOF) of Rs.2
crore and a specific authorisation from the Reserve Bank to accept public deposits.
(vi) There would be powers with the Reserve Bank to (a) prescribe different capital for different classes of
financial companies, (b) raise the requirement of minimum owned fund (entry norm) from Rs.25 lakh to
Rs.200 crore for new financial companies not accepting public deposits, (c) raise the minimum NOF
(entry norm) from the present ceiling of Rs.2 crore to Rs.10 crore in the case of new financial
companies intending to accept public deposits, and (d) raise the minimum NOF from the present level
of Rs.25 lakh to Rs.2 crore for the existing financial companies accepting public deposits. However,
sufficient time would be allowed to such financial companies to attain the enhanced capital
requirement.
(vii) The requirement of creation of reserve fund would be applicable only to the financial companies
accepting public deposits, as against the earlier requirement applicable to all NBFCs.
(viii) Unsecured depositors would have first charge on liquid assets and assets created out of the deployment
of the part of the reserve fund.
(ix) The financial companies would require prior approval of the Reserve Bank for any change in the name,
change in the management or change in the location of the registered office.
(x) Any sale of property in violation of order for prohibition from alienation of any property or assets
would be void and that such order could be extended by the Reserve Bank in tranches of one year each
on each occasion upto a period of five years.
III Regulatory and Supervisory Issues
(xi) The Reserve Bank would be empowered to appoint Special Officer(s) on a delinquent financial
company and a duty has been cast on such company to cooperate with such Special Officer(s).
(xii) The Company Law Board (CLB) would continue to be authority to adjudicate the claims of depositors
against the delinquent companies with powers to order initial payment of a part of deposit, attach assets
of fraudulent financial company and appoint Recovery Officer(s) for management of such asset. The
financial company would have no recourse to the CLB to seek deferment of the depositors' dues.
(xiii) The prohibitory provisions for unincorporated bodies would continue in the Financial Companies
Regulations Bill, but the role of exercising the powers for enforcement of these provisions have been
exclusively entrusted to State Governments, in addition to the powers under the respective State Laws
for protecting the interests of investors in financial establishments.
(xiv) There would be powers vested in the District Magistrates to call for information and to proceed against
delinquent unincorporated bodies.
(xv) There would be a ban on the issue of advertisement for soliciting deposits by all unincorporated bodies,
irrespective of whether they are conducting financial business or not.
(xvi) Unauthorised deposit-taking by companies (a) whose applications for Certificate of Registration have
been rejected, (b) whose registration has been cancelled, (c) who have been prohibited from accepting
public deposits would be a cognisable offence. The same would be the case for unregistered financial
companies as well as unincorporated bodies.
(xvii) Powers would be vested with a police officer of the rank not below that of the Superintendent of Police
of any State to order investigations into the alleged violations of requirement of registration by financial
companies and prohibition from acceptance of deposits by unincorporated bodies.
(xviii) Penalties have been rationalised in accordance with the severity of defaults, with the objective that the
penalty should serve as a deterrent to others.
The Bill has been introduced in the Parliament in 2000 and has since been referred to the Standing Committee on
Finance.
5. Business of the NBFC Sector
5.29 The broad profile of the NBFC sector for 1998-99 and 1999-2000, based on the
