Non Banking Financial Companies (“NBFC”) are companies set up under the companies act 2013 that are involved in activities that include but are not limited to:
• The Issuance of loans and advances
• Acquisition of shares
• Acquisition of Bonds
• Hire Purchase activities
• Insurance and Re-insurance
• The business of Chit Fund
Whether a company is an NBFC can be determined with the help of the 50-50 rule. This means that a company is said to be principally engaged in financial activities if :
A) The financial assets of the company comprise at least 50% of the total assets held by the company, AND
B) Where at least 50% of revenue is derived from financial assets.
Companies that fulfill the above conditions will have to be registered as NBFCs with the RBI.
NBFCs are broadly categorized as deposit taking and non-deposit taking entities. Within this classification they are further divided as follows: