NBFC stands for Non Banking Financial Company and NBFC companies are those, which are registered under the companies Act 1956. NBFC Companies are engaged in the business of chit fund, insurance, purchase of bond, stock, acquisition of shares and advances & loans. The term NBFC does not include those companies, whose main business pertains to industrial or agricultural activities or construction, purchase and sale of immovable property.

Now, the question that would be arising in our mind is how does an NBFC company differ from banks. The difference is that NBFCs cannot accept demand deposits and cannot issue cheques drawn on itself, which are highly possible in the case of banks. The similarity between banks and NBFCs is that both of them provides finance to businesses and customers.

Services offered by NBFCs:

NBFCs offer all sorts of banking services, like merger activities, underwriting, money markets, retirement planning, credit and loan facilities. Since industrial, retail and venture capital companies has entered the lending business, the number of non-banking financial companies has expanded considerably. Like any other industry, NBFC sector is also dominated by some of the top players and the names of these players are given below:

Top five NBFCs in India:

• Housing Development Finance Corporation Limited

• Power Finance Corporation Limited

• Rural Electrification Corporation Limited

• National Bank of Agricultural and Rural Development

• Infrastructure Development Finance Company Limited

Some of the details regarding these top five NBFCs in India are given below:

Housing Development Finance Corporation Limited:

Housing Development Finance Corporation Limited is shortly called as HDFC, which was incorporated in the year 1997 with the objective of offering long-term finance to households to meet their housing requirements. HDFC is basically engaged in the promotion of housing ownership by offering long-term finance to households. Some of the products offered by them are land purchase loans, home equity loans, short-term bridge loans, home extension loans, home improvement loans and home loans.

Power Finance Corporation Limited:

Power Finance Corporation Limited came into existence in the year 1986 with the objective of promoting the power sector in the nation. The company is engaged in offering finance for implementation of power projects and for development of new power plants. The company offers both non-financial and financial support to power equipment manufacturing firms, municipal bodies, co-operative societies, private sector power companies, joint sector power companies, central power companies and state electricity departments.

Rural Electrification Corporation Limited:

Rural Electrification Corporation Limited shortly called as REC came into existence in the year 1969 for the purpose of promotion of rural electrification projects in the country. The company became an NBFC in the year 1998 and it plays a crucial role in expansion, modernization and creation of power infrastructure in all segments of power sector in the nation covering distribution, transmission and generation as well. It is also offering financial support to emerging areas like non-conventional energy and decentralized distributed generation.

National Bank of Agricultural and Rural Development:

Shortly called as NABARD, this NBFC came into existence in the year 1982 for enabling flow of credit for promotion of rural non-farm and agricultural sectors. It acts as an apex institution in rural development and agricultural credit. The functions of NABARD has been classified into four categories namely supervision, promotion & development, financial services and credit planning.

Infrastructure Development Finance Company Limited:

Infrastructure Development Finance Company Limited shortly called as IDFC came into existence in the year 1997 in the Indian state of Tamil Nadu. In the year 2005, it became a public entity and it is engaged in offering project finance, asset management, investment banking, principal investment & treasury and project finance services. The business activities of this NBFC can be divided into two types namely fund-based and non-fund based businesses.

There are several other NBFCs in India like Shriram Transport Finance Company Limited, IFCI Limited, etc…