regulatory returns submitted by deposit holding/accepting companies is presented in Table V.2.
In view of the difference in the number of reporting companies in the two years, the data are not
strictly comparable. As at end-March 1999, the total outstanding public deposits of the 1,547
deposit holding companies (both registered and unregistered) aggregated Rs.20,429 crore,
equivalent to 2.6 per cent of the outstanding deposits (Rs.7,71,129 crore) of scheduled
commercial banks (excluding Regional Rural Banks). In the case of 1,005 reporting companies,
as at end-March 2000, the total quantum of outstanding public deposits reported by them was
Rs.19,342 crore, equivalent to 2.2 per cent of the aggregate deposits (Rs.8,96,696 crore) of
scheduled commercial banks.
Table V.2: Profile of the NBFC Sector
(As at end-March)
(Amount in Rs. crore)
Item 1999 2000
NBFCs of which RNBCs NBFCs of which RNBCs
12345
Number of reporti ng companies 1,547 11 1,005 9
Total Assets 47,048.50 11,080.50 51,324.26 11,317.31
Public Deposits 20,428.93 10,644.27 19,341.72 11,003.77
(52.1) (56.9)
Net Owned Funds 9,118.27 -666.39 6,222.89 -442.82
Notes: 1. Figures are provisional.
2. Figures in brackets indicate percentages to total outstanding deposits of NBFCs.
5.30 The aggregate assets of the NBFC sector increased to Rs.51,324 crore as on March 31,
2000, from Rs.47,049 crore, as on March 31, 1999.
5.31 The break-up of public deposits within the different categories of NBFCs is provided in
Table V.3. Some of the companies have converted themselves into non deposit-holding
companies by repaying the deposits held by them. At the disaggregated level, public deposits
with the hire purchase companies and RNBCs increased by 22.3 per cent and 3.4 per cent,
respectively (Chart V.2).
6. Region-wise Composition of Deposits held by NBFCs
5.32 The region-wise analysis is based on the number of deposit-holding/accepting NBFCs that
reported data to the Reserve Bank for the years ending March 1999 and March 2000 (Table V.4
and Chart V.3). The NBFCs based in the southern region continued to account for a significant
share of the reporting NBFCs in both years although their share fell sharply from 23.7 per cent of
total public deposits at end-March 1999, to 16.4 per cent at end-March 2000. Of the NBFCs
located in the southern region, the major quantum of public deposits was held by the NBFCs
located in Chennai. The deposits of NBFCs located in the western region declined from 14.0 per
cent at end-March 1999 to 12.6 per cent at end-March 2000. The share of deposits of the NBFCs
based in the northern region to the total deposits of all NBFCs, recorded an increase from 2.4 per
cent at March 1999 to 2.7 per cent at March 2000, mainly due to an increase in the share of
public deposits held in New Delhi. The share of deposits in the eastern region increased from
37.7 per cent of total deposits to 49.5 per cent mainly on account of mobilisation of
nonconvertible
debentures (NCDs) to the tune of Rs. 1,668 crore by one Government-owned NBFC
based in West Bengal. The public deposits reported by NBFCs in four metropolitan centres of
Mumbai, New Delhi, Kolkata and Chennai accounted for Rs.14,403 crore (70.5 per cent) and
Rs.14,920 crore (77.1 per cent), respectively, of the total deposits for the years ending March
1999 and March 2000.
Table V.3 : Activity–wise Profile of Public Deposits of NBFCs
(As at end-March)
Nature of Business Public Deposits Percentage Variation
Col. (3) over Col. (2)
1999 2000
1234
1. Equipment Leasing (EL) 1,172. 91 1,021.20 -12.9
(5.7) (5.2)
2. Hire Purchase (HP) 3,339.78 4,083.54 22.3
(16.3) (21.2)
3. Investment and Loan (IL) 4,455.80 2,517.46 -43.5
(21.8) (13.0)
4. RNBCs 10,644.27 11,003.77 3.4
(47.8) (56.9)
5. Other NBFCs* 816.17 715.75 -12.3
(4.0) (3.7)
Total 20,428.93 19,341.72 -5.3
(100.0) (100.0)
* includes Miscellaneous Non-Banking Companies, unregistered and unnotified Nidhis etc.
Note: Figures in brackets indicate percentages to total.
