Non – Banking Financial company – NBFC

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Dear Aspirants,

Today we are providing a study material Topic  on “non – Banking and Financial Company” This Banking study material will really help in your upcoming Exams like – SBI PO and IBPS exam.

Non – Banking Financial company – NBFC 

It is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of share/stock/bonds/debentures/securities issued by government or local authority or other marketable securities of a like nature, leasing, hire – purchase, insurance business, chit business.

It does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods ( other than securities ) or providing any services and Sale / purchase / Construction of immovable which is a company and has principal business of receiving deposit under any scheme or arrangement in one lump sum or in installment by way of contributions or in any other manner, is also a non – banking financial company ( Residuary non – banking company ) .

Different between Banks and NBFCs

NBFC cannot accept demand deposits;
NBFCs do not form part of payment and settlement system and cannot issue cheques drawn on itself ;
Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

Types of Services provided by NBFCs

NBFCs provide range of financial services to their clients.

Types of services under non – banking finance services include the following

  • Hire purchase services
  • Leasing purchase services
  • Housing finance services
  • Asset management services
  • Venture capital services
  • Mutual benefit finance services ( Nidhi ) banks.

NBFCs are essentially banks, since they perform the basic twin functions of attracting deposit from the public and making loans. However, unlike Commercial Banks, they are not incorporated as a bank and are not governed by the provision of the Banking Regulation Act, 1949.

RBI directions for NBFC’s functioning

  1. With the enactment of RBI ( Amendment ) Act, 1997, the RBI now control the functioning of NBFCs.
  2. NBFCs as a whole account for 11.2% of assets of the total financial system.

Two broad categories of NBFCs are

  • Deposit taking NBFCs ( NBFCs-D)
  • Non – deposit taking NBFCs (NBFC – ND )
  • Capital to Risk – weighted Assets Ratio ( CRAR ) norms were made application to NBFCs-D in case of unrated NBFCs-D ) .
  • NBFCs-ND-SI are Non-Deposit taking systemically important NBFCs as they have asset size of 100 crore and above.
  • Mutual Fund are the most important among the newser capital market institution. MFS function is to mobilise the savings of the general public and invest them in stock market securities.
  • Venture Capital Funds (VCFs) essentially give commercial support to new ideas and for the introduction and adaptation of new technologies.
    • Government launched the National Venture Fund for Software and IT Industry ( NVFSIT) to provide technology development especially for small and medium enterprise, NVFSIT is managed by SIDBI.

Financial Inclusion

It refers to the delivery of banking service at an affordable cost to the vast sections of disadvantaged and low income group of the population. The purposes of financial inclusion is to provide access to banking, acess to affordable credit and access to free information on money matters. This concept has become a part of public policy so as to make avavilable banking and payment services to the entire population without discrimation. The primary aim is to avoid the pitfalls of financial exculusion in the form of social tensions arising from lak of emporment of the low income strata of the population.

Steps take for Financial Inclusion

  • RBI’s No Frills account for poor people. Later renamend to Basic Saving Bank Deposit Account (BSBDA).
  • Government lanched Swabhiman project to extend banking services to rural areas.
  • RBI permitted Business Corespondents (BC) System. Banks extend services to villagers which helps of these agent.
  • Bhartiya Mahils Bank set-up and owned by GOI, exculusively for woman is a initiative towards financial inclusion.
  • RBI has ordered the banks to open at least 25% of their new branches in unbanked rural centers.
  • Government’s Direct Benefit Transfer (DBT) initiative. Money directly sent to beneficiary’s banks account.
  • If he dosn’t have bank account already then it’ll be opened.
  • RBI relaxed know your Customer (KYC) norms for small value accounts. RBI allows customer accounts to be openend without any documentary proof of identity or current address if the amount involved are less than rs 50,000.
  • RBI permitted Aadhar card can be used as proof, for opening bank account. General purposes Credit Card (GCC) and kisan Credit Card (KCC) to help people get loans easily.
  • Post office has tied up with LIC, offering variety of insurance schemes, particularly targeting rural junta e.g., Grams Surakha, Suvidha Sumangal etc.
    RBI and SEBI running financial literacy campaigs.

Co-operative Marketing

It is term used in the world of business adveritisement to mean marketing initiative that involves more than one institution. Market value means the probable price of a product or services in the market.

Role of Co-Operative Marketing in Agriculture Produce

Agriculture is basically difference from manufacture. The problems faced by it the sale complicated. The farmers who have surplus goods have to sell these generally in un-regulated reasonable price for their produce due to number of reasons. e.g., the goods produced by the farmers are generally perishable and cannot be stored for a long period of time. Their is less grading of agricultural produce.

No market news services is easily avilable to the farmers. There is a long chain of middlemen who take away about ⅛ th of the hard earned income of the farmers. The transport and strong facilities are not only inadequate, but also expensive. In order to help the farmers for getting a fair return of their surplus produce, establishment of cooperative sale societies are considered the best solution to help the agriculturists at the village end.

Co-Operative Marketing Mechanism NAFED

( National Agriculture co -operative Marketing Federation India Limited) It was establish on 2nd october, 1958. It is registered under the Multistate Co-operative Societies Act. NAFED was set – up wirh objective to promote co-operative marketing of agricultural produce to benefit farmers. It organise, promote and develop marketing, processing and strong of agricultural, horticultural and forest produce.

TRIFED

( Trible Co-operative Marketing Development Federation of India Limited ) It came into existence on 6th August, 1987 and got registered under the multistage Co-operative societies Act, 1984 (How the Multistate Co-operative Societies Act, 2002). The main objective of TRIFED is serve the interest of its member in more than one state for the social and economic betterment of its member by conducting its affair in professional, democratic and autonomous manner through self help and mutual co-operation for tribal products.

Financial Stability and Deveopment Council -FSDC 

Financial Stability and Development Council is apex-level body constituted by government of India. The idea to create such a super regulatory body was frist mooted by Raghuram Rajan Committee in 2008.

Composition of the Council Chairperson

The Union Finance Minister of India and other Member are -Governor Reserve Bank of India (RBI), Finance secetary and/ or Secretary, Departmnt of Economic Affaires ( DEA), Secretary, Department of Financial Services ( DFS ) , Chif Economic Advisor, Ministry of Finance, Chairman, Securities and Exchange Board of India ( SEBI), Chairmain, Insurance Regulatory and Development Authoriry ( IRDA ), Chairman , Pension Fund Regulatory and Development Authority ( PFRDA ), Chairman, Forward Markets Commission ( FMC ), Additional Secretary of the Council. The Chairperson may invite any person whose presence is deemed necessary for any of its meetings.

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