BANKING IN INDIA
» Banks in India was introduced by the British rulers, way back in the 17th century.
» Today Indian banks are considered among the best banks in the developing world and its attempts to emerge among the best in the world and is going on.
BANK & NON BANK INSTITUTIONS
BANK
A financial institution which accepts different forms of deposits and lends them to the prospective borrowers as well as allows the depositors to withdraw their money from the accounts by cheque is a bank.
Non - Banking financial Institution
If the financial institution has all the same functions but does not allow depositors to issue cheque and withdraw their money from deposits then it is a Non - bank institution.
NON - BANKING FINANCIAL COMPANIES (NBFCS)
A Non - banking institution which is a company and which has its Principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a Non - banking financial company.
Functions of NBFC
i) An NBFC can not accept demand deposits (Which are payable on demand), like the savings and current accounts.
ii) It is not a part of the payment and settlement system and as such cannot issue cheque to its customers, and
iii) Deposit insurance facility is not available for NBFC depositors unlike in case of banks.
» Under the RBI Act, 1934, the NBFCs have to get registered with the RBI
» The requirement of registration with RBI such as
i) Venture Capital Fund, merchant banking companies, stock broking companies register with SEBI.
ii) Insurance company holding a valid certificate of registration issued by IRDA.
iii) Nidhi Companies under the companies Act, 1956.
iv) Chit Companies under the Chit Funds Act, 1982
v) Housing Finance Companies regulated by National Housing Bank of the RBI
A company incorporated under the companies Act, 1956 and desirous of commencing business of the NBFC should have a minimum net owned fund (NOF) of Rs. 25 lakhs NBFCs registered with RBI have been reclassified (since 2006) as - The Asset Finance Company (AFC)
» Investment Company (IC) and the loan company (LC) Provisions for accepting deposits.
