DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name of the staff : Smt M. L.Kameswari.
Designation : Sr.Lecturer in CCP.
Institute : Govt Polytechnic for Women,
Bheemunipatnam
Semester : VI semester.
Sub. Code : CCP 604(B)
Subject : Banking-II
Topic : Role of Non-Banking Financial Institutions
(3 to 4/18)
Sub-topic : Features and Functions of NBFC
Duration : 50 minutes
Teaching aids : PPT

CCP-604(B)-57 to 58 1
Objectives:

On completion of this class you

would be able to
 Explain the features of NBFC
 List out the functions of NBFC

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Recap:

In the last class we discussed

about
 The meaning of NBFC
 Various categories of NBFC

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Features of NBFC

• NBFC is a company registered under

Companies Act
• Its business is receiving deposits under any
scheme
• And lending in any manner
• It carries on as its principal business or part of
its business

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Features of NBFC…

 Delivering of goods to a hirer under

hire purchase agreement
 Carrying on any class of Insurance
business
 It conducts chit fund business
 It is also governed by the guidelines of
RBI

CCP-604(B)-57 to 58 5
Functions of NBFC

 Mobilizing deposits by offering attractive

rates of interest
 Provide loans without security
 Provide loans to unorganized sector
 Run chit funds, provide hire purchase,
merchant banking activities etc.

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Mobilize deposits

 The NBFC’s are able to attract the

deposits of huge amounts
 They offer attractive rates of interest when
compared to commercial banks
 Half of their deposits are below 2 years
time period
 But the deposits are subject to extreme
insecurity

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Provide loans
 They provide loans to unorganised sector
 They also provide loans without any security
 Generally the parties who fail to obtain loan
from commercial banks only approach
NBFC’s for loans
 They charge heavy interest which may vary
from 24 to 36 percent
 The loans provided by NBFC are at high risk

CCP-604(B)-57 to 58 8
Other functions
They are able to fill credit gaps by providing finance
to
 Lease finance
 Hire purchasers
 Installment buying
 Discount hundies
They run chit funds. They finance for short period,
but often renew them , so that they become long
term loans

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Summary:

In this class we discussed about

• The features of non-banking financial
company
• The functions of NBFC

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Quiz

1. NBFC should be registered under

Companies Act

 True
 False

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Quiz

1. Hire purchase, leasing finance does not

come under NBFC activities

 True
 False

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Quiz
3. NBFC provide loans to its customers
___________________ security

a) With high
b) Without
c) With less
d) None of the above

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Quiz
4. NBFC is governed by the guidelines
of

a) State bank of India

b) Reserve bank of India
c) SEBI
d) None of these

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Quiz
5. NBFC provide loans to

a) Agricultural sector
b) Industrial sector
c) Organised sector
d) Unorganised sector

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Frequently asked questions

1. Write the features of a non-banking financial

company

2. State the functions of a NBFC

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