What is Non-Banking Finance company?
What is Non-Banking Finance company?
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
The term ‘principal business’ is not defined by the Reserve Bank of India Act. The Reserve Bank has defined it so as to ensure that only companies predominantly engaged in financial activity get registered with it and are regulated and supervised by it.
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 comply with the following:
It should be a company registered under Section 3 of the companies Act, 1956
It should have a minimum net owned fund of Rs. 5 crore, the same should be increased to Rs. 7 crore by 31.03.2025 and by 31.03.2027 to Rs. 10 crore.