7. Interest Rate and Maturity Pattern of Deposits with NBFCs
5.33 The maturity-wise analysis of deposits held by NBFCs together with the interest rate
range on the deposits is presented in Table V.5 and Table V.6.
5.34 The broad trends indicate that NBFCs (other than RNBCs) had outstanding public
deposits of Rs.9,785 crore as at end-March 1999, which declined to Rs. 8,338 crore by end-
March 2000. The decline of Rs.1,447 crore (14.8 per cent) in public deposits was observed in 1-2
year, 2-3 year and 3-5 year maturities. However, the quantum of public deposits in the maturity
bucket exceeding 5 years witnessed a significant jump, from Rs.168 crore at end-March 1999 to
Rs.1,718 crore by end-March 2000. This is mainly due to mobilisation of non-convertible
debentures (NCDs) to the tune of Rs. 1,668 crore by one Government-owned NBFC based in
West Bengal. In 1999, around 90 per cent of the deposits were in the maturity bucket of 1-5
years, while as at end-March 2000, most deposits were in the maturity bucket '1-2 years', '2-3
years' and 'exceeding 5 years'; the last category comprising over one-fifth of the public deposits
as at end-March 2000.
5.35 Interest rate-wise, there was a rise in the quantum and percentage of deposits in the
interest rate range of 12-14 per cent. The deposits in this range increased from Rs. 2,337 crore
(23.9 per cent) in 1999 to Rs. 3,702 crore (44.4 per cent) (Chart V.4). Deposits with interest rates
of over 16 per cent declined from Rs. 3,645 crore to Rs. 1,144 crore, over the year.
8. Asset Profile of NBFCs
5.36 The information on the asset profile of NBFCs (excluding RNBCs) based on reporting
companies reveals that out of 1,536 companies, 30 NBFCs with an asset size exceeding Rs.50
crore accounted for 92 per cent of the total assets. By end-March 2000, the number of such
companies increased to 66 and these accounted for 91 per cent of the total assets of NBFC sector
(Table V.7). Perceptible reduction in the number of small companies was evidenced during the
year 2000. The number of companies in the asset range of Rs.25 lakh to Rs.10 crore declined
from 1,442 in 1999 to 840 companies in 2000.
Table V.4: Region-wise break-up of Public Deposits held by Registered and Unregistered NBFCs
(As at end-March)
1999 2000
Public Deposits Public Deposits
Region NBFCs NBFCs
No. Amount Per cent of which RNBCs No Amount Per cent of which RNBCs
No Amount Per cent No. Amount Per cent
1 2 3 4 5 6 7 8 9 10 11 12 13
Northern 204 484.07 2.4 - - - 251 529.04 2.7 - - -
North-Eastern 30 0.89 Neg. - - - 4 7.02 Neg. 1 5.55 0.1
Eastern 64 7,711.91 37.7 5 7,068.26 66.4 32 9,573.05 49.5 6 7,506.62 68.2
Central 244 4,533.94 22.2 4 3,574.73 33.6 124 3,623.41 18.7 2 3,491.64 31.7
Western 180 2,851.08 14.0 1 0.27 Neg. 86 2,441.17 12.6 - - -
Southern 825 4,847.04 23.7 1 1.01 Neg. 508 3,168.07 16.4 - - -
Total 1,547 20,428.93 100.0 11 10,644.27 100.0 1,005 19,341.76 100.0 9 11,003.81 100.0
Memorandum Items:
Mumbai 123 2,405.04 11.8 - - - 68 2,381.21 12.3 - - -
Chennai 408 3,843.13 18.8 - - - 340 2,577.56 13.3 - - -
Kolkata 38 7,702.53 37.7 5 7,068.26 66.4 28 9,508.53 49.2 5 7,446.67 67.5
New Delhi 90 452.17 2.2 - - - 122 452.65 2.3 - - -
Neg.- Negligible
Table V.5: Maturity Pattern of Deposits held by NBFCs @
(As at end-March)
Maturity Period Amount of Deposits Variation of Col. 2 over Col.3
1999 2000 Amount Per cent
12345
Less than 1 year 1,694.59 1,323.45 -371.14 -21.9
(17.3) (15.9)
1-2 years 2,904.34 1,615.94 -1,288.40 -44.4
(29.7) (19.4)
2-3 years 2,895.80 2,462.48 -433.32 -15.0
(29.6) (29.5)
3-5 years 2,122.16 1,218.45 -903.71 -42.6
(21.7) (14.6)
5 years and above 167.77 1,717.63 1,549.86 923.8
(1.7) (20.6)
Total 9,784.66 8,337.95 -1,446.71 -14.8
(100.0) (100.0)
@ On the basis of residual maturity of outstanding deposits (excluding RNBCs).
Table V.6: Distribution of NBFC Deposits according to Rate of Interest @
(As at end-March)
Interest Range Amount of deposits Per cent to total deposits
