Saturday, December 9, 2017

Non-banking Finance Companies (NBFC)

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Non-banking Finance Companies (NBFC)

The categories of NBFCs and the nature of their main activities currently being followed by the RBI, which are very similar to the ones discussed by the Shah Working Group, are as follows:

1. Equipment leasing company (ELC) means any company which is carrying on as its principal business, the activity of leasing of equipment or the financing of such activity.

2. Hire-purchase finance company (HPFC) means any company which is carrying on as its principal business, hire-purchase transactions or the financing of such transactions.

3. Housing finance company (HFC) means any company which is carrying on as its principal business, the financing of the acquisition or construction of houses including the acquisition or development of plots of land in connection therewith.

4. Investment company (IC) means any company which is carrying on as its principal business, the acquisition of securities.

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5. Loan company (LC) means any company which is 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. This category does not include an equipment leasing company or a hire-purchase finance company or a housing finance company.

6. Mutual benefit financial company (MBFC) means any company which is notified by the Central Government under Section 620A of the Companies Act 1956 (1 of 1956).

7. Miscellaneous non-banking company (MNBC) means a company carrying on all or any of the following types of business :

(a) Managing, conducting or supervising as a promoter, foreman or agent of any transaction or arrangement by which the company enters into an agreement with a specified number of subscribers that every one of them shall subscribe a certain sum in installment over a definite period and that every one of such subscribers shall in his turn, as determines by lot or by auction or by tender or in such other manner as may be provided for in the agreement be entitled to the prize amount.

(b) Conducting any other form of chit or kuri which is different from the type of business referred to above. Undertaking or carrying on or engaging in or executing any other business similar to the business referred to above.

8. Residuary non-banking company (RNBC) means a company which receives any deposit under any scheme or arrangement, by whatever name called, in one lump sum or in installments by way of contributions or subscriptions or by sale of units or certificates or other instruments, or in any other manner and which according to the definitions contained in the Non-Banking Financial Companies (Reserve Bank) Directions, 1977 or as the case may be, the Miscellaneous Non-Banking Companies (Reserve Bank) Directions, 1977 is not an insurance company or a company belonging to one to seven at the previous page.

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