Non-Banking Financial Company: Reserve Bank of India Act, 1934

Admin
March 03, 2023

Non-Banking Financial Companies (NBFCs) under the Reserve Bank of India Act, 1934:

  1. Definition: Non-Banking Financial Company (NBFC) is defined under Section 45-I(f) of the Reserve Bank of India Act, 1934 as a company registered under the Companies Act, 1956 and engaged in the business of loans and advances, acquisition of shares, stocks, bonds, debentures, securities issued by the Government or local authority, leasing, hire-purchase, insurance business, or chit fund business.

  2. Registration: NBFCs are required to obtain a Certificate of Registration from the Reserve Bank of India (RBI) to carry out the business of an NBFC. The registration process involves filing an application with the RBI along with the necessary documents and fees.

  3. Capital Adequacy: NBFCs are required to maintain a minimum capital adequacy ratio (CAR) of 15%, as per the guidelines issued by the RBI from time to time.

  4. Deposit Acceptance: NBFCs are not allowed to accept deposits from the public, except for certain categories of NBFCs that are registered with the RBI and have obtained a specific authorization to accept deposits.

  5. Regulation and Supervision: The RBI is responsible for the regulation and supervision of NBFCs. The RBI has the power to inspect the books and accounts of NBFCs, call for information from them, and take such other measures as it deems fit for the regulation of NBFCs.

  6. Prudential Norms: NBFCs are required to adhere to various prudential norms, such as maintenance of liquidity, classification and provisioning of assets, and exposure norms.

  7. Capital Market Activities: NBFCs are allowed to undertake capital market activities, such as investment in securities, subject to the guidelines issued by the RBI.

  8. Conduct of Business: NBFCs are required to conduct their business in a fair and transparent manner, and in compliance with all applicable laws and regulations.

  9. Grievance Redressal: NBFCs are required to have a grievance redressal mechanism in place to address the complaints of their customers.

These are some of the key provisions related to Non-Banking Financial Companies (NBFCs) under the Reserve Bank of India Act, 1934. The Act also provides for various other provisions related to the regulation and supervision of NBFCs, their management and governance, and their dissolution and winding up.