(per cent)
1999 2000 1999 2000
12345
Upto10 52.38 22.96 0.5 0.3
10-12 87.49 588.50 0.9 7.1
12-14 2,336.67 3,702.08 23.9 44.4
14-16 3,662.74 2,880.79 37.4 34.6
More than16 3,645.38 1,143.62 37.3 13.6
Total 9,784.66 8,337.95 100.0 100.0
@ Excluding RNBCs.
9. Distribution of Assets of NBFCs according to Activity
5.37 The major portion of the assets of NBFCs (excluding RNBCs) are in the form of hire
purchase and equipment leasing assets. These two portfolios constituted 42.9 per cent of the total
assets of NBFCs as at end-March 2000. The loans and inter-corporate deposit (ICD) portfolios
accounted for 26.4 per cent of the assets of the NBFCs (Table V.8).
10. Analysis of Borrowings by NBFCs
5.38 The borrowings by NBFCs (excluding RNBCs) for the years ended March 1999 and
2000 are presented in Table V.9. As evident from the Table, total borrowings registered a
marginal decline of 0.8 per cent, the decline is more pronounced in inter-corporate borrowings
(40.1 per cent), money raised through convertible bonds or secured debentures (16.3 per cent)
and borrowings from financial institutions (10.4 per cent). Money raised through commercial
paper increased from Rs.465 crore to Rs.554 crore and borrowings through other sources
increased from Rs. 4,130 crore to Rs. 6,480 crore (Chart V.5).
11. Net Owned Funds of NBFCs
5.39 Net owned fund (NOF) of NBFCs is the aggregate of paid-up capital and free reserves,
netted by (i) the amount of accumulated balance of loss, (ii) deferred revenue expenditure and
other intangible assets, if any, and further reduced by investments in shares and loans and
advances to (a) subsidiaries, (b) companies in the same group and (c) other NBFCs, in excess of
10 per cent of owned fund.
5.40 The data on NOF of NBFCs for the years 1999 and 2000 presented in Table V.10,
reveals that the number of companies having NOF upto Rs. 25 lakh have declined from 736 as at
end-March 1999 to 205 as at end-March 2000. This reduction, to an extent, is reflected in the
decline of number of reporting companies by 540 during the same period.
Table V.7: Asset Profile of NBFCs*
(As at end-March)
Range of Assets No. of reporting Assets Percentage
(Rs. crore) companies (Rs. crore) Variation of Col.
1999 2000 1999 2000
123456
1. Less than 0.25 736 82 30.15 7.86 -73.9
2. 0.25 - 0.50 319 95 49.15 36.36 -26.0
3. 0.50 - 2 332 397 307.41 434.32 41.3
4. 2 - 10 55 266 961.49 1,142.02 18.8
5. 10 - 50 64 90 1,701.31 1,921.11 12.9
6. 50 - 100 11 16 1,709.95 1,114.35 -34.8
7. 100 - 500 18 28 8,122.76 7,825.22 -3.7
8. Above 500 1 22 23,085.78 27,525.71 19.2
Total 1,536 996 35,968.00 40,006.95 11.2
* The 996 reporting NBFCs (excluding RNBCs) have been regrouped on the basis of their asset size as on
end-March1999 and end-March 2000.
12. Income Expenditure Statement of NBFCs
5.41 The profitability analysis of the NBFCs indicates that the net profits of these institutions
registered an increase during the year 1999-2000. While income witnessed a decline of 0.6 per
cent, largely due to a drop in fund-based income, the decline in expenditure was more
pronounced, with the result that the net profits of NBFCs increased by 14.2 per cent from
Rs.120 crore in 1998-99 to Rs.137 crore in 1999-2000. The fee-based income of the reporting
NBFCs has registered an increase of Rs. 213 crore (Table V.11).
13. Capital Adequacy Ratio
5.42 The capital adequacy norms were made applicable to NBFCs in 1998. The norms relating
to capital adequacy ratio (CAR) stipulate that every NBFC shall maintain a minimum capital
ratio consisting of tier I and tier II capital that shall not be less than (a) 10 per cent on or before
March 31, 1998; and (b) 12 per cent on or before March 31, 1999, of its aggregate risk-weighted
assets and of risk-adjusted value of off-balance sheet items. The total of tier II capital, at any
point of time, shall not exceed 100 per cent of tier I capital. Table V.12 presents CAR of the
