What is the Full Form of NBFC? Its Meaning, Types, Role & Scope

In recent years, digital lending has emerged as a game-changer in the Indian financial industry. With the rise of technology and the increasing adoption of digital platforms, individuals have started leveraging digital lending to apply online for loans to increase their chances of approval.
 
A key factor that has contributed to the growth of the Indian economy and has made digital lending more accessible and hassle-free for borrowers is the emergence of NBFCs like Hero FinCorp. The full form of NBFC is Non-Banking Financial Companies. NBFCs like us have played a significant role in the development of the Indian economy in the areas of credit and finance.
 
An NBFC offers a wide range of financial services to salaried individuals, businesses, and other self-employed professionals. These services include lending, investment, asset management, and financial advisory services. In this blog, we will go through the meaning, types, scope, and role of NBFCs.
 
So, let's begin with understanding the meaning of NBFC.
 

What is an NBFC?

An NBFC is a type of financial institution registered under the Companies Act, 1956. It deals with several financial services, including lending and investment. With NBFCs, borrowers can apply for loans with affordable interest rates online.
 
NBFCs have emerged as key participants in the present financial landscape. The sector has also introduced cutting-edge credit distribution strategies for MSMEs, which has had a substantial positive impact on the Indian economy and the financial system as a whole.
 
Read More: 8 Different Types of Loans You Should Know
 

Services Offered by NBFCs

 
NBFCs offer a wide range of financial services, including:
 

1. Personal loans
2. Home loans
3. Vehicle loans
4. Gold loans
5. Microfinance
6. Leasing and hire-purchase services
7. Credit card services
8. Insurance services
9. Investment and asset management services

 

Importance of NBFCs in the Indian Economy

NBFCs have emerged as an important component of the Indian financial system. They have played a crucial role in providing credit and finance to various sectors of the economy, including agriculture, infrastructure, and small and medium-sized enterprises (SMEs).
 
Here are some of the key reasons why NBFCs are important:
 

1. Promoting Financial Inclusion

   NBFCs have been instrumental in promoting financial inclusion in India. They provide credit to borrowers who are unable to obtain loans from banks due to various reasons, such as lack of collateral, credit history, and documentation. NBFCs have played a significant role in enabling access to credit for individuals and small businesses in rural and semi-urban areas of India.
    

2. Supporting SMEs

   NBFCs play a vital role in supporting the growth of SMEs. They offer a range of financial products, such as Business Loans, Working Capital Loans to SMEs for machinery and trade finance, which in turn helps them to expand their business operations.
    

3. Boosting Consumer Spending

   NBFCs provide loans for the purchase of popular consumer expenses such as vehicles, education, travel, two-wheelers, and homes. These loans help boost consumer spending, which in turn drives economic growth.

Now that you know what NBFC stands for, its importance, let's dive deeper into its scope and types.
 

Scope of NBFCs

The scope of NBFCs in India is vast and growing, given the increasing demand for credit and financial services. They offer a wide range of financial products and services, such as Personal Loans, Business Loans, Car loans, Bike Loans, and other credit facilities.
 

Types of NBFCs

There are various types of NBFCs in India, catering to different sectors and needs. Here are some of the commonly known NBFCs:
 

1. Asset Finance Company (AFC)

   These NBFCs finance the purchase of physical assets for companies, such as machinery, equipment, and vehicles.

 

2. Investment Company (IC)

   These NBFCs wholly deal in investing in securities, such as shares, bonds, and other debt instruments.

 

3. Loan Company (LC)

   These NBFCs provide loans and credit facilities to individuals and businesses. The various loans can be Personal Loans, Car Loans, Business Loans, etc.

 

4. Infrastructure Finance Company (IFC)

   These NBFCs finance infrastructure projects like power, telecom, and transportation.

 

5. Microfinance Company (MFC)

   These NBFCs provide microfinance services, such as small loans, to individuals and groups in semi-urban or rural areas.
    

Now that we have discussed the meaning and types of NBFCs, let's look at their role and scope in the financial system.
 

Role of NBFCs

NBFCs play a crucial role in the Indian financial system, especially in providing credit to sectors that are not served by traditional banks. They cater to the needs of small businesses, low-income households, and other underserved markets, filling the gap left by banks. NBFCs also play a significant role in the growth of the economy by providing funds for investment and infrastructure projects.
 
Read More:  What Credit Score do I need for Personal Loan
 

Scope of NBFCs

The scope of NBFCs in India is vast and growing, given the increasing demand for credit and financial services. They offer a wide range of financial products and services, such as Personal Loans, Business Loans, Vehicle Loans, Loan Against Property, and other credit facilities. NBFCs also provide investment opportunities, such as mutual funds, fixed deposits, and other investment products.
 

What are the Differences Between NBFCs and Banks?

Despite lending money and investing like banks, NBFCs have notable differences that set them apart.

• NBFCs are not authorized to accept demand deposits.
• Issuing self-drawn cheques is not permitted for NBFCs.
• Unlike banks, deposit insurance coverage from the Deposit Insurance and Credit Guarantee Corporation is unavailable for NBFC depositors.
• NBFCs are not included in the payment and settlement system.

 

Conclusion

Now that you know all about NBFCs, their scope, roles and types. We can summarise that NBFCs like us indeed play an important role in the economy. They assist borrowers and businesses with instant capital by providing credit and financial services. The major products offered by NBFCs are Retail Loans and Corporate Loans.
 
An an NBFC, we have been assisting professionals and entrepreneurs with various cash credit and loan requirements, like instant Personal Loans, Business Loans, Home Loans, Two-Wheeler Loans, etc.
 
If you are a business owner looking to apply for Business Loan or looking to buy your dream bike using a Two-Wheeler Loan, consider the Hero FinCorp website or mobile app for a hassle-free application and approval process. Apply Now!
 

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