Types of NBFC
There are only two categories of NBFCs playing an important role in India as described below:
Deposit taking NBFC -Deposit taking NBFCs are those NBFCs which accept deposit from the public.
Non Deposit taking NBFC: Non Deposit taking NBFCs are those which only lend and cannot accept deposit from public other than paying back of borrowed money.
On the basis of these two categories there are different types of NBFCs prevailing in India as described below:
Asset Finance Company: Asset Finance company is an type of NBFCs whose principal business is the financing of physical assets supporting productive and economic activities such as machines,automobiles,generators, material equipment’s, industrial machines and meaning of principal business for this is 60% of total assets in financing physical assets and 60 % of total income arises from this physical assets only.
Investment Company: It is an type of NBFCs whose principal business is to invest in the acquisition of securities and meaning of principal business in this regard is 50% of total assets is in investment activity and 50% of total income arises from these assets.
Loan Company: It is also a type of NBFCs whose principal business is to provide finance for making loan and advances for purposes such as working capital finance and moreover it doesn’t include assets finance company and the meaning of Principal business is 50% of total assets in lending and 50% of total income arises from these assets.
Infrastructure finance company means: It is a type NBFCs who has net owned funds of at least Rs. 300 crore and has a credit rating of A or above and also has CRAR ( Capital to risk assets ratio ) of 15% and most importantly use 75% of its total assets in Infrastructure loan.Public deposit acceptance is also not allowed.
Systemically Important Core Investment Company–It is a type of NBFCs whose assets size is of 100 crore or more and main business is acquisition of shares and securities and holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, debt or loans in group companies wherein out of this 90% at least 60% should be invested in the equity shares( also including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies.It does not trade in its investments in shares, debt or loans in group companies but at the time of dilution or disinvestment, it can do only through a block sale. Moreover, it only invests in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies. It accepts public funds
Infrastructure debt fund– Infrastructure debt fund is a type of NBFCs having a minimum Net Owned Fund of Rs 300 crores or more and would take over loans extended infrastructure projects which are created through Public Private Partnerships (PPP) route and have successfully completed one year of commercial production and it would be covered by a tripartite agreement between the IDF, concessionaire and project authority for practicing a compulsory buyout at the time of default in repayment by concessionaire along with termination payment. It is a non- deposit taking NBFCs.
Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI) – It is a non – deposit-taking finance company.It has at least 85% of its assets in the form of microfinance. The microfinance should be in the form of loan given to a borrower having an annual income of Rs. 1, 00,000 in rural areas and Rs. 160,000 in urban areas. Such loans should not exceed Rs. 50,000 in the first cycle and 1, 00,000 in subsequent cycles and the tenureof loan should not be less than 24 months for the loan amount in excess of Rs. 15000 with prepayment without penalty. Further, the loan has to be given without collateral. Loan repayment should be done at the choice of the borrower on weekly, fortnightly or monthly installments.
Non-Banking Financial Company – Factors (NBFC-Factors) – It is a type of no- deposit taking NBFCsinvolved in the business of factoring .and have a minimum Net Owned Fund (NOF) of Rs. 5 Crore and at least 75 percent of its total assets should constitute financial asset and income derived from this business should not be less than 75 percent of its gross income.
After analysis, the type of NBFCs the company should apply to RBI for registration after fulfilling the condition laid down by the RBI in this regard for obtaining the certificate of registration.