{"id":4369,"date":"2023-03-31T18:38:42","date_gmt":"2023-03-31T13:08:42","guid":{"rendered":"https:\/\/fatakpay.com\/blog\/?p=4369"},"modified":"2025-11-11T17:17:07","modified_gmt":"2025-11-11T11:47:07","slug":"what-is-an-nbfc","status":"publish","type":"post","link":"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/","title":{"rendered":"What is an NBFC?"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Introduction_NBFC\" >Introduction (NBFC):<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#RBI_definition_of_NBFC\" >RBI definition of NBFC:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Types_of_NBFCs\" >Types of NBFCs:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Investment_and_Credit_Company_ICC\" >Investment and Credit Company (ICC):<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Asset_Finance_Company_AFC\" >Asset Finance Company (AFC) :<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Investment_Company_IC\" >Investment Company (IC) :<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Loan_Company_LC\" >Loan Company (LC):<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Infrastructure_Finance_Company_IFC\" >Infrastructure Finance Company (IFC):<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Infrastructure_Debt_Fund_Non-_Banking_Financial_Company_IDF-NBFC\" >Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC):<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Microfinance_Institution_MFI_%E2%80%93_Non-Banking_Financial_Corporation_NBFC-MFI\" >Microfinance Institution (MFI) &#8211; Non-Banking Financial Corporation (NBFC-MFI):<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#What_is_the_difference_between_banks_NBFCs\" >What is the difference between banks &amp; NBFCs?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#Additional_links\" >Additional links:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.fatakpay.com\/blog\/learn-finance\/what-is-an-nbfc\/#About_FatakPay\" >About FatakPay:&nbsp;<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction_NBFC\"><\/span><strong>Introduction (NBFC):<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NBFC, or <strong>Non-Banking Financial Companies<\/strong>, are financial institutions that provide banking services without holding a banking licence. NBFC typically lend money, make investments, and offer other financial services such as asset management, retirement planning, insurance etc.<\/p>\n\n\n\n<p>However, unlike traditional banks, NBFC cannot accept demand deposits, issue checks, or provide savings accounts. They are also not a part of the payment and settlement system, which means they cannot issue credit cards or offer online banking services.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"RBI_definition_of_NBFC\"><\/span><strong>RBI definition of NBFC:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According to the <strong>Reserve Bank of India (RBI)<\/strong>, A <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><a href=\"https:\/\/www.rbi.org.in\/commonperson\/English\/Scripts\/FAQs.aspx?Id=1167\" target=\"_blank\" rel=\"noopener\">Non-Banking Financial Company<\/a><\/mark> (NBFC) is a business registered under the Companies Act of 1956 that engages in the business of loans and advances, acquisition of shares\/stocks\/bonds\/debentures\/securities issued by the government or a local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, and chit business.&nbsp;<\/p>\n\n\n\n<p>It excludes institutions whose main line of business is that of agriculture activity, industrial activity, purchase or sale a non-banking financial company is also one that receives deposits under any scheme or arrangement on a single occasion, in installments through contributions, or in any other way as its primary activity (Residuary non-banking company).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_NBFCs\"><\/span><strong>Types of NBFCs:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Let\u2019s have a look at the different types of NBFCs:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investment_and_Credit_Company_ICC\"><\/span><strong>Investment and Credit Company (ICC):<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Here we see a new category of NBFCs dubbed NBFC-ICC by combining the three NBFC categories of asset finance companies (AFC), <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><a href=\"https:\/\/fatakpay.com\/\" target=\"_blank\" rel=\"noopener\">loan companies<\/a><\/mark> (LC), and investment companies (IC).<\/p>\n\n\n\n<p>Let&#8217;s have a closer look at AFCs, LCs, and ICs:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Asset_Finance_Company_AFC\"><\/span><strong>Asset Finance Company (AFC) :<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>An AFC is a firm that engages in the <strong>financing of physical<\/strong> assets that support productive or economic activity, such as cars, tractors, lathes, generators, earthmoving and material handling equipment that can move independently, as well as general industrial machines.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investment_Company_IC\"><\/span><strong>Investment Company (IC) :<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>An IC engages in the acquisition of securities. That is its core business. An IC is a financial institution.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Loan_Company_LC\"><\/span><strong>Loan Company (LC):<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>LC means any company which is a <strong>financial institution<\/strong> carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own but does not include an Asset Finance Company.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Infrastructure_Finance_Company_IFC\"><\/span><strong>Infrastructure Finance Company (IFC):<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A minimum of three-fourths of the assets used by infrastructure finance organisations are invested in infrastructure <strong>loans<\/strong>. The capital to risk-weighted assets ratio is 15%, the net owned funds exceed $3 billion, and the minimum credit grade is &#8220;A&#8221;.