NON-BANKING FINANCE COMPANY (NBFC)
NBFCs are institutions that perform a diversified range of functions and offer various financial services to individuals, corporate and institutional clients. They cover a wide range of institutions from highly specified institutions such as development banks or insurance companies to simple institutions like mutual savings society.
ROLE OF NBCF’s
They play an important role in economic development. They play important role in the following ways:
# Intermediary Role
They collect the savings of the people and lent to various parties like household, firm, small enterprises on a sustained basis. In this ways, they bring the savers and lenders together and this help in mobilizing resources in the economy.
# Capital Formation
NBFCs help in mobilizing savings in very remote and unbanked areas and thereby contribute to the capital formation of the economy.
# Promotion of Business Sector
It helps the business sector by financing it through loans, mortgages, purchase of bonds, shares etc. inflexible terms and procedures.
# Provide Liquidity
NBFCs provide liquidity when they convert an asset into cash easily and quickly without loss of value in terms of money.
# Helps Government
NBFCs helps the local bodies by purchasing their bonds and by selling and purchasing the securities of the government.
# Specialized Credit Requirements
NBFCs provide various types of loans and financial services which are of special nature and differ from customer to customer. Banks cannot meet their requirements as they are having lending policies confirming to the banking legislation.
# Employment Generation
NBFCs help in both direct and indirect employment generation. They have employed many persons to man their offices. Besides office staff, institutions need the services of experts which help them in finalizing lending proposals.
# Efficient and Competitive Sector
The advent of NBFCs has ensured a healthy, efficient and competitive financial sector which reinsured the quality financial services to the customers.