What Is an NBFC and How It Works in India
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act that carries on the business of loans and advances, acquisition of shares and securities, leasing, hire-purchase or similar financial activity — without holding a banking licence. In India, NBFCs are regulated by the Reserve Bank of India.
How an NBFC earns money
The basic model is straightforward: an NBFC raises funds from its own capital, borrowings and deposits (where permitted), and deploys them into loans and investments. The spread between the return it earns and the cost of its funds is its core income, supplemented by fees and investment gains.
Typical NBFC activities
- Extending short-term and long-term loans to businesses and individuals.
- Investing in quoted and unquoted shares, debentures and other securities.
- Asset financing, leasing and hire-purchase.
- Investment advisory and portfolio-related services, where registered to do so.
RBI regulation
NBFCs must obtain a certificate of registration from the RBI before commencing financial business. The central bank prescribes prudential norms on capital adequacy, income recognition, asset classification and provisioning, and conducts supervision through periodic returns and inspections.
In recent years the RBI has moved to a scale-based regulatory framework, placing larger and more systemically important NBFCs under progressively stricter requirements in the upper layers.
Why NBFCs matter in India
NBFCs serve segments that banks often reach less efficiently: small businesses, self-employed borrowers and niche asset classes. Their flexible credit assessment and faster turnaround make them an important pillar of credit delivery alongside the banking system.
Shree Securities Limited is registered as an NBFC with the Reserve Bank of India, Kolkata, and focuses its operations on lending and investment in shares and securities.