Non Banking Financial Institutions - Types with Examples | UPSC (2024)

Types of Non Banking Financial Institutions with Examples in Detail

The following are some examples of non banking financial companies:

Asset Finance Company (AFC)

  • An AFC is an organisation that conducts the financing of tangible assets as its primary business.
  • For the purposes of this definition, a company’s principal business is any operation that generates at least 60% of its total assets and income from financing tangible assets that support economic activity.

Investment Company (IC)

Any business that engages in the acquisition of securities as its primary business and is a financial institution is referred to as an IC.

Loan Company (LC)

LC refers to any company that is a financial institution and conducts the provision of finance as its primary business. This includes making loans, advances, and other types of financial commitments for activities other than its own.

Infrastructure Finance Company (IFC)

IFC is a non-banking finance business that:

  • invests at least 75% of its total assets in infrastructure loans;
  • has a minimum of Rs 300 crore in net owned funds;
  • has a minimum credit rating of “A” or similar;
  • has a CRAR of 15%.

Systemically Important Core Investment Company (CIC-ND-SI)

A Core Investment Company (CIC) is a Non-Banking Financial Company (NBFC) that engages in the acquisition of shares and securities and invests at least 90% of its net assets.

Non-Banking Financial Company (IDF-NBFC)

  • IDF-NBFC is a business that has been registered as an NBFC to make it easier for long-term funding to flow into infrastructure projects.
  • IDF-NBFC raises funds by issuing bonds with a minimum 5-year maturity that are denominated in rupees or dollars.
  • IDF-NBFCs may only be sponsored by Infrastructure Finance Companies (IFC).

Non-Banking Financial Company – Factors (NBFC-Factors)

NBFC-Factor is a non-deposit-taking NBFC with factoring as its main line of business. NBFC-Factor means a non-banking financial company that meets the Principal business criteria:

  • whose financial assets in the factoring business constitute at least 75 percent of its total assets,
  • has Net Owned Funds of Rs. 5 crore,
  • has been granted a certificate of registration by the RBI under Section 3 of the Factoring Regulation Act, 2011.

Mortgage Guarantee Companies (MGC)

MGCs are financial organizations with a net owned fund of Rs 100 crore and a mortgage guarantee business that accounts for at least 90% of their business turnover or at least 90% of their gross income.

Non Banking Financial Institutions - Types with Examples | UPSC (1)

Also, check the Regulators of Banks & Financial Institutions in India Here.

Non Banking Financial Institutions - Types with Examples | UPSC (2024)

FAQs

What are examples of non-banking financial institutions? ›

Examples of nonbank financial institutions include insurance firms, venture capitalists, currency exchanges, some microloan organizations, and pawn shops. These non-bank financial institutions provide services that are not necessarily suited to banks, serve as competition to banks, and specialize in sectors or groups.

What are the types of NBFC? ›

Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration under Section 45 ...

What are some examples of non deposit financial institutions? ›

Non-depository Corporations, for example, mutual funds, insurance companies, provident funds, asset management companies, and securities companies, etc.

What are the characteristics of non-banking financial institutions? ›

NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
  • NBFC cannot accept demand deposits;
  • NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;

What are the largest non-bank financial institutions? ›

Rankings by Total Assets
RankProfileTotal Assets
1.Visa Inc.$90,499,000,000
2.PayPal Holdings$75,803,000,000
3.Mastercard Inc$38,724,000,000
4.Rocket Companies$32,774,895,000
33 more rows

What is the difference between a bank and a non banking institution? ›

The non-banking financial institution which comes under the category of financial institutions cannot accept deposits into savings and demand deposit accounts. A bank is a financial institution which can accept deposits into various savings and demand deposit accounts, and give out loans.

What are at least three common nondeposit financial institutions? ›

Some financial institutions provide certain banking services but do not accept deposits. These nondepository financial institutions include insurance companies, pension funds, brokerage firms, and finance companies. They serve both individuals and businesses.

Do non banking institutions accept deposits? ›

Non-banks tend to offer services such as lending, currency exchange, underwriting, and more. However, unlike their banking compatriots, they cannot accept traditional deposits.

What are two types of non-deposit accounts? ›

Many banks also offer non-deposit accounts or products that are not insured by the FDIC. Stocks, bonds, and mutual funds are examples of non-deposit investment products. These carry some level of risk, meaning that you could lose some or all of the money that you invest in these products.

What are the non-financial banking companies? ›

Investment banks, mortgage lenders, money market funds, insurance companies, hedge funds, private equity funds, and P2P lenders are all examples of NBFCs. Since the Great Recession, NBFCs have proliferated in number and type, playing a key role in meeting the credit demand unmet by traditional banks.

Is a credit union a non-bank financial institution? ›

Key Takeaways. Credit unions are financial cooperatives that provide traditional banking services to their members. Credit unions have fewer products than traditional banks, but offer clients access to better rates and more ATM locations.

What are the limitations of non bank financial institutions? ›

The Disadvantages of Non Bank Lenders
  • Some borrowers may be subject to higher interest rates compared to traditional banks. ...
  • There is a troubling lack of regulation compared to traditional banks. ...
  • Non bank lenders often have a limited range of financial products compared to traditional banks.

Are there NBFCs in the USA? ›

Non-Banking Financial Company Explained

NBFCs in the United States generally fall under the regulations of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The legislation was passed in 2010 among the broad financial reform within the United States as a response to the 2008 Global Financial Crisis.

Is a casino a non-bank financial institution? ›

Since 1985, Casinos that have Gross Annual Gaming Revenues in excess of $1,000,000 are considered to be Financial Institutions and are subject to the requirements of the Bank Secrecy Act (BSA).

Which of the following are not examples of non banking finance companies? ›

Detailed Solution
  • Non banking financial company: These are those financial institutions that provides various banking services but they do not have banking license. ...
  • Hence, it can be concluded that Insurance companies is not an example of non banking financial companies.
Feb 13, 2023

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