The financial world is what our lives revolve
around. Hence, 2 major company types in the market control the financial flow
in their way known as —financial banking company and non-banking financial
company. The reason they are divided is majorly due to the wide market and
changing demands they need to cater to. Non-Banking Financial Companies are
the new trend in the market.
The role of these companies is to receive
deposits under any scheme, arrangement, and agreement in one lump or
instalments by various possible methods. They do not follow the norm of
traditional banks. They offer services like loans and credit facilities,
retirement planning, money markets, underwriting and merger activities.
Non-banking financial companies are very
different for banking institutes:
·
A
Nbfc Loan Company cannot accept demand deposits.
·
Do
not form a part of the payment and settlement system and cannot issue cheques
drawn to one self.
·
The
most important deposit insurance facility of deposit insurance and credit
guarantee is not available.
NBFCs were officially classified under the
Dodd-Frank Wall Street Reform and Consumer Protection Act. The birth of these institutes took place due
to ensuing financial crises, and the time taken to recover under normal banking
facilities, these institutes were able to operate outside the constraints of
banking regulations. Nowadays as these are taking the front seat, they are
successful in meeting the credit demand, unlike the traditional banks. They are
the leading peer-to-peer loan providers. This has increased due to the increased
social media connections and meeting of ideas of like-minded people.
This has also given investors the opportunity
to invest with non-banks and build a diversified portfolio of loans by getting
investment done across a range of various borrowers. Hence this is the market
trend for NBFC loan companies too.