reporting companies for the years ended March 1999 and March 2000, respectively.
14. Other Developments
Role of BFS in Monitoring NBFCs
5.43 Considering the manifold growth of the non-banking financial companies in the early
nineties and with a view to having an integrated approach to the entire financial sector, the
supervision of NBFC sector was brought under the jurisdiction of the Board for Financial
Supervision (BFS) with effect from July 1, 1995. Since then, the BFS has been serving as an
important supervisory body for direction, formulation and overseeing the implementation of
policy as well as supervision of NBFCs. Approval of BFS is obtained before any important
policy change and amendments in the regulatory framework of NBFCs are carried out. BFS also
serves as an important forum for deciding the course of action against problem companies and
monitoring their status on an on-going basis. In addition to information notes on specific
companies, quarterly reports on the status of large, weak and problem companies are discussed in
BFS meetings. Furthermore, half-yearly reports on the performance of the NBFC sector are also
put up for information of BFS.
Table V.8: Activity-wise Distribution of Assets of NBFCs @
(As at end-March)
Activity Amount in Rs.crore Per cent
1999 2000 1999 2000
12345
Loans & ICD 2,158.11 10,561.35 6.0 26.4
Investments 4,352.13 5,578.65 12.1 13.9
Hire Purchase 13,128.29 12,016.79 36.5 30.0
Equipment & Leasing 3,165.18 5,146.70 8.8 12.9
Bills 1,095.56 1,280.09 3.0 3.2
Other assets 12,068.73 5,423.37 33.6 13.6
Total 35,968.00 40,006.95 100.0 100.0
@ excluding RNBCs.
The share under Loans & ICD has increased because of appropriate classification of assets in 2000, which were
earlier booked under the head ‘Other Assets’.
Table V.9: Classification of Borrowings by NBFCs (excluding RNBCs)
(As at end-March)
Item 1999 2000
123
Money borrowed from Central/State Government @ 2,739.59 2,603.60
(12.1) (11.6)
Money borrowed from foreign sources* 624.18 601.32
(2.8) (2.7)
Inter-corporate borrowings 3,076.48 1,842.74
(13.6) [8.2)
Money raised by issue of convertible or secured debentures, 4,001.78 3,348.82
Including those subscribed by banks (17.7) (14.9)
Borrowings from banks 6,038.10 5,632.77
(26.7) (25.1)
Borrowings from Financial Institutions 1,544.76 1,384.47
(6.8) (6.1)
Commercial Paper 465.23 554.42
(2.1) (2.5)
Others # 4,130.47 6,480.24
(18.3) (28.9)
Total 22,620.59 22,448.38
(100.0) (100.0)
@ Mainly by State-Government owned companies.
* The amount received from foreign collaborators as well as from institutional investors (Asian Development
Bank,
International Finance Corporation, etc.). The major amount is in infrastructure and leasing companies.
# Includes security deposits from employees and caution money, allotment money, borrowings from mutual
funds, Directors, etc.
Note:Figures in brackets are percentages to total.
Table V.10: Net Owned Funds vis-à-vis Public Deposits of NBFCs @
(As at end-March)
Range of 1999 2000
NOF
Amounts No. of Net Public Public No. of Net Public Public
reporting Owned Deposits Deposits reporting Owned Deposits Deposits
companies Fund as companies Fund as
multiple multiple
of NOF of NOF
123456789
Upto 0.25 736 38.08 650.22 17.1 205 -215.15 394.78 -1.8
0.25 - 0.50 319 70.43 115.51 1.6 360 116.17 194.20 1.7
0.50 - 5.0 332 442.74 1,067.55 2.4 314 501.98 362.86 0.7
5 - 10 55 336.37 264.71 0.8 43 294.12 202.13 0.7
10 - 50 64 1,285.08 2,107.15 1.6 46 1,060.24 2,773.16 2.6
50 - 100 11 786.99 1,271.05 1.6 9 628.40 877.58 1.4
100 - 500 18 3,946.07 4,286.73 1.1 19 4,279.95 3,533.24 0.8
Above 1,000 1 1,120.83 21.74 0.02 - - - -
Total 1,536 8,026.59 9,784.66 1.2 996 6,665.71 8,337.95 1.3
@ Excluding RNBCs.
Note : There were no reporting companies with NOF of above Rs. 1,000 crore as at end-March 2000
Table V.11: Financial Performance of NBFCs*
Item 1998-99 1999-2000 Variation of Col. (3)
over Col. (2)
12345
Absolute Percentage
A.Income (i+ii) 6,809 6,770 -39 -0.6
