NBFC in India

Non Banking Financial Companies (NBFCs) in India

NBFC in India, Non Banking Financial Companies (NBFCs) in India

NBFC in India, Non Banking Financial Companies (NBFCs) in India

A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFC facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawn shops, cashier’s check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations. Alan Greenspan has identified the role of NBFIs in strengthening an economy, as they provide “multiple alternatives to transform an economy’s savings into capital investment which act as backup facilities should the primary form of intermediation fail.”

The term non-bank likely[vague] started as non-deposit taking banking institution. However, due to financial regulations adopted from English speaking countries, non-English speaking countries took “non-bank” as a single word. This is probably[vague] because in English speaking countries the term ‘bank’ is generally accepted as equivalent to ‘financial institution’ but outside English speaking countries, especially developing countries, see the term bank as deposit taking institutions only, and every other financial service providers as something that must not be termed a bank. This is possibly[vague] due to language differences. But also importantly, this is likely[vague] due to developing countries in the past having adopted the western banking system much later than the West. As developing countries adopted, or learned the financial system from English speaking countries, there was a higher focus in regulatory terms such as bank and non-bank, while not understanding that non-bank is actually a shortened version of non-deposit taking bank. This is in contrast to English speaking countries as in English speaking countries the general public, as well as regulatory institutions, refer to financial institutions as simply a “bank” in many instances.

Operations of non-bank financial institutions are not covered under a country’s banking regulations.

Non Banking Financial Companies (NBFCs) in India