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Understanding the NBFC Conundrum
Till recently, non-banking financial companies were the poster boys of the financial sector, with loans from the sector growing at phenomenal rates. An examination of what NBFCs are and their activities shows how they are regulated, what the sources of their funds are, and the recipients of the credit issued by them.
Non-banking financial companies (NBFCs) are companies registered under the Companies Act, 1956 and, as per Section 45 (I) of the Reserve Bank of India (RBI) Act, 1934, are
engaged in the business of making loans, advances, acquisition of shares, stock, bonds, debentures, or securities issued by the government or local authority or other securities of marketable nature, leasing, hire-purchase, insurance and chit business.1
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