In how many layers the Non-Banking Financial Company (NBFC) is classified?

Solution

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. NBFCs will be classified into four categories – base, middle, upper and top layers. The regulatory structure for NBFCs comprises four layers based on their size, activity, and perceived riskiness. The Reserve Bank of India (RBI) has aligned provisioning norms for standard assets of large non-banking financial companies with that for commercial banks.