NBFC

Definition

An NBFC (Non-Banking Financial Company) is a company registered under the Companies Act, 2013 (or the previous 1956 Act) that provides loans and other financial services but does not hold a banking licence or accept demand deposits like banks.

What is an NBFC?

A Non-Banking Financial Company (NBFC) is a financial institution that offers various banking-like financial services without being a bank. NBFCs play an important role in expanding access to credit, especially for individuals, small businesses, MSMEs, self-employed professionals, and underserved sectors that may not easily qualify for bank loans.

An NBFC must be:

Registered as a company under the Companies Act, 2013
Registered with the Reserve Bank of India (RBI) under Section 45-IA of the RBI Act, 1934
Engaged in the primary 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, leasing, hire-purchase, etc

Unlike banks, NBFCs cannot accept demand deposits and cannot issue cheques drawn on themselves. However, they are regulated by the RBI and contribute significantly to India’s financial system by improving credit availability.

Kissht is one such RBI-regulated NBFC that offers personal loans, business loans, and loans against property with minimal documentation, instant approval, and quick disbursal.

NBFC vs Bank

Basis	NBFC	Bank
Governing Law	RBI Act, 1934 & Companies Act, 2013	Banking Regulation Act, 1949
Banking Licence	Not Required	Mandatory
Accept Demand Deposits	No	Yes
Savings & Current Accounts	Not Permitted	Permitted
Issue Cheque Books	No	Yes
Payment & Settlement System	Not a part	Yes
Deposit Insurance Facility of the Deposit Insurance and Credit Guarantee Corporation (DICGC)	Not Available	Available
Primary Role	Lending & Financial Services	Lending, Deposits, Payments, and Banking Services
RBI Regulation	Yes	Yes

Types of NBFCs

Type	Primary Business
Investment and Credit Company (ICC)	Provides loans and advances, finances assets, and invests in securities
Infrastructure Finance Company (IFC)	Finances infrastructure projects such as roads, power, and ports
Infrastructure Debt Fund-NBFC (IDF-NBFC)	Refinances completed infrastructure projects
Core Investment Company (CIC)	Holds investments primarily in group companies
Micro Finance Institution (NBFC-MFI)	Provides microfinance loans to low-income households
Housing Finance Company (HFC)	Offers home loans and housing-related finance
Non-Banking Financial Company-Factor (NBFC-Factor)	Provides receivables financing and factoring services
Mortgage Guarantee Company (MGC)	Provides mortgage guarantee services to lenders
Standalone Primary Dealers (SPDs)	Undertake Primary Dealer activities in government securities
Non-Operative Financial Holding Company (NOFHC)	Holds shares in a banking company and other financial services companies within the same group, in accordance with RBI regulations
NBFC-Account Aggregator (NBFC-AA)	Securely collects and shares a customer’s financial information with authorised institutions, with the customer’s consent
NBFC-Peer-to-Peer Lending Platform (NBFC-P2P)	Acts as an intermediary connecting borrowers and lenders through an online peer-to-peer lending platform

FAQs

What is an NBFC?

Who regulates NBFCs in India?

RBI regulates and supervises NBFCs under the Reserve Bank of India Act, 1934 and related RBI Directions.

What’s the difference between a bank and an NBFC?

The fundamental difference between a bank and an NBFC is that banks accept demand deposits and offer payment services. Whereas, NBFCs are primarily financial intermediaries that lend money and invest but do not accept demand deposits or issue cheques.