NBFCs and Gold Loans in India
What an NBFC Is
Non-banking finance companies lend and invest like banks but cannot take demand deposits, and they reach borrowers banks often miss.
An NBFC is a company registered under the Companies Act and regulated by the RBI that lends money, buys securities or provides similar services, but does not hold a banking licence.
How they differ from banks
NBFCs cannot accept demand deposits such as savings or current accounts, are not part of the payment system, and their deposits are not covered by deposit insurance.
What they do
They offer vehicle loans, home loans, gold loans, business loans, consumer durable loans and microfinance.
Why they exist
They serve customers that banks find costly or risky, using faster processes and local knowledge.
A farmer who lacks a long credit history gets a tractor loan from an NBFC that understands his income cycle.
The RBI regulates them.
- NBFCs lend without a banking licence.
- They cannot take demand deposits.
- Their deposits lack deposit insurance.
- They serve segments banks miss.
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