Non-Banking Financial Companies (NBFCs) are financial institutions that provide various financial services and products but do not hold a banking license. Unlike traditional banks, NBFCs do not accept demand deposits, meaning they cannot offer checking accounts or savings accounts that allow withdrawals on demand. However, they engage in a range of financial activities such as loans and credit facilities, asset management, leasing, hire purchase, insurance, and venture capital.
NBFCs play a crucial role in the financial system, particularly in catering to the financing needs of sectors that may be underserved by banks. They often focus on specific niches, such as providing loans to small businesses, financing consumer goods, or offering investment options.
NBFCs are regulated by specific financial authorities, which vary by country; for instance, in India, they are regulated by the Reserve Bank of India (RBI). Although they are instrumental in enhancing financial inclusion and providing credit facilities, NBFCs also face regulatory scrutiny due to their potential risk in the financial system, as they can be exposed to liquidity challenges and may operate with different risk profiles compared to traditional banks.
The Transformative Power of NBFCs The Non-Banking Financial Companies (NBFCs) sector is on the brink of an unprecedented evolution. **Over the last two years, growth has surged**, driven by innovative…