Nbfi's

.1 IMPORTANCE OF NBFC’S According to RBI Non Banking Finance Companies (NBFCs) is a constituent of theinstitutional structure of the organized financial system in India. NBFCs perform a significantand important role in our financial system. They facilitate the process of channelising of public savings and provide better return to the depositors. We are aware that due toliberalization and globalisation, banking industry and financial sector has gone through manyreforms. In the present economic environment it is very difficult to cater need of society byBanks alone so role of Non Banking Finance Companies and Micro Finance Companiesbecome indispensable. The activities of non-banking financial companies(NBFCs) in India have undergone qualitative changes over the years through functionalspecialisation. The role of NBFCs as effective financial intermediaries has been wellrecognised as they have inherent ability to take quicker decisions, assume greater risks, andcustomise their services and charges more according to the needs of the clients. While thesefeatures, as compared to the banks, have contributed to the proliferation of NBFCs, theirflexible structures allow them to unbundle services provided by banks and market thecomponents on a competitive basis. The distinction between banks and non-banks has beengradually getting blurred since both the segments of the financial system engage themselvesin many similar types of activities. At present, NBFCs in India have become prominent in awide range of activities like hire-purchase finance, equipment lease finance, loans,investments, etc. By employing innovative marketing strategies and devising tailor-madeproducts, NBFCs have also been able to build up a clientele base among the depositors, mopup public savings and command large resources as reflected in the growth of their depositsfrom public, shareholders, directors and their companies, and borrowings by issue of non-convertible debentures, etc. According to KPMG