NBFCs are usually the following:
(a) Hire Purchase Finance Company
(b) Housing Finance Company
(c) Equipment Leasing Company
(d) Loan and Investment Company
(e) Mutual Benefit Financial Company (MBFCs)
(f) Residuary Non-Banking Companies (RNBCs)
Of these, the Mutual Benefit Financial Companies which are known as ‘Nidhi’ Company or ‘Permanent Funds’ are regulated by Central Government under Companies Act and not by RBI.
These are companies accepting deposits/subscriptions under a combination of certain schemes like insurance/investment etc. for a given period. The discontinuance from the scheme in mid-way may lead to forfeiture of money.
Peerless General Finance and Investment Co., is an example of this type. Since 1987, RBI regulates their deposit taking activity by prescribing minimum interest rate on deposit as well as protection of depositor’s money. This is ensured by RBI by prescribing minimum level of investment in government securities.
The activities of other NBFCs are currently regulated by RBI. For this purpose, NBFCs are basically divided into two categories viz., those accepting public deposits and those not accepting public deposits. The activities of public deposit accepting NBFCs are strictly regulated. The other NBFCs have been regulated in a limited manner.