Types and Funding Sources of NBFC
Types of Non-Banking Financial Institutions:
- intermediaries between investors and the stock market
- The corpus is the sum of money people obtain by selling their units.
- UTI is the oldest mutual fund firm in India ( Unit Trust of India)
- Almost all of the factors are provided by mutual funds.
- Obtain funds from the general population by selling insurance policies
- Life insurance and general insurance are the two categories of insurance.
- Property, car, house, and other losses are covered by general insurance.
- Health Insurance is also included.
According to the FDI policy, automatic route foreign investment is allowed in the NBFC sector.
- The automatic method is one in which the planned investment can be made without first obtaining RBI or the Foreign Investment Promotion Board (FIPB) permission.
- Without FIPB approval, foreign investment up to 100% is allowed under the automatic.
- According to the rules established under FEMA, all foreign transactions must be handled exclusively through organizations to which the RBI has granted a license.
- Only non-banking financial service activities are eligible for foreign investment under the automatic route.
- Merchant banking, underwriting, portfolio management services, stock broking, asset management, venture capital, custodian services, factoring leasing & finance, housing finance, credit card business, microcredit, rural credit, non-fund-based activities, investment advisory services, financial consulting, forex broking, credit rating agencies, money changers, etc. are just a few examples.
How does NBFC raise money?
Non-Banking Financial Companies (NBFCs) borrow money from other financial institutions and take non-chequable deposits as their main funding sources.