12.4         ndian     onom
        (iii) housing finance company (regulated by              (i) Asset Finance Company (AFC)
               the National Housing Bank);                      (ii) Investment Company (IC) and
         (iv) nidhi company (regulated by the                  (iii) Loan Company (LC).
               Ministry of Corporate Affairs under the           Under this classification, an AFC is defined as
               Companies Act, 1956);                       a financial institution whose principal business is
          (e) chit fund company (by respective state       that of financing the physical assets, which support
               governments under Chit Funds Act,           various productive and economic activities in the
               1982).                                      country. Such NBFCs are supposed to play a very
           [Detailed discussion on the Nidhi, Chit,        vital role in financing infrastructure projects in
     Chitty, Kuri and MNBCs are in the following           2016–17, as per the Government of India.
     sections of this Chapter.]                                  To promote financial inclusion through
           Some of the important regulations relating      direct interaction between small lenders and small
     to acceptance of deposits by the NBFCs are:           borrowers together with addressing consumer
               allowed to accept and/or renew public       protection, during 2017-18, RBI introduced two
               deposits for a minimum period of 12         new categories of the NBFC—Peer to Peer (P2P)
               months and maximum period of 60             and Account Aggregators (AAa). Today3, NBFC
               months.                                     sector accounts for 17 per cent of bank assets and
                                                           0.26 per cent of bank deposits with a balance sheet
               cannot accept demand deposits (i.e., the    size of Rs. 20.7 lakh crores. The sector depends
               saving and current accounts).               largely on public funds though the share of non-
               cannot offer interest rates higher than the convertible debentures (NCDs) also contribute to
               ceiling rate prescribed by the RBI.         their balance sheet. By end-September the Capital
               cannot offer gifts, incentives or any other to Risk Weighted Assets Ratio (CRAR) and gross
               additional benefit to the depositors.       NPAs were 22.5 and 5.5 per cent respectively.
               should have minimum investment grade
               credit rating.                              Debenture reDemPtion
               their deposits are not insured.             The norm of the NBFCs, which raise capital
               the repayment of deposits by NBFCs is       through debentures, have became stricter after the
               not guaranteed by RBI.                      new Company Act, 2013 came into effect (w.e.f.
                                                           1 April, 2014), which are given below:
               need to maintain Capital Adequacy Ratio
               (CAR) norm as prescribed by the RBI.              (i) They need to create a debenture
                                                                      redemption reserve (DRR) account out
           The NBFCs registered with the RBI have
                                                                      of the profits, to be used only to redeen
     different types depending on their main business:-
                                                                      debentures. The corpus of DRR should
           (i) Equipment leasing company—leasing of                   be atleast 50 per cent of the amount
               equipments.                                            raised through debentures.
          (ii) Hire-purchase company—hire-purchase.             (ii) The need to invest or deposit a sum not
        (iii) Loan company— forwarding loans.                         less than 15 per cent of the amount in the
         (iv) Investment company—buying and selling                   form of deposits in banks or government
               of securities.                                         on corporate bounds. The amount canot
           These NBFCs have been reclassified into            3.    Economic Survey 2017-18, Vol. 2, Ministry of Finance,
     three categories:                                              GoI, N. Delhi, p. 53.