Non-Banking Financial Company (NBFC)

NBFCs are classified in three ways:

• By type of liabilities: into Deposit-accepting and Non-Deposit-accepting NBFCs.
• By regulatory structure: under the Scale-Based Regulation, they are grouped into the NBFC-Base Layer, NBFC-Middle Layer, NBFC-Upper Layer, and NBFC-Top Layer.
• By the nature of their activities

Based on the type of activities they conduct, the different types of NBFCs are as follows:

• Investment and Credit Company (ICC):
  • ICC means any company which is a financial institution carrying on as its principal business – asset finance, the providing of finance whether by making loans or advances or otherwise for any activity other than its own and the acquisition of securities; and is not any other category of NBFCs as defined by the Reserve Bank in any of its Master Directions.
• Housing Finance Company (HFC):
  • HFC shall mean a company that fulfils the following conditions:
    •  It is an NBFC whose financial assets, in the business of providing finance for housing, constitute at least 60% of its total assets (netted off by intangible assets). 
    • Out of the total assets (netted off by intangible assets), not less than 50% should be by way of housing finance for individuals.
• Infrastructure Finance Company (IFC):
  • IFC is a non-banking finance company (a) which deploys at least 75 per cent of its total assets towards infrastructure lending.
• Infrastructure Debt Fund (IDF-NBFC):
  • IDF-NBFC means a non-deposit taking NBFC which is permitted to (a) refinance post commencement operations date (COD) infrastructure projects that have completed at least one year of satisfactory commercial operations; and (b) finance toll operate transfer (TOT) projects as the direct lender.
• Core Investment Company (CIC):
  • CIC is a NBFC carrying on the business of acquisition of shares and securities which satisfies the following conditions:
    • It holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, debt or loans in group companies;
    •  Its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies and units of Infrastructure Investment Trusts (InvITs) only as sponsor constitutes not less than 60% of its net assets;
    • Provided that the exposure of such CICs towards InvITs shall be limited to their holdings as sponsors and shall not, at any point in time, exceed the minimum holding of units and tenor prescribed in this regard by SEBI (Infrastructure Investment Trusts) Regulations, 2014, as amended from time to time. It does not trade in its investments in shares, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;
    • it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except (i) investment in bank deposits, money market instruments, government securities, bonds or debentures issued by group companies; (ii) granting of loans to group companies; and (iii) issuing of guarantees on behalf of group companies;
    • Its asset size is ₹100 crore or above; and
    • It accepts public funds
• Micro Finance Institution (NBFC-MFI):
  • “NBFC-MFI” means a non-deposit taking NBFC which has a minimum of 75 percent of its total assets deployed towards “microfinance loans” as defined under Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022 .
• Non-Banking Financial Company – Factors (NBFC-Factors):
  • NBFC-Factor is a non-deposit taking NBFC engaged in the principal business of factoring. The financial assets in the factoring business should constitute at least 50 percent of its total assets and its income derived from factoring business should not be less than 50 percent of its gross income.
• Mortgage Guarantee Companies (MGC):
  • MGC means a company registered as mortgage guarantee company which primarily transacts the business of providing mortgage guarantee i.e., a guarantee for the repayment of an outstanding housing loan and interest accrued thereon up to the guaranteed amount to a creditor institution, on the occurrence of a trigger event. A mortgage guarantee company shall be deemed to primarily transact the business of providing mortgage guarantee when at least 90% of the business turnover is mortgage guarantee business or at least 90% of the gross income is from mortgage guarantee business.
• Standalone Primary Dealers (SPDs):
  • SPDs are primarily NBFCs which have been granted authorisation to undertake the Primary Dealer activities in Government Securities.
  • SPDs may undertake a set of core and non-core activities which are clearly defined.
  • SPDs support G- Sec market, (both primary and secondary) through various obligations like participating in primary auctions, market making in G- Secs, predominance of investment in G-Secs, achieving minimum secondary market turnover ratio, etc.
• Non-Operative Financial Holding Company (NOFHC):
  • NOFHC means a non-deposit taking NBFC referred to in the “Guidelines for Licensing of New Banks in the Private Sector” dated February 22, 2013, issued by the Reserve Bank, which holds the shares of a banking company and the shares of all other financial services companies in its group, whether regulated by the Reserve Bank or by any other financial regulator, to the extent permissible under the applicable regulatory prescriptions.
• NBFC – Account Aggregator (NBFC-AA):
  • An NBFC-Account Aggregator (NBFC-AA) is a non-banking financial company that carries out the business of account aggregation, either for a fee or otherwise.
  • The role of an account aggregator is to retrieve or collect financial information about a customer, as specified by the RBI, and to consolidate, organise, and present this information to the customer or any other authorised financial information user.
  • Importantly, the customer’s financial information remains their property and cannot be used by the account aggregator for any other purpose.
• NBFC – Peer to Peer Lending Platform (NBFC-P2P):
  • NBFC-P2P means a non-banking institution which carries on the business of a Peer to Peer Lending Platform i.e., acting as intermediary providing the services of loan facilitation via online medium or otherwise, to the participants of the platform.