India’s Leading BFSI Companies 2020

XXII Overview Non-Banking Financial Companies play a crucial role in the Indian financial system by extending financial services to the unbanked section society and enhancing competition and diversification in the system. They complement the banking sector in terms of meeting the financial needs of the corporate sector, the unorganized sector, especially the micro, small and medium enterprises (MSMEs), as well as small retail borrowers, and in this regard, contribute significantly to nation- building and financial inclusion. NBFCs can be classified based on a) their asset/liability structures; b) their systemic importance; and c) the activities they undertake. In terms of liability structures, NBFCs are subdivided into deposit-taking NBFCs (NBFCs-D) - which accept and hold public deposits - and non-deposit taking NBFCs (NBFCs-ND) - which rely on markets and banks to raise money. Among NBFCs-ND, those with an asset size of ` 500 crore or more are classified as non-deposit taking systemically important NBFCs (NBFCs-ND-SI). At the end of September 2019, there were 82 NBFCs-D and 274 NBFCs- ND-SI as compared to 88 and 263, respectively at the end of March 2019. Since NBFCs cater to niche areas, they are also categorized on the basis of activities they undertake. Till February 21, 2019, NBFCs were divided into 12 categories. Thereafter, these categories were harmonized in order to provide NBFCs with greater operational flexibility. As a result, asset finance companies (AFCs), loan companies (LCs) and investment companies (ICs) were merged into a new category called Investment and Credit Company (NBFC-ICC). At present, there are 11 categories of NBFCs in the activity- based classification: 1. Investment and Credit Company (ICC): Lending and investment 2. NBFC-Infrastructure Finance Company (NBFC-IFC): Provision of infrastructure loans 3. NBFC-Systemically Important Core Investment Company (CIC-ND-SI): Investment in equity shares, preference shares, debt or loans of group companies. 4. Infrastructure Debt Fund-NBFC (IDF-NBFC): Facilitation of flow of long-term debt into infrastructure projects 5. NBFC-Micro Finance Institution (NBFC-MFI): Credit to economically disadvantaged groups 6. NBFC-Factor: Acquisition of receivables of an assignor or extending loans against the security interest of the receivables at a discount 7. NBFC-Non-Operative Financial Holding Company (NOFHC): Facilitation of promoters/ promoter groups in setting up new banks 8. Mortgage Guarantee Company (MGC): Undertaking of mortgage guarantee business 9. NBFC-Account Aggregator (NBFC-AA): Collecting and providing information about a customer’s financial assets in a consolidated, organized and retrievable manner to the customer or others as specified by the customer 10. NBFC–Peer to Peer Lending Platform (NBFC-P2P): Providing an online platform to bring lenders and borrowers together to help mobilize funds 11. Housing Finance Companies (HFC): Financing for housing Although both banks and NBFCs are engaged in increasingly similar business activities, especially on the assets side, NBFCs are subject to certain regulatory constraints, which restrict their business portfolio. Owing to the different regulatory and cost-incentive structures of banks and NBFCs, the RBI has imposed certain checks and balances on the latter to safeguard the interest of banks’ depositors against any possible risk arising due to the inherent differences. However, in order to Non-Banking Financial Companies (NBFCs) Dun & Bradstreet