Advantages of NBFCs

One should examine the advantages and drawbacks of NBFCs in a detailed fashion before reaching any decision while applying for a loan.

In layman’s language, any non-banking institution which is a duly registered company under the relevant act has its principal business similar to that of a bank. The two key features of a principal business are:

  • Receiving deposits under any scheme or arrangement or in any other manner;
  • Lending money in any way.

Advantages of NBFC:

  1. Provide facilities for loans and credit;
  2. Engage in trading of instruments in the money market;
  3. Capable of doing wealth management by managing stocks and share portfolios;
  4. Have the power to underwrite stocks and shares along with other obligations;
  5. NBFCs can help those whose help banks cannot do;
  6. NBFCs are the most significant motivators for moving finances into the country;
  7. NBFCs work swiftly;
  8. NBFCs are familiar with the latest technologies, which helps them make information easily accessible for others anytime, anywhere. 
  9. NBFCs know how to make use of digitalization to present multiple choices to larger audiences at a quicker pace, giving rise to the emergence of larger NBFC;
  10. NBFCs use a combination of partnerships and databases aptly to increase penetration of financial inclusion. 
  11. NBFCs are capable of minimizing financial risks. 
  12. NBFCs maintain forged partnerships that too include the government's ability to use their database, which further helps them in identifying the worthiness of any customer. This makes their lending productive.

Advantages of NBFC over Bank

  1. NBFCs charge lower fees, making them more profitable than banks. This point further helps people in receiving cheaper loans. 
  2. NBFCs are less time-consuming because of less paperwork as compared to banks.
  3. NBFCs have less stringent regulations than banks
  4. Both the public and private sectors are eligible to take loans from NBFCs.
  5. Registration for NBFC is more accessible than getting a license for Bank.
  6. Banks generally prefer considering the financial needs of large businesses, and NBFCs, on the other hand, are more concerned about small borrowers.
  7. Banks stress more upon a person's credit score, due to which the borrowers are at times being denied loans because of low credit scores. However, this is not the case for NBFCs.
  8.  In the case of gold loans, the borrowers of NBFCs get leverage for repaying their regular interest throughout the loan term and paying the principal amount in the end. This scenario is very different in banks where the principal and regular interest have to be paid at regular intervals. 
  9. NBFCs do not have penalty clauses which makes the repayment of loans much easier than banks. 
  10. Banks do not consider statutory charges like stamp duty and other enlistments while computing the property loan amount. NBFCs consider this.


Just like a coin, NBFCs also have two faces. One is having a positive approach and one negative. It is better to scrutinize both faces before reaching any decision. This article will give you a better understanding of both sides of an NBFC. 

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