What is NBFC in India?

NBFC stands for Non-Banking Financial Company. It’s a company registered under the Companies Act, 2013 (or its predecessor) that is in the business of loans and advances, acquisition of shares/bonds, leasing, hire-purchase, insurance, or chit business — but is not a bank.

The simplest way to think about it: an NBFC does most of what a bank does on the lending side, but cannot do what a bank does on the deposit side. No savings accounts, no current accounts, no cheque issuance against your deposit. NBFCs raise funds from banks, bond markets, and (some types of) public deposits, then lend that money out at a margin.

You almost certainly know more NBFCs than banks — they’re behind a huge share of Indian retail credit:

• Bajaj Finance — consumer durables, personal loans, EMI cards
• Tata Capital, Aditya Birla Finance, L&T Finance, Piramal Capital — diversified retail and SME lending
• Mahindra Finance, Cholamandalam, Shriram Finance — vehicle finance, rural lending
• Muthoot Finance, Manappuram Finance, IIFL Finance — gold loans
• HDFC — was India’s largest housing finance NBFC until it merged with HDFC Bank in 2023
• Thousands of smaller NBFC-ICCs across India focused on retail, MSME, and supply-chain finance

The RBI classifies NBFCs by what they primarily do. The main categories:

• NBFC-ICC (Investment and Credit Company) — the general lending category. Most NBFCs you’ve heard of fall here.
• NBFC-MFI (Microfinance Institution) — small-ticket loans to low-income borrowers, often via joint liability groups.
• NBFC-IFC (Infrastructure Finance Company) — at least 75% of assets in infrastructure loans.
• NBFC-Factor — invoice/receivables financing.
• NBFC-AA (Account Aggregator) — consent-based data sharing across financial institutions; the rails behind India’s open-banking layer.
• NBFC-HFC (Housing Finance Company) — home loans, now under unified RBI regulation since 2019.
• NBFC-P2P — peer-to-peer lending platforms.

The RBI also classifies NBFCs by size into a scale-based framework: Base Layer, Middle Layer, Upper Layer, and Top Layer — with tighter prudential norms as the layers get heavier.

The headline differences:

• Demand deposits. Banks can accept savings and current accounts. NBFCs cannot.
• Cheques. Banks issue chequebooks drawn on themselves. NBFCs do not.
• Deposit insurance. Bank deposits up to ₹5 lakh per depositor are insured by DICGC. NBFC deposits are not.
• CRR/SLR. Banks must maintain Cash Reserve Ratio and Statutory Liquidity Ratio with the RBI. NBFCs don’t (though they have their own liquidity norms).
• Funding. Banks fund themselves with low-cost CASA deposits. NBFCs borrow from banks, bond markets, and commercial paper — usually at higher cost.
• Flexibility. NBFCs typically have more flexible underwriting and faster turnaround — which is why a huge share of DSA-originated files route through NBFCs rather than banks.

Every NBFC must register with the RBI and meet ongoing requirements:

• Net Owned Fund (NOF) minimum — currently ₹10 crore for most NBFC categories.
• Capital adequacy — minimum CRAR of 15% (with at least 10% Tier-1) for most layers.
• NPA recognition — non-performing asset rules now broadly aligned with banks (90-day overdue norm).
• Fair Practices Code — KYC, transparent pricing, no harassment in collections.
• Digital Lending Guidelines (2022, updated since) — borrower data protection, fee disclosure, cooling-off period.
• Scale-based regulation — Middle and Upper Layer NBFCs face additional governance, disclosure, and liquidity norms.

A small NBFC doing ₹50–200 Cr of monthly disbursal often runs lead capture, documentation, underwriting decisions, and partner-bank co-lending payloads on a patchwork of: a Loan Origination System (LOS) for the core book, an Excel sheet for the DSA pipeline, WhatsApp groups for document chasing, and the lender’s email inbox for credit decisions.

The LOS handles the booked loan well. The problem is everything beforesanction: the lead, the file build, the back-and-forth with the DSA, the credit-committee notes, the sanction terms. That’s where the data gets lost, decisions take four days instead of four hours, and partner banks complain that sanction payloads are missing fields.

TatvaCRM’s NBFC software is the pre-LOS layer: capture leads from DSAs, run underwriting, track sanction, and hand off cleanly to whatever LOS you already use. We don’t replace your LOS — we feed it.