NBFCND

NBFCND refers to Non-Deposit-taking Non-Banking Financial Company, a category used in the Indian regulatory framework to describe NBFCs that do not accept or hold public deposits. In practice, NBFCNDs operate like other non-banking lenders, offering credit and related financial services, but they rely on sources other than public deposits for funding.

Regulatory framework and requirements: NBFCNDs are regulated by the Reserve Bank of India (RBI). To commence operations, an entity must be registered as an NBFC and meet standards such as a minimum net owned funds (NOF), typically set to two crore rupees, to maintain regulatory eligibility. They are prohibited from taking public deposits and must rely on borrowings from banks, financial institutions, issue of debt securities, or securitization transactions for funding. NBFCNDs must comply with RBI guidelines on asset quality, provisioning, corporate governance, and disclosures, and submit periodic reports and audits. Anti-money laundering, customer protection, and fair-practices codes also apply.

Business model and activities: NBFCNDs provide credit to individuals, micro, small and medium enterprises, and other segments such as vehicle financing, consumer loans, working capital, and SME finance. They may engage in activities like leasing, factoring, and asset-backed lending, and can securitize assets to raise funds. Their flexibility in product design is balanced by risk management requirements and liquidity considerations.

Relationship with banks and markets: NBFCNDs complement traditional banks by serving underserved or niche segments. They operate with relatively lighter balance-sheet constraints than banks but face liquidity, funding, and RBI-compliance pressures. The category has evolved with tighter regulation and increased focus on governance, risk management, and transparency to reduce systemic risk and protect consumers.

See also: Non-Banking Financial Company, RBI, NBFC-ND-SI, Deposit-taking NBFC.