Financial companies that lend and invest like banks but do not hold a banking licence; they are registered under the Companies Act and regulated by the RBI, and cannot accept demand deposits.
- An NBFC's principal business is finance: loans and advances, leasing, hire-purchase, investment in shares and bonds, or financing of assets, but not agriculture, industry or trade as its main activity.
- Unlike banks, NBFCs cannot accept demand (chequable) deposits, are not part of the payment-and-settlement system, and their depositors are not covered by DICGC deposit insurance.
- They must register with the RBI (with limited exceptions for those regulated by SEBI, IRDAI or others) and meet net-owned-fund and prudential norms.
- They play a major role in concept financial inclusion by reaching segments banks underserve, such as vehicle finance, microfinance, gold loans and small-business lending.
- A scale-based regulatory framework since 2022 tiers NBFCs by size and systemic importance, with stricter rules for large ones.
The bank-versus-NBFC distinction (no demand deposits, no DICGC cover, no payment-system access) and RBI registration are standard financial-sector facts.
NBFCs (lend and invest but cannot take demand deposits or issue cheques) versus banks (full deposit and payment services with deposit insurance); not all NBFCs accept any public deposits.
RBI-regulated finance companies that lend and invest but cannot take demand deposits, lack DICGC cover and are outside the payment system.