i) Fund 6,551 6,299 -252 -3.8
ii) Fee 258 471 213 82.6
B.Expenditure (I+ii+iii) 6,416 6,363 -53 -0.8
i) Financial 4,355 3,687 -668 -15.3
ii) Operating 1,077 1,614 537 49.9
iii) Other 984 1,062 78 7.9
C.Tax Provisions 273 270 -3 -1.1
D.Net Profit 120 137 17 14.2
E.Total Assets 35,968 40,007 4,039 11.2
F.Financial Ratios @
i) Income 18.9 16.9 -2.0 -
ii) Fund Income 18.2 15.7 -2.5 -
iii) Fee Income 0.7 1.2 0.5 -
iv) Expenditure 17.8 15.9 -1.9 -
v) Financial Expenditure 12.1 9.2 -2.9 -
vi) Operating Expenditure 3.0 4.0 1.0 -
vii) Other Expenditure 2.7 2.7 -0.1 -
viii)Tax Provisions 0.8 0.7 -0.1 -
ix) Net Profit 0.3 0.3 0.0 -
* excluding RNBCs.
@ Ratios to Total Assets
Close Monitoring of Errant NBFCs
5.44 The Reserve Bank continued to keep close surveillance on large NBFCs, particularly
those which had difficulties in honouring commitments to depositors and against whom
Company Law Board (CLB) had issued orders for repayment of deposits. The implementation of
CLB orders is being monitored by Regional Co-ordination Committees formed at Chennai,
Kolkata, New Delhi and Mumbai with representatives from Department of Company Affairs and
Economic Offences Wing of State Governments.
Institutionalised Decision-making Mechanism
5.45 The Informal Advisory Group for NBFCs constituted by the Reserve Bank in January
1998 consists of representatives from the Institute of Chartered Accountants of India, national
level Associations of NBFCs, chief executive officers of two large NBFCs, besides the Reserve
Bank. The Group meets at quarterly intervals to deliberate on regulatory issues relating to
NBFCs for aiding decision-making process, and serves as a useful institutionalised framework
for periodical consultation with various associations of NBFCs. The term of the Group has been
extended to June 2002.
Developmental Aspects
5.46 The NBFCs are widely dispersed across the country and their managements exhibit
varied degrees of professionalism. Furthermore, the depositors have varied degrees of
perceptions regarding safety of their deposits while making an investment decision. Therefore, a
need was felt for educating the depositors about the regulations of NBFCs, the personnel of
NBFCs and their auditors about their obligation to the regulator and the personnel of
enforcement bodies like police and State Government departments about their role in curbing
unscrupulous activities. The Task Force on NBFCs had also suggested that the State
Governments should be increasingly involved in curbing the illegal and unauthorised deposit
taking activities of the NBFCs and unincorporated bodies engaged in the financial business. The
Reserve Bank also received requests from a number of State Governments for conducting
seminars/programmes for their civil and police officials on various aspects of legal and
supervisory issues pertaining to NBFCs. Accordingly, the Reserve Bank has organised focussed
training programmes/ seminars/workshops for personnel of NBFCs and enforcement agencies.
Table V.12: Distribution of Reporting NBFCs by CRAR
(As at end-March)
CRAR 1999 2000
Range EL HP LC/IC RNBC Total EL HP LC/IC RNBC Total
(per cent)
1 2 3 4 5 6 7 8 9 10 11
Less than 10 11 33 39 1 84 7 11 12 2 32
10-12 1 1 2 - 4 - - 1 - 1
12-15 1 7 10 - 18 1 3 3 - 7
15-20 7 27 15 1 50 3 31 8 - 42
20-30 10 71 37 - 118 12 52 16 1 81
Above 30 27 144 230 2 403 23 253 159 1 436
Total 57 283 333 4 677 46 350 199 4 599
Publicity Campaign for NBFC Depositors
5.47 The elaborate publicity campaign for educating depositors through advertisements which
began in July 1998 continued through the year. The campaign has since been fine-tuned with a
three-pronged strategy comprising advertisements in print media, spots on electronic media and
informal publicity through seminars and press meets elucidating the steps taken for ensuring
protection of depositors’ interests.
Committee for Redesigning Balance Sheet Format for NBFCs
