RBI’s NBFC License Rush

Non-Banking Financial Companies (NBFCs) are gaining immense attention from Fintech firms eager to enter the lending space. But obtaining an NBFC license is far from straightforward. With the Reserve Bank of India (RBI) maintaining strict oversight, the NBFC landscape is both promising and challenging.

What can be an NBFC?

An NBFC is a financial institution that offers banking-like services without meeting the legal definition of a bank. Entities eligible for an NBFC license include:

• Loan companies
• Asset Finance companies
• Investment companies
• Infrastructure finance companies

NBFCs have the flexibility to perform various financial activities, such as:

What can NBFCs do?

• Lending to individuals and businesses
• Providing hire-purchase and leasing services
• Managing investment
• Accept public deposits (in some cases)

What NBFCs can’t do?

• Despite their banking-like operations, NBFCs face certain restrictions:
• Cannot accept demand deposits (like savings accounts)
• Do not have access to settlement systems
• Cannot issue cheques or drafts

To maintain the integrity of India’s financial ecosystem, RBI only permits credible and compliant firms enter the NBFC space.