Non-Banking Financial Companies (NBFCs) in India serve diverse financial roles, categorized as follows:
1. Investment and Credit Company (ICC)
- Consolidates asset finance companies (AFCs), loan companies (LCs), and investment companies (ICs) into a new category termed NBFC-ICC.
- Principal activities include asset financing, providing finance through loans or advances, and securities acquisition.
- Excludes other categories defined by RBI in its master directions.
2. Infrastructure Finance Company (IFC)
- Channels at least three-fourths of total assets into infrastructure loans.
- Requires net owned funds exceeding INR 3 billion, a minimum ‘A’ credit rating, and a Capital to Risk-Weighted Assets Ratio of 15%.
3. Infrastructure Debt Fund: Non-Banking Financial Company (IDF-NBFC)
- Facilitates long-term debt flow into infrastructure projects.
- Raises resources through multi-currency bonds with a minimum maturity of five years.
- Sponsored exclusively by Infrastructure Finance Companies (IFCs).
4. NBFC-Factors
- Specializes in factoring, a financial transaction involving debtor finance.
5. Gold Loan NBFCs in India
- Experienced substantial growth driven by rising gold prices and increased demand, particularly among lower and middle-income segments.
- Dominated by Kerala-based companies: Muthoot Finance, Manappuram Finance, and Muthoot Fincorp.
- Growth marked by expanding asset under management (AUM), branch network, and customer base.
6. Residuary Non-Banking Companies (RNBCs)
- Primarily receives deposits under various schemes or arrangements.
- Not categorized as Investment, Asset Financing, or Loan Companies.
- Mandated by RBI to maintain investments as per regulatory directives, in addition to liquid assets.
7. Account Aggregators (AA)
- Introduced by RBI in 2016 as a new class of NBFC.
- Facilitates account aggregation services for a fee, adhering to RBI’s consent architecture.
- Enhances loan application processes by providing data access to financial institutions based on customer consent.
New Categorization of NBFCs by RBI (October 2021)
- Base Layer: Includes non-systemically important NBFCs, such as peer-to-peer lending platforms, Account Aggregators (AA), and non-operative financial holding companies. Minimum asset size increased to INR 1,000 crores.
- Middle Layer: Covers systematically important non-deposit taking and deposit taking NBFCs with assets exceeding INR 1,000 crores. Encompasses NBFC-HFCs, NBFC-IFCs, IDF-NBFCs, and Core Investment Companies (CICs).
- Upper Layer: Comprises the largest NBFCs by asset size and other systemically important NBFCs based on size, interconnectedness, complexity, and liabilities.
This revised framework by the Reserve Bank of India aims to enhance regulatory oversight and systemic stability within the NBFC sector, aligning with evolving financial landscapes and economic needs.