NBFC License is grabbing the attention of most fintech entrepreneurs in India who seek to penetrate the financial domain of India with style. However, despite having enthusiasm, not all of them understand the functions and features of a Non Banking Financial Company.
In the year 2017, the Reserve bank of India decided to introduce new Master Directions to govern the NBFCs of India. Aiming at introducing an information technology framework to the traditional non-banking financial institutes, the Reserve bank of India introduced several measures that increased the demand for NBFC licenses in India.
As it has brought several fintech entrepreneurs out of the woodwork, it has also revealed a severe lack of knowledge they possess. Therefore, this article explains the functions of a Non Banking Financial Company in a way that you have never encountered before – the simple way. Other Useful Content: NLD License
Functions of an NBFC
An NBFC performs the following functions under the governance of the Reserve Bank of India – India’s apex financial institute:
- Retail Financing: It offers short-term funds and loans against shares, gold, property and other tangible assets for consumption purposes.
- Infrastructural Funding: Those who seek to establish infrastructures are now moving away from banks and relying on NBFCs for their funding requirements.
- Hire Purchase Services: Non-banking Financial Companies provide hire-purchase services to provide products and services without selling them. The buyer pays in instalments, and the seller allows them to use the product or service. After payment’s completion, the seller transfers the rights of the product/service to the buyer.
- Trade Finance: Companies providing non-banking financial facilities sometimes deal with distributor or dealer finance services. Thus, they grant loans to fulfil vendor finance, working capital requirements and other business.
- Venture Capital Services: Venture capital services entail investing in small businesses during their starting stages. Such a function takes time to turn out profits. But when it does, the income is high, and the small enterprise is thankful.
- Asset Management Services: Many with NBFC licenses transform into AMCs or Asset Management Companies. Such business entities invest the funds of small investors and manage them to turn a profit.
- Leasing Services: Leasing services entail renting or leasing a property to a party that can be an individual or a business entity. Such facilities can provide passive income to the non-banking financial companies, especially those that seek growth in their initial stages. Read More: Demonstration License
Benefits of NBFC in India
The functions that an NBFC performs makes it the recipient of the following perks:
- Providing growth to the country’s economy
- Establishing a comprehensive economy with a specific region
- Enhancing the size of the fintech sector
- Lending to the nation’s infrastructural development
- Earning profits at a lower cost
A Non Banking Financial Company is a business entity that acts as a bank but stays away from its identity. Read More: Trust Registration in India
It is a business entity that has established deep foundations in India. It’s those roots that will push India forward on the path of digital growth. However, it will only come to pass if you contribute too.
Become an NBFC by reaching out to our experts.
What do you think are the features of NBFC? Take a look into the functions of NBFCs in India.