In India, Non-Banking Financial Companies (NBFCs) are classified based on their principal business activities. The types of NBFCs in India are as follows:
- Asset Finance Company (AFC): An AFC is an NBFC that primarily engages in providing finance for the purchase of vehicles, equipment, or other assets. These companies may also provide working capital finance to businesses that are engaged in asset-based activities.
- Investment Company (IC): An IC is an NBFC that primarily engages in investing in shares, debentures, or other securities. These companies may also provide loans and advances against securities.
- Loan Company (LC): An LC is an NBFC that primarily engages in providing loans and advances. These companies may also engage in other activities such as investment in securities, hire-purchase, and leasing.
- Infrastructure Finance Company (IFC): An IFC is an NBFC that primarily engages in providing long-term finance for infrastructure projects. These companies may also provide advisory and consultancy services related to infrastructure development.
- Systemically Important Core Investment Company (CIC-ND-SI): A CIC-ND-SI is an NBFC that has assets worth more than Rs. 100 crore and is classified as systemically important. These companies primarily engage in investing in shares and debentures of other companies, and their main business activity is not financial intermediation.
- Microfinance Institution (MFI): An MFI is an NBFC that primarily engages in providing microfinance services such as small loans, savings, and insurance to low-income households and businesses.
- Non-Banking Financial Company – Factors (NBFC-Factors): An NBFC-Factor is an NBFC that primarily engages in factoring activities, which involves buying and selling of receivables from businesses.
- Non-Banking Financial Company – Infrastructure Debt Fund (NBFC-IDF): An NBFC-IDF is an NBFC that primarily engages in providing long-term debt for infrastructure projects. These companies raise funds through the issuance of infrastructure bonds.
- Non-Banking Financial Company – Non-Operative Financial Holding Company (NBFC-NOFHC): An NBFC-NOFHC is an NBFC that holds or controls the equity of other financial companies, but does not engage in financial intermediation.
In conclusion, the classification of NBFCs in India is based on their principal business activities, and each type of NBFC is regulated by the Reserve Bank of India (RBI) under a specific set of guidelines and regulations. The types of NBFCs in India provide specialized financial services to different segments of the economy, and they play an important role in promoting financial inclusion and supporting economic growth.