Non-banking financial companies or NBFCs have become an integral part of India’s financial system. In recent times, NBFCs have emerged as lenders to both companies and individuals. When it comes to lending, NBFCs are generally regarded to be complementary to banks and are often able to offer better services and products to their customers.
An NBFC is pretty much what its name suggests, that is, a company (not being a bank) carrying on financial activities. The Reserve Bank of India (RBI) Act, 1934, defines the term “NBFC” and various regulations passed by RBI govern NBFCs in India.
For foreign investment purposes, the government of India has specifically listed certain categories of NBFCs that are eligible to receive foreign investments.
India’s foreign exchange laws regulate and govern foreign investment in certain categories of financial service companies and the categories of activities which can be carried on by such companies after they have received foreign direct investment (FDI), referred to as FDI NBFCs.
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