NBFC: Meaning, How It Differs from a Bank, and Safety Checks
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NBFC stands for Non-Banking Financial Company. It is a company that lends money or invests, registered with the RBI, but it is not a bank. It can't offer a savings or current account or issue cheques, and any deposit you place with it is not insured by DICGC. Before borrowing or investing, check that it is on RBI's list.
- Full form
- Non-Banking Financial Company
- Regulator
- RBI, under the RBI Act, 1934
- Needs
- Certificate of Registration from RBI
- Savings / current account
- Not allowed
- Deposit insurance
- None
- NBFC deposit period
- 12 to 60 months
- Check registration
- rbi.org.in → Regulation → Non-Banking
- Complaints
- NBFC first, then cms.rbi.org.in
What is an NBFC?
An NBFC is a company registered under the Companies Act whose main business is giving loans and advances, buying shares, bonds or other securities, leasing or hire-purchase. Companies whose main business is farming, industry, trading goods, services or real estate are not NBFCs, even if they lend a little on the side.
RBI decides this with the 50-50 test: if more than half of a company's assets are financial assets and more than half of its income comes from them, it must register with RBI as an NBFC.
NBFC vs bank: the key differences
NBFCs lend and invest much like banks, but RBI lists three major differences:
| What you might need | Bank | NBFC |
|---|---|---|
| Savings or current account (money you can withdraw any time) | Yes | No. It can't accept demand deposits. |
| Cheque book drawn on it; part of the payment and settlement system | Yes | No |
| Deposit insurance from DICGC | Up to ₹5 lakh per depositor per bank | None, even for deposit-taking NBFCs |
| Fixed deposits from the public | Yes | Only the few NBFCs with RBI's specific permission |
| Loans | Yes | Yes |
Because an NBFC has no current account for you, your loan is paid into your bank account, and EMIs are usually collected from your bank account, for example by NACH auto-debit.
Types of NBFC you may deal with
RBI groups NBFCs by what they do. These are the ones ordinary customers meet most:
Investment and Credit Company
The general lending category: loans, asset finance (such as vehicles) and investment in securities.
Housing Finance Company
At least 60% of its assets are housing finance. Since 9 Aug 2019 RBI regulates them as a type of NBFC; NHB continued to supervise them and handle their complaints.
Microfinance (NBFC-MFI)
Collateral-free loans to households earning up to ₹3 lakh a year. No deposit or security can be demanded, you get a loan card in your language, and there is no prepayment penalty.
Peer-to-peer platform (NBFC-P2P)
An online platform that connects lenders and borrowers and facilitates loans between them.
Account Aggregator (NBFC-AA)
Fetches your financial information, with your consent, and shares it with you or a lender. The data is never its property.
Not every finance business is an NBFC under RBI. Insurance companies (IRDAI), stock brokers and collective investment schemes (SEBI), Nidhi companies, and chit funds (State Governments) are regulated elsewhere.
How to check if an NBFC is registered with RBI
No company can carry on NBFC business without a Certificate of Registration from RBI. Making a false claim of being RBI-regulated is illegal.
- Open RBI's NBFC page (rbi.org.in → Regulation → Non-Banking).
- Download the list of registered NBFCs and search the company's exact legal name.
- Also check the list of NBFCs whose registration was cancelled.
- Found a company lending or taking deposits that isn't on the list? Tell the nearest RBI Regional Office, or report it on Sachet.
Borrowing from or investing in an NBFC
- No interest cap. RBI doesn't fix NBFC loan rates; your loan agreement does. But the NBFC must disclose the rate and how it is worked out in the application form, sanction letter and on its website.
- Get the KFS. For retail and small-business term loans sanctioned from 1 Oct 2024, you must get a Key Facts Statement showing the APR (the yearly cost including all charges) and the repayment schedule.
- No hidden fees. A fee or charge not in the KFS can't be charged at any stage without your explicit consent.
- Microfinance loans: late-payment penalty only on the overdue amount, not the whole loan; rate changes must be told in writing in advance and apply only from then on.
Higher interest means higher risk. NBFC deposits are unsecured and have no DICGC insurance. RBI does not guarantee repayment or the company's financial soundness.
- Only a few can take deposits. The NBFC needs a deposit-accepting Certificate of Registration and at least a "BBB–" credit rating. Since 1997 RBI has not given this permission to any new NBFC.
- Rules: period 12 to 60 months, nothing repayable on demand, and interest of at most 12.5% a year (as on 15 Sep 2026).
- Insist on a proper receipt, signed by an authorised officer, showing the date, your name, the amount in words and figures, interest rate, maturity date and amount.
- Using an agent? Make sure the NBFC has authorised them.
- If it defaults, you can approach the National Company Law Tribunal (NCLT), a consumer forum or a civil court. State depositor-protection laws also let State Governments attach a defaulter's property.
Loan apps and RBI's digital lending rules
Many instant-loan apps are run by, or on behalf of, an NBFC or bank. RBI's Digital Lending Directions, 2025 (8 May 2025) protect you:
- Money goes straight to you. The loan is paid into your own bank account, and you repay directly into the lender's account. No third party, including the app, may control the flow.
- App fees are the lender's cost. The lender pays the app's fees; the app can't charge you separately for them.
- Cooling-off period. You can exit the loan within a cooling-off period of at least one day by repaying the principal and the proportionate APR, with no penalty. The lender may keep a reasonable one-time processing fee if that is disclosed in the KFS.
- No snooping. The app must not access your files and media, contact list or call logs. Camera, microphone or location access may be taken once, only for onboarding or KYC, with your consent.
- Grievance officer. The app, the lender's website and the KFS must show the grievance officer's contact details, and you must be able to complain in the app.
- Check the app is real. Since 1 Jul 2025, RBI publishes a directory of loan apps deployed by regulated lenders. It is based on lenders' own data and is not an RBI endorsement.
Harassed by an illegal loan app? Call 1930 or report on cybercrime.gov.in. Never share an OTP or give an app access to your contacts.
How to complain about an NBFC
- Complain to the NBFC first, in writing, and keep the complaint number. Every NBFC must have a grievance redressal system, and disputes about its staff's decisions must be heard at least one level higher.
- No reply in 30 days, or unhappy? File a free complaint with the RBI Ombudsman under RB-IOS at cms.rbi.org.in, or call 14448.
| Is the NBFC covered by RB-IOS 2026? | Answer |
|---|---|
| Authorised to accept deposits | Yes |
| Deals with customers and has assets of ₹100 crore or more | Yes |
| Housing finance companies | No. Complain to NHB. |
| Core investment, infrastructure finance and debt fund, mortgage guarantee