What are the different types/categories of NBFCs registered with RBI?

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Non-Banking Financial Companies (NBFCs), registered under the Companies Act, 1956, are
often referred to as shadow bankers, complementing the formal financial system to extend last
mile credit with the vision of promoting financial inclusion and stability. NBFCs started gaining
investor attention in the 1980s and 1990s due to their offering of high-interest rates, albeit
accompanied by higher associated risks. NBFCs, akin to banks in lending and investments, differ
by not accepting demand deposits, not participating in the payment system or issuing self-drawn
cheques, and lacking deposit insurance for their depositors. As of March 2023, the total number
of registered NBFCs with the RBI was 9443. Among them, non-deposit-taking NBFCs (NBFC-
ND) comprised 8966; systemically important non-deposit-taking NBFCs (NBFC-ND-SI)
numbered 413; while deposit-taking NBFCs (NBFCs-D) totaled 39.

NBFCs can be classified based on their liabilities and the specific types of activities they
undertake.

 Classification of NBFCs based on Deposit Acceptance:

1. NBFCs-D: Resembling banks, they adhere to prudential regulations covering income
recognition, asset classification, and provisioning. With a capped interest rate of 12.5%,
they accept public deposits for 12 to 60 months but not repayable on demand.
Maintaining a 15% SLR, NBFCs-D is not subject to CRR requirements.
2. NBFCs-ND: They face limited regulation, but as foreign direct investment
opportunities opened up, large companies entered this category. NBFCs-ND with an asset
size of Rs. 500 crores and above is classified as NBFC-ND-SI and must adhere to
exposure and capital adequacy norms.
 Classification of NBFCs based on Activity:
1. Asset Finance Company (AFC): It is a financial institution that engages in financing
physical assets for economic activities. To qualify as an AFC, at least 60% of its total
assets and income must be derived from financing these assets.
2. Investment Company (IC): The financial institution’s principle business involves
around acquisition of securities.
3. Loan Company (LC): Principal business is providing finance, including making loans
or advances, for activities other than its own, excluding AFCs.
4. Infrastructure Finance Company (IFC): It is a non-banking finance company primarily
allocating at least 75% of its total assets to infrastructure loans, with minimum NOF of
₹300 crore, a minimum credit rating of 'A' or equivalent, and a CRAR of 15%.
5. Systemically Important Core Investment Company (CIC-ND-SI): An NBFC primarily
investing in group companies, with 90% of total assets in equity, preference shares, debt,
or loans, and an asset size of ₹100 crore or more.
 6. Infrastructure Debt Fund: IDF-NBFC is an NBFC registered to channel long-term debt
into infrastructure projects. It raises funds by issuing Rupee or Dollar-denominated bonds
with a minimum maturity of 5 years.
7. NBFC-Micro Finance Institution (NBFC-MFI): NBFC-MFI focuses on non-deposit
assets, comprising at least 85%, with specific criteria for borrower income, loan amounts,
and repayment flexibility.
8. NBFC-Factors: It is a non-deposit NBFC primarily involved in factoring, with a
requirement of at least 50 percent of total assets and income derived from the factoring
business.
9. Peer to-Peer NBFCs (P2P): Engages in the business of a P2P lending platform by
facilitating loans between participants. The platform serves as a connection point for
lenders and borrowers, but the company itself does not lend from its own books.
10. NBFC-Non-Operative Financial Holding Company (NOFHC): It is exclusively
established for promoters or promoter groups to establish a new bank.

To conclude, NBFCs are the resilient pillars of IFS that diversify an deepen the financial
landscape. NBFCs contribute to economic growth and hence it's crucial to recognize the
regulatory framework that guides their operations, ensuring stability, and safeguarding the
interests of investors and customers. As NBFCs continue to evolve, striking a balance between
innovation and prudential regulations will be key for their sustained success in the dynamic
financial ecosystem.