NBFC Full Form
NBFC Full Form-What is NBFC?Here’s What NBFC Means, And Why It’s Important : 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 Government.
NBFC Full Form
|Non-Banking Financial Company|
What does NBFC mean?
National Housing Finance Limited,(NHFC) a 100 per cent subsidiary of India’s largest mortgage finance company Housing Development Finance Corporation (HDFC) is considered as the first NBFC in India. It was incorporated in the year 1983 as a Private Limited Company and converted into a Public Limited Company in the year 1997. Today it has the biggest market share of mortgages in the country, with assets under management (AUM) of around Rs. 41,500 crores. This is around 8 times more than the next highest mortgage lender. It is the first home finance company and is involved in providing housing finance for individual as well as construction industry. Government created National Housing Bank in the year 1998. The banks functioning under it have been converted into NBFCs.
What does NBFC do?
The main business of an NBFC is facilitating loans and other financing (which can include refinancing of loans) to borrowers of commercial and consumer nature. An NBFC’s main purpose is to act as a financial intermediary between a borrower and its lender, who may be a bank or a financial institution. NBFCs may also lend money or take advances from the Government or have ancillary activities such as financial investment.
What’s the difference between NBFCs and banks? One of the most important distinctions between NBFCs and banks is that an NBFC may receive credit from third parties, while a bank is solely responsible for credit risk. NBFCs also require approval from Reserve Bank of India (RBI) before raising funds and holding securities. Why Are Indian NBFCs important?
How does NBFC differ from a bank?
By definition, NBFCs can act as a platform between and the lending institution. They act as a facilitator or a middle-person. They provide financing solutions to both the financiers and borrowers. Also, an NBFC can use its expertise in all the loan and investment portfolios and provide the best possible products or services through tie-ups with lenders. Therefore, NBFCs can work as an efficient lending institution and can deliver more cash to businesses who cannot afford to pay loans or fund over their short-term needs.
Rise in Businesses – Opportunities for NBFCs The rate of non-performing assets (NPA) in the Indian banking system stands at over 8%. However, there has been a slow rise in business startups.
What are the advantages of NBFC?
Over the last decade, a rapid growth has been witnessed in the retail lending market by non-banks. The NBFCs are especially helping low-income and middle-income individuals to access credit in a secured manner. NBFCs provide an easy funding route to those who are unable to obtain loans from banks because they lack credit history or don’t have traditional bank accounts. These NBFCs will also, in the future, help customers to save on the cost of credit by providing several attractive financial solutions and product variants. For example, while going to a bank, customers are required to pay the fund transfer charges, which will add up to their overall expenses. However, NBFCs do not levy such charges on their customers.
What are the disadvantages of NBFC?
They are often unregulated, often transfer risk, often inflate asset values, can cause financial instability They are seen as easy money, can cause default and trigger market ructions, can be driven by greed or profit. They are usually heavily leveraged, and fall into the ‘speculative’ category How are NBFCs different from Banks? Financial companies are common, regulated and regulated differently from banks Banks are seen as having fixed assets (deposits, loans, etc) for lending NBFCs do not get interest on money lent to the borrower, and instead get it back as profit, hence investors get more stability. They are usually seen as unsecured lending, making it a little safer, but can sometimes lack terms, transparency.
What is a NBFC? What are the operational parameters that include maximum amount of loans a NBFC can give a borrower at a maximum percentage of their deposits, RBI cap on interest rates and minimum documentation as per RBI guidelines, etc.? We are in an era of financial technology. Its theme is that of automation and the further process of digitization of the economy. Just like a smartphone will soon do most of the things that a PC does, a bank will start going the way of a mobile phone in terms of technology. However, there are still a lot of challenges for the retail borrowers, which can be partially answered by NBFCs. We will delve into the answers that the NBFC offers, and also see the impact of its operation on the digital ecosystem.
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