What is NFBC Concepts, RBI Guidelines, Progress, problems and Prospects | Commerce Study Notes

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What is NFBC Concepts, RBI Guidelines, Progress, problems and Prospects

What is NFBC

A Non-Banking monetary Company (NBFC) may be a company registered underneath the businesses Act, 1956 and is engaged within the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or agency or different securities of like marketable nature, leasing, installment plan, insurance business, bill business however doesn't embrace any establishment whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of stabile property. 

NBFCs Regulation

  • NBFCs area unit allowed to accept/renew public deposits for a minimum amount of twelve months and most amount of sixty months. they can not settle for deposits due on demand
  • NBFCs cannot provide interest rates more than the ceiling rate prescribed by tally from time to time.the current ceiling is eleven per cent each year.
  • NBFCs cannot provide gifts/incentives or the other extra profit to the depositors
  • The deposits with NBFCs don't seem to be insured
  • The reimbursement of deposits by NBFCs isn't secure by tally
  • The NBFCs having assets size of Rs. five hundred large integer and higher than however not receptive public deposits area unit needed to submit Quarterly come back on necessary monetary parameters of the corporate the NBFC is needed to furnish the data in respect of any modification within the composition of its Board of administrators, address of the corporate and its administrators and therefore the name/s and official designations of its principal work placers and therefore the name and office address of its Auditors 

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Progresss Of NGBC 

Registration was created mandatory for all NBFCs with minimum web owned funds of Rs. twenty five lakhs as against Rs. fifty lakhs in 1993.

Maintenance of quick assets by NBFCs as a proportion of their deposits in unencumbered approved securities (government secure bonds) was created obligatorythe boundaries were to bedetermined by the depository financial institution of Republic of India from time to time.
Creation of a reserve and mandatory transfer of a minimum of two hundredth of world wide webprofits to higher than aforementioned fund was created mandatory.the corporate Law Board was approved to direct defaulting NBFCs to repay deposits.

The depository financial institution of Republic of India was unconditional with following powers:-

  • Issue directions to NBFCs relating to compliance with the prudent norms.
  • Issue directions to NBFCs and their auditors on matters with reference to record and undertake pecial audit as conjointly to impose penalty on each auditor.
  • forbid NBFCs from acceptive deposits for violation of the provisions of the tally Act and directions given by the depository financial institution of Republic of India.
  • {reserve bank|Federal depository financial institution|depository financial institution|bank|banking concern|banking company} of {india|India|Republic of Republic of India|Bharat|Asian country|Asian nation} was approved to file finishing up petition against NBFCs for violation of the provisions of thetally Act or directions issued by the Reserve Bank of India
  • depository financial institution of Republic of India was conjointly approved to impose penalty directly on NBFCs for non-compliance with the provisions of the tally Act.

New regulative Framework for NBFCs

Based on higher than powers and knowledge gained regarding the operating of NBFCs since 1993, the depository financial institution of Republic of India declared new set of regulativemeasures in January 1998 that is that the basis of management and direction.

NBFCs are classified into 3 classes for functions of laws :-

(a) Those acceptive public deposits.
(b) Those that don't settle for public deposits.
(c) Core investment firms that hold a minimum of ninetieth of their assets as investment within thesecurities of their cluster / holding / company.

Problems Of NFBC 

  1. The NBFCs area unit allowed to accept/renew public deposits for a minimum amount of twelvemonths and most amount of sixty months. they can not settle for deposits due on demand.
  2. NBFCs cannot provide interest rates more than the ceiling rate prescribed by tally from time to time.the current ceiling is twelve.5 per cent each year. The interest could also be paid or combined at rests not shorter than monthly rests.
  3. NBFCs cannot provide gifts/incentives or the other extra profit to the depositors.
  4. NBFCs (except bound AFCs) ought to have minimum investment grade credit rating.
  5. The deposits with NBFCs don't seem to be insured.
  6. The reimbursement of deposits by NBFCs isn't secure by tally.
  7. Certain obligatory disclosures area unit to be created regarding the corporate within the form issued by the corporate soliciting deposits

Download Pdf  For RBI Guideline Rules and Regulation  Click Here  

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