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Non Banking Financial Companies
Non Banking Financial Companies
(616/600 words)
Non-Banking Financial Companies (NBFCs), registered under the Companies Act, 1956, are
often referred to as shadow bankers, complementing the formal financial system to extend last
mile credit with the vision of promoting financial inclusion and stability. NBFCs started gaining
investor attention in the 1980s and 1990s due to their offering of high-interest rates, albeit
accompanied by higher associated risks. NBFCs, akin to banks in lending and investments, differ
by not accepting demand deposits, not participating in the payment system or issuing self-drawn
cheques, and lacking deposit insurance for their depositors. As of March 2023, the total number
of registered NBFCs with the RBI was 9443. Among them, non-deposit-taking NBFCs (NBFC-
ND) comprised 8966; systemically important non-deposit-taking NBFCs (NBFC-ND-SI)
numbered 413; while deposit-taking NBFCs (NBFCs-D) totaled 39.
NBFCs can be classified based on their liabilities and the specific types of activities they
undertake.
To conclude, NBFCs are the resilient pillars of IFS that diversify an deepen the financial
landscape. NBFCs contribute to economic growth and hence it's crucial to recognize the
regulatory framework that guides their operations, ensuring stability, and safeguarding the
interests of investors and customers. As NBFCs continue to evolve, striking a balance between
innovation and prudential regulations will be key for their sustained success in the dynamic
financial ecosystem.