5.48 The Committee for Redesigning of Financial Statements of Non-Banking Financial
Companies (Chairman: Shri V.S.N.Murty), submitted its Report in September 1999. It
recommended revised formats for balance sheets which essentially follows the existing formats
prescribed under the Companies Act, with additional disclosures in respect of maturity profile of
assets and liabilities, sector-wise concentration of assets and liabilities, details in respect of
overdue loans and other credits, non-performing assets and provisioning thereagainst, valuation
of investments, etc., as schedules to the main balance sheet as well as the formats for these
additional schedules. Two salient recommendations of the Committee viz., uniform accounting
year ending on March 31, and constitution of audit committees for NBFCs having asset size of
Rs.50 crore and above have been implemented. Other recommendations of the Committee are
under the consideration of the Reserve Bank.
Asset Securitisation
5.49 The Government of India constituted an Expert Committee (Chairman: Shri T.R.
Andhyarujina) for the purpose of formulating specific proposals to give effect to the suggestions
made by the Committee on Banking Sector Reforms (Chairman: Shri M. Narasimham) relating
to changes needed in the legal framework. The Committee submitted its Report in February
2000. As a follow up, the Government of India constituted a Working Group (Chairman: Shri
S.H. Bhojani, with Shri M.R.Umarji as a member from the Reseve Bank) on asset securitisation
in July 2000 to examine the Expert Committee's recommendations for implementation. The
Working Group has drafted a Bill on asset securitisation and submitted the same to the
Government.
Foreclosure Laws
5.50 The Government of India constituted a Working Group (Chairman: Shri M.R. Umarji) in
July 2000 to examine the recommendations of the Andhyarujina Expert Working Group on
Foreclosure Laws regarding vesting of powers with banks and financial institutions for taking
possession and sale of securities without the intervention of the courts and to draft a bill for
consideration of the Government. The Working Group submitted its report to the Government
along with the draft Bill in May 2001.
1 Regulated deposits are defined as receipt of money by way of deposit or loan or in any other form excluding
amounts received as share capital, bank borrowings, institutional borrowings, chit subscription, borrowings from
registered money lenders and money received in ordinary course of business; further excluding certain other forms
of deposits as specified in Non-Banking Financial Companies (Reserve Bank) Directions, 1977 like money received
from Central or State Governments, foreign Government, financial institutions, companies and certain other forms
of deposits.
2 As regards plantation companies, the Securities and Exchange Board of India (SEBI) is entrusted with the
responsibility of regulating the resource-taking activities of these companies. Accordingly, SEBI has implemented a
regulatory framework in terms of which no new plantation scheme can be floated without credit rating and minimum
requirement of paid up capital. The SEBI (Collective Investment Schemes) Regulations, 1999 were notified in
October 1999. As prescribed in the regulations, no person other than a Collective Investment Management
Company, which had obtained a CoR from SEBI under the SEBI (Collective Investment Schemes) Regulations,
1999 would be entitled to carry on or sponsor or launch a collective investment scheme. Also, no company engaged
in the business of collective investment scheme can launch any new scheme or raise money from investors even
under existing schemes, unless a CoR is granted to it under the aforesaid regulations. The Securities Laws (Second
Amendment) Act, 1999 inserted a new section 11 AA in the SEBI Act, 1992. In February 2000, the SEBI
(Collective Investment Schemes) Amendment Regulations, 2000 were notified in the Gazette of India.

