Page 92 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 7: Non-banking Financial Companies

unscrupulous players, were expanded in January, 1997, vesting considerable powers with the Notes
Reserve Bank.
RBI has put in place a comprehensive regulatory and supervisory framework in order to
discharge the heavy statutory responsibilities cast on it with a view to providing indirect
protection to the depositors' interest and strengthening the NBFC sector. As a result, growth
rate had slowed down, gradually leading to a negative growth rate in 1988. However, from 1989
the trend has changed for the better, there are a host of reasons that have led to the revival of
interest in financial services. Firstly, the enormously progressive measured of liberalisation
and dismantling of the hitherto control ridden economy have to a great extent opened up larger
vistas of growth.
Registration is being granted to NBFCs on assessment and evaluation of various factors and as
per the criteria laid down in the RBI Act. The applications for registration are subjected to
thorough scrutiny. RBI has issued up to Aug. 24, 2009, approvals for registration of 336 NBFCs
which are permitted to accept public deposits and to 12607 NBFCs which are non-public deposits
taking companies. A company incorporated under the Companies Act, 1956 and desirous of
commencing business of non-banking financial institution as defined under Section 45 I(a) of the
RBI Act, 1934 should have a minimum net owned fund of 25 lakhs (raised to 200 lakhs w.e.f
April 21, 1999). RBI closely supervises those NBFCs, which accept public deposits, through a
comprehensive mechanism comprising on-site examination, off-site surveillance, a sensitive
market intelligence system and initiation of necessary supervisory action whenever necessary.
The statutory auditors of NBFCs have been directed to report exceptions to compliance with RBI
regulations to the Reserve Bank directly for punitive action. RBI has undertaken publicity
campaign through print media all over the country to create awareness among the public about
do's and don'ts in regard to making deposits with NBFCs. RBI has also been coordinating its
efforts with State Government authorities and other enforcement bodies for checking
unscrupulous activities of NBFCs and unincorporated bodies accessing public deposits illegally.
At the same time, the well-run and managerially sound NBFCs are being encouraged to continue
their genuine business operations. Bank credit to the NBFCs for their advances against
commercial vehicles has recently been brought under the ambit of priority sector advances. The
earlier ceilings on bank credit to NBFCs as a multiple of their NOF have been abolished for
NBFCs registered with RBI.

Notes Number of NBFCs Registered with RBI (Till June 2010)
The following table shows the number of NBFCs registered with the Reserve Bank of
India and the trend of registration of companies as NBFC since the last decade. The table
also indicates registration of deposit accepting NBFCs of the total NBFCs registered with
RBI.
Number of NBFCs Registered with the RBI

End Number of Number of Number of
June Registered NBFCs NBFCs-D NBFCs-ND-SI
2005 13,261 507 -
2006 13,014 428 149
2007 12,968 401 173
2008 12,809 364 189
2009 12,740 336 234
2010 12,630 308 260

Source: RBI
Note: For latest details about the NBFCs in India you can visit the RBI website www.rbi.org.in.

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