NBFC
- ECONOMY
News: NBFCs
likely to see asset growth of 14-17% next fiscal, says CRISIL
What's
in the news?
●
Assets under management (AUM) of
non-banking financial companies (NBFCs) is expected to grow at 14-17% in the
next fiscal on the back of continued strong credit demand across retail loan
segments, CRISIL Ratings said in a report.
Non-Banking
Financial Company (NBFC):
●
An NBFC is a company registered under the Companies Act 1956 engaged in the
business of loans and advances, acquisition of
shares/stocks/bonds/debentures/securities issued by the Government or local
authority or other marketable securities of a like nature.
Features:
●
They offer various banking services but do not have a banking license.
●
They provide banking services like loans,
credit facilities, TFCs, retirement planning, investing and stocking in the
money market.
●
Generally, these institutions are not allowed to take traditional demand
deposits - readily available funds, such as those in checking or savings
accounts from the public.
●
NBFCs also provide a wide range of
monetary advice like chit-reserves and advances.
Regulation:
●
NBFCs are regulated by the Reserve Bank of India (RBI), the central bank of
India.
●
The RBI has the authority to issue
licenses to NBFCs, regulate their operations and ensure that they adhere to the
established norms and regulations.
Difference
between Banks and NBFCs:
NBFCs lend and make
investments and hence their activities are akin to that of banks. However,
there are a few differences as given below.
●
NBFC cannot
accept demand deposits.
●
NBFCs do
not form part of the payment and settlement system and cannot issue cheques
drawn on itself.
●
Deposit insurance facility of Deposit
Insurance and Credit Guarantee Corporation is not available to depositors of
NBFCs, unlike in case of banks.
●
Unlike banks, NBFCs are not subjected to stringent and substantial
regulations.
Examples:
●
Investment banks, mortgage lenders, money
market funds, insurance companies, equipment leasing companies, infrastructure
finance companies, hedge funds, private equity funds and P2P lenders.