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Non-banking financial company

From Wikipedia, the free encyclopedia

Non-bank financial companies (NBFCs) are financial institutions that

 act as suppliers of loans and credit facilities

1. Development finance institutions

Why is NBFC a House Divided unto Itself?

Arijit Chakraborty - ALG India Law Offices

NBFC under the RBI Act

‘NBFC’, itself is defined under sec. 45-I(f) of the Act, as under

Sec. 45-I(f): ) "non-banking financial company" means-

Regulatory Framework of NBFC’s

Loan company [ para 2(1)(viii) of APD directions]

Investment company [ para 2(1)(vi) of APD directions]

Hire-purchase Finance Company [ para 2(1)(iv) of APD directions]

Equipment Leasing Company [ para 2(1)(ii) of APD directions]

Mutual Benefit Financial Company [ para 2(1)(ix) of APD directions]

Comparison of the two definitions

Business Query Form

NBFC Registration Requirements

Reserve Bank of India

Frequently Asked Questions on NBFCs

QUES -1 What is a Non-Banking Financial Company (NBFC)?

QUES 5. Updated on February 10, 2009 What are the requirements / is the

NBFC means Non-banking financial company.[1] A non-banking financial company (NBFC) is a

1 Difference between NBFCs & Banks

[edit]Difference between NBFCs & Banks

(i) an NBFC cannot accept demand deposits;

Microfinance institutions, also known as MFIs[3], offer financial services to undeserved,

[edit]MFIs go for NBFC licences

[edit]Exemptions granted to NBFCs engaged in microfinance

[edit]MFIs & SHG-Bank linkage programme

[edit]RBI relaxes norms for NBFCs

MFIs go for NBFC licences for better access to

Net profits of commercial banks

The criteria for administrative autonomy are:

WTO negotiations on financial services:

Major features of India's offer include:

Foreign insurance companies

LIC and GIC

Capital Account Convertibility

The NBFCs that are registered with RBI are:

(i) equipment leasing company;

(i) Asset Finance Company (AFC)

Some of the important regulations relating to acceptance of deposits by NBFCs are as

Parity with banks

Similarly, income deferred in respect on non-performing assets of NBFCs is unjustly

Tax deduction at source (TDS) is an effective machinery to collect taxes in advance,

An authority for NBFCs:

The year Ahead for NBFCs

Banks should look at their relationship with NBFCs as a wholesaler-retailer

1. Companies with Limited Liability

The aforesaid companies are further classified into the following:

1. Public Limited Company

Company with Limited Liability

Company with unlimited Liability

Company limited by Guarantees Company

Public Limited Company