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Infrastructure_Debt_Fund_Non-_Banking_Financial_Company_IDF-NBFC\"><\/span><strong>Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC):<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>IDF-NBFC is a business that has been registered as an NBFC to make it easier for long-term funding to flow into infrastructure projects. IDF-NBFC raises capital through multi-currency bonds with a minimum maturity of five years. IDF-NBFCs may only be sponsored by Infrastructure <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><a href=\"https:\/\/fatakpay.com\/blog\/fintech-revolutionizing-corporate-finance\/\" target=\"_blank\" rel=\"noopener\">Finance Companies<\/a><\/mark> (IFC).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Microfinance_Institution_MFI_%E2%80%93_Non-Banking_Financial_Corporation_NBFC-MFI\"><\/span><strong>Microfinance Institution (MFI) &#8211; Non-Banking Financial Corporation (NBFC-MFI):<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>&nbsp;NBFC-MFI is an NBFC that does not accept deposits and has at least 85% of its assets in the form of qualifying assets that meet the following requirements:<\/p>\n\n\n\n<p>a. a loan provided by an NBFC-MFI to a borrower whose yearly family income is not more than 1,00,000 in a rural area or 1,60,000 in an urban or semi-urban area;<\/p>\n\n\n\n<p>b. the loan amount is limited to Rs.50,000 in the initial cycle and Rs.1,00,000 in subsequent cycles;<\/p>\n\n\n\n<p>c. The borrower&#8217;s total debt does not exceed Rs.1,00,000;<\/p>\n\n\n\n<p>d. For loans over Rs.15,000, the loan term cannot be less than 24 months, and early repayment is not subject to penalties;<\/p>\n\n\n\n<p>e. loan to be extended without collateral;<\/p>\n\n\n\n<p>f. The total amount of loans made for income generation account for at least 50% of all loans made by MFIs;<\/p>\n\n\n\n<p>g. The borrower may choose to repay the loan in weekly, fortnightly, or monthly installments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_difference_between_banks_NBFCs\"><\/span><strong>What is the difference between banks &amp; NBFCs?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The activities of NBFCs are quite similar in nature with respect to banks because they lend money and make investments, but there are a few differences, which are listed below:<\/p>\n\n\n\n<p>i. Demand deposits cannot be accepted by NBFC;<\/p>\n\n\n\n<p>ii. NBFCs cannot issue checks drawn on themselves and are not a part of the payment and settlement system;<\/p>\n\n\n\n<p>iii. Unlike in the case of banks, depositors of NBFCs cannot use the Deposit Insurance and Credit Guarantee Corporation&#8217;s deposit insurance provision<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Additional_links\"><\/span><strong>Additional links:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>We hope this was an informative and pleasant read. You can check out some our previous blogs and LinkedIn Articles:<\/p>\n\n\n\n<p><a href=\"https:\/\/fatakpay.com\/blog\/what-are-neo-banks\/ \" target=\"_blank\" rel=\"noopener\">https:\/\/fatakpay.com\/blog\/what-are-neo-banks\/ <\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/fatakpay.com\/blog\/bittersweet-impact-of-covid-19-on-the-credit-sector\" target=\"_blank\" rel=\"noopener\">https:\/\/fatakpay.com\/blog\/bittersweet-impact-of-covid-19-on-the-credit-sector<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/fatakpay.com\/blog\/impact-of-inflation-on-personal-loan-interest-rates\" target=\"_blank\" rel=\"noopener\">https:\/\/fatakpay.com\/blog\/impact-of-inflation-on-personal-loan-interest-rates<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.linkedin.com\/pulse\/rise-fintech-its-impact-traditional-financial-institutions-fatakpay\/?trackingId=nf%2BBcssWcRsnIxkRBXHCug%3D%3D\" target=\"_blank\" rel=\"noopener\">https:\/\/www.linkedin.com\/pulse\/rise-fintech-its-impact-traditional-financial-institutions-fatakpay\/?trackingId=nf%2BBcssWcRsnIxkRBXHCug%3D%3D<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.linkedin.com\/pulse\/what-assurance-fatakpay\/?trackingId=OgOEA46cIjB6oNISjYFZkw%3D%3D\" target=\"_blank\" rel=\"noopener\">https:\/\/www.linkedin.com\/pulse\/what-assurance-fatakpay\/?trackingId=OgOEA46cIjB6oNISjYFZkw%3D%3D<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"About_FatakPay\"><\/span><strong>About FatakPay:<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>FatakPay provides virtual credit facilities for all. It&#8217;s available on your phone and caters to your everyday needs in both online and offline format. Payments are done seamlessly through UPI\/QR codes. The solution provides an almost zero cost, free, quick, transparent and a secure way to transact in multilingual format with a Scan Now Pay Later facility and easy repayment options.<br><\/p>\n\n\n\n<p>Link to FatakPay App: <a href=\"https:\/\/link.ftkp.in\/2uSI\/dkasgvnf\" target=\"_blank\" rel=\"noopener\">https:\/\/link.ftkp.in\/2uSI\/dkasgvnf<\/a><\/p>\n\n\n\n<p>Link to the Website: <a href=\"https:\/\/fatakpay.com\/\" target=\"_blank\" rel=\"noopener\">https:\/\/fatakpay.com\/<\/a><\/p>\n\n\n\n<p><\/p>\n\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"BlogPosting\",\n  \"headline\": \"What is an NBFC?\",\n  \"description\": \"Understand what a Non-Banking Financial Company (NBFC) is and how it differs from banks. 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NBFC typically lend money, make investments, and offer other financial services such as asset management, retirement planning, insurance etc. However, unlike traditional banks, NBFC cannot accept demand deposits, issue checks, or provide savings accounts. They are<\/p>\n","protected":false},"author":1,"featured_media":6809,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[260],"tags":[97,98,95,96,117],"class_list":{"0":"post-4369","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-learn-finance","8":"tag-fatakpay","9":"tag-finance-tips","10":"tag-financial-wellness","11":"tag-fintech","12":"tag-nbfc"},"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/posts\/4369","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/comments?post=4369"}],"version-history":[{"count":11,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/posts\/4369\/revisions"}],"predecessor-version":[{"id":6888,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/posts\/4369\/revisions\/6888"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/media\/6809"}],"wp:attachment":[{"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/media?parent=4369"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/categories?post=4369"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/tags?post=4369"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}