A Non-Banking Financial Company (NBFC) is a company that is involved in a financial business of providing loans and advances, acquiring stocks or shares, depositing money, lease, insurance, hire-purchases, chit funds, and similar companies.
The NBFC was established under the Companies Act 2013 and still acts similar to the banks; the difference is that NBFC can actively deposit lending money but cannot issue cheques. Moreover, the NBFC deposits are neither covered by insurance for deposits nor by the Credit Guarantee Corporation.
Under the Reserve Bank of India, an NBFC license is required for the supervision of the NBFCs. For an NBFC license, fulfill the following requirements:
The net owned fund is calculated based on the last audited balance sheet of the company, consisting of paid-up equity capital, capital reserves, and balance in share premium account, which sums up the profit from the sale using the asset. However, this does not include the reserves made by the re-valuation of the assets.
From the aggregate above, the loss accumulated and the book value of the intangible assets are deducted to get the metric of the net owned funds.
There are eight categories of NBFC licenses, which are listed as follows:
After determining the type of NBFC, the application is filed online or offline with prescribed documents submitted to the RBI regional office.