What are the different types of NBFCs?

Asset Finance companies(AFC): These firms' primary operation is to provide financing for assets such as machinery, vehicles, generators, material equipment, industrial machines, and so on.

Investment Company (IC): These firms' main line of operation is dealing in securities.

Loan Companies(LC): Making loans or advances, or otherwise providing funding for any activity other than its own. ELCs, HPFCs, and Housing Finance Companies are not included in this function (HFC).

Infrastructure finance company (IFC): IFC refers to a firm that has net owned funds of at least Rs. 300 Crore and has used 75 percent of its total assets in Infrastructure loans, provided it has a credit rating of A or above and a CRAR of 15%.

Systemically Important Core Investment Company (CIC-ND-SI): A CIC-ND-SI is a systematically important NBFC (assets of Rs. 100 crores or more) that has used at least 90% of its assets in the form of investments in shares, debt, or loans in group firms. Out of the 90 percent investment, 60 percent should be in equity shares or instruments that can be forcedly converted into equity shares. Such businesses do take public subsidies.

Infrastructure Debt Funds ( IDF-NBFCs): Infrastructure Debt Funds are intended to inject capital into the infrastructure industry. The importance of these funds stems from the fact that infrastructure finance has a long gestation period and long-term requirements. In India, IDF can be established as a trust or as a corporation. If IDF is established as a trust, it will be a mutual fund governed by SEBI. If it is formed as a corporation, it will be governed by the RBI.

Non-Banking Financial Company – Micro Finance Institution-A non-deposit taking NBFC with at least 85 percent of its assets in the form of microfinance is known as an NBFC-MFI. Microfinance should be provided in the form of a loan to people with an annual income of Rs 60,000 in rural regions and Rs 12,000 in urban areas. Such loans should not be for more than Rs 50,000 and should not be for shorter than 24 months. Furthermore, the loan must be made without the use of collateral. The borrower can choose to repay the loan in weekly, fortnightly, or monthly instalments.

Non-Banking Financial Company - Factors (NBFC - Factors) This sort of organisation is involved in the factoring sector. An NBFC-Factoring firm must have a minimum Net Owned Fund (NOF) of Rs. 5 Crore, and its financial assets in the factoring industry must account for at least 75% of its total assets, and its income from the factoring business must not be less than 75% of its gross income.

Requirements for NBFCs Registration Process

• In 2013, the corporation must be registered under the Companies Act.
• Financial activity should be pursued by the applicant. If the financial flow of the firm rises by more than 50% of the entire capital asset, the company must be registered as an NBFC.
• The minimum capital requirement for enterprises in India's north-eastern area is Rs 2,00,00,000, while for the rest of the country, it is Rs 5,00,00,000
• They should have at least one director from the same field or a senior banker on their board.
• The most critical thing is that the CIBIL (Credit Information Bureau Limited) records are clean.

Before making a loan, banks often conduct a comprehensive examination of the applicant. On the other hand, obtaining a loan from an NBFC is simpler. Such flexible situations made NBFCs so appealing to the Indian public that they failed to notice the increased interest rates. Because of their operational flexibility, they are able to service a greater range of clientele.