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What is an NBFC? What Are The Different Types Of NBFCs?

Published on Feb 2, 2023Updated on Dec 5, 2023

What is an NBFC? What Are The Different Types Of NBFCs?

Non-Banking Financial Corporations (NBFCs) are a crucial component of the Indian financial ecosystem, providing a wide range of financial services to individuals, small-scale businesses, startups, and so on. These institutions play a vital role in providing credit and other financial services, such as loans, retirement planning, money markets, underwriting, and merger operations, to small businesses and local borrowers.

In times of economic stress, NBFCs have also been essential in managing risks and mitigating their impact, and they are increasingly recognized as a valuable complement to traditional lending institutions. They are categorized into different types based on the type of services and business model they offer. Some of the examples are Deposits accepting NBFCs, Asset Finance NBFCs, Infrastructure Finance NBFCs and many more.

What Are NBFCs?

An NBFC is a business that is registered under the Companies Act of 2013 and engages in lending, hire-purchase, leasing, insurance, and, in some situations, the receipt of deposits, as well as the acquisition of stocks, shares, and chit funds. The Reserve Bank of India and the Ministry of Corporate Affairs jointly oversee the NBFCs' operations. 

By offering loans at competitive rates, NBFCs are playing a crucial role in the current financial landscape. New credit disbursal procedures for micro, small, and medium enterprises have also been implemented by the NBFC sector. This has a significant impact on the Indian economy and financial system as a whole.

You can also turn to an NBFC if you are an individual looking for a personal loan. This money can be used for any application. For example, a personal loan for meeting urgent expenses, renovating your home, etc. 

Must Read: Why Prefer a Reputed NBFC as a Personal Loan Provider?

Different Types Of NBFCs

Based on their activity, the deposits they hold, and the different types of loans they give, NBFCs can be divided into different categories. Let's explore five of them:

  1. Loan Company - Any lender engaged in the provision of funds, whether through the granting of loans or advances or in another way, for any activity other than its own is referred to as a loan company. It collects funds from the general public and loans them to ultimate consumers, such as small-scale businesses and other traders, who require financial support. These lenders offer streamlined processes for granting credit facilities in a clear, prompt, and efficient manner.
  2. Microfinance Institution - People in India's urban, semi-urban, and rural areas demand financial assistance to launch their businesses and meet other necessities. The microfinance company steps forward to help these underprivileged individuals financially. These businesses offer small-scale financial services to the unbanked in rural and semi-urban areas in the form of credit or savings.
  3. Asset Finance Company - It is a financial institution that allows people and businesses to get finance for a variety of assets, including enormous power generators, heavy industrial machines, and farm and production equipment. Asset finance companies must register with the RBI and are subject to the same regulations as lending firms. Additionally, they adhere to the prudential rules established by the RBI with regard to capital sufficiency, credit and investment norms, asset-liability management, income recognition, accounting standards, asset classification, and other disclosure requirements.
  4. Investment Company - A financial institution called an investment company (IC) engages in the acquisition of securities as its primary business. It does this by taking money from the general population and investing it in different securities and financial products. After deducting operating expenses from profits, the business distributes the remaining funds to its owners. 

Infrastructure Finance Company - Infrastructure finance companies are loan companies that do not accept deposits and have at least 75% of their total assets allocated to infrastructure loans. Additionally, infrastructure finance businesses must have a minimum net worth of INR 300 crore, CRAR of 15%, Tier-I capital of 10%, and a minimum credit rating of A from CRISIL, FITCH, CARE, ICRA, BRICKWORK, or an equivalent rating from any other certifying rating organisations. These businesses offer loans for the construction of infrastructure for projects including energy, transportation, communication, water, and sanitation, as well as other forms of social and economic infrastructure. 

Must Read: Should You Choose NBFCs or Banks for a Business Loan?


SMFG India Credit is a leading non-banking financial company offering a wide range of financial products and solutions to its customers at affordable rates and flexible repayment terms. You can opt for a bike loan, vacation loan, business loan, personal loan, property loan, and even a wedding loan under our NBFC at affordable interest rates and comfortable repayment tenures.

Visit our website to learn more about our financial solutions and apply right away.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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