An NBFC is a Non-Banking Financial Company. These are registered by law, specified in the Companies Act. NBFCs are usually engaged in any one of the following businesses:
Shares and stocks, and bonds, debentures and securities—these may be dealt by the government, or by local authorities—this includes marketable securities.
An NBFC functions just like a bank. It legally needs to be registered with the RBI. Non-Banking Financial Companies often differ from banks in a couple of ways, though.
The types of NBFCs
NBFCs vary in their interest rates. They do offer a high interest rate on deposits. This is often only done to compensate for the risk taken by the depositor, though. You take into account the credit rating of the NBFC before you invest in any deposit scheme.
The interest you’ll pay on an NBFC loan is usually more than the interest rate charged by banks. Let’s say you want to get a Home Loan. The interest rate will be high with an NBFC. This is because their cost of capital is high as well.
Home Loans from an NBFC
Housing Finance Companies (HFCs) are a kind of NBFC that provides Home Loans.
Taking a home loan from an NBFC gives you a higher interest outflow. On the other hand, loan eligibility criteria laid down by NBFCs are easier to fulfil. These companies are often willing to offer you Home Loans even when your credit score is low.
A Home loan from a bank offers at the most financing to the extent of 80% of the property value. NBFCs include the registration and stamp duty costs as well to determine the property value. So, what you get is a larger financing and a lower outflow from your pocket.
The EMI would of course be high, but the bright side is that you get a higher amount of financing that covers the entire cost of the property.
In fact, the market share of HFCs in the home loan market has considerably increased. In the current scenario, with the falling interest rates, banks have been passed on the interest rate cuts to borrowers. NBFCs don’t slash interest rates on their home loans, because of their high cost of capital.
The 10 best NBFC companies In India
HDFC
This is the leading provider of housing loans and finance.
2.Bajaj Finserv
Engaged in the business of lending, insurance and wealth advisory services. Unique products include Doctor Loan, Gold Loan.
3. Power Finance Corporation Limited
A Navratna status company, it provides financial assistance to power projects.
4. IndiaBulls Housing Finance Limited
It offers home loans and loans against property. Awarded the Best Housing Finance company in 2015.
5. LIC Housing Finance Limited
Provides loans for construction, renovation and repairs for houses and flats.
6. Shriram Transport Finance Company
Provides finance for commercial vehicles. Also offers stock broking, mutual funds and general insurance.
7. Sundaram Finance
Offer financial assistance for commercial vehicles and passenger cars. Portfolio of products include Tractor finance, deposits, mutual funds and mortgage loans.
8. Mahindra Finance
Offer a number of financial services. These include gold loans, home loans, vehicle loans, corporate loans and working capital loans.
9. L & T Finance
Offers all types of financial services across all sectors, agriculture, industry and trade.
10. Reliance Capital
Major operating domains include commercial finance, asset management, Insurance, Broking and Distribution.
- Giving out loans
- Leasing
- Hire Purchase
- Insurance business
- Chit fund business
Shares and stocks, and bonds, debentures and securities—these may be dealt by the government, or by local authorities—this includes marketable securities.
An NBFC functions just like a bank. It legally needs to be registered with the RBI. Non-Banking Financial Companies often differ from banks in a couple of ways, though.
- Unlike banks, NBFCs cannot accept demand deposits
- It cannot issue cheques to its customers as they are not part of the payment and settlement system
- NBFC depositors are not covered by Deposit Insurance
The types of NBFCs
- Asset Finance Company
- Investment Company
- Loan Company
NBFCs vary in their interest rates. They do offer a high interest rate on deposits. This is often only done to compensate for the risk taken by the depositor, though. You take into account the credit rating of the NBFC before you invest in any deposit scheme.
The interest you’ll pay on an NBFC loan is usually more than the interest rate charged by banks. Let’s say you want to get a Home Loan. The interest rate will be high with an NBFC. This is because their cost of capital is high as well.
Home Loans from an NBFC
Housing Finance Companies (HFCs) are a kind of NBFC that provides Home Loans.
Taking a home loan from an NBFC gives you a higher interest outflow. On the other hand, loan eligibility criteria laid down by NBFCs are easier to fulfil. These companies are often willing to offer you Home Loans even when your credit score is low.
A Home loan from a bank offers at the most financing to the extent of 80% of the property value. NBFCs include the registration and stamp duty costs as well to determine the property value. So, what you get is a larger financing and a lower outflow from your pocket.
The EMI would of course be high, but the bright side is that you get a higher amount of financing that covers the entire cost of the property.
In fact, the market share of HFCs in the home loan market has considerably increased. In the current scenario, with the falling interest rates, banks have been passed on the interest rate cuts to borrowers. NBFCs don’t slash interest rates on their home loans, because of their high cost of capital.
The 10 best NBFC companies In India
HDFC
This is the leading provider of housing loans and finance.
2.Bajaj Finserv
Engaged in the business of lending, insurance and wealth advisory services. Unique products include Doctor Loan, Gold Loan.
3. Power Finance Corporation Limited
A Navratna status company, it provides financial assistance to power projects.
4. IndiaBulls Housing Finance Limited
It offers home loans and loans against property. Awarded the Best Housing Finance company in 2015.
5. LIC Housing Finance Limited
Provides loans for construction, renovation and repairs for houses and flats.
6. Shriram Transport Finance Company
Provides finance for commercial vehicles. Also offers stock broking, mutual funds and general insurance.
7. Sundaram Finance
Offer financial assistance for commercial vehicles and passenger cars. Portfolio of products include Tractor finance, deposits, mutual funds and mortgage loans.
8. Mahindra Finance
Offer a number of financial services. These include gold loans, home loans, vehicle loans, corporate loans and working capital loans.
9. L & T Finance
Offers all types of financial services across all sectors, agriculture, industry and trade.
10. Reliance Capital
Major operating domains include commercial finance, asset management, Insurance, Broking and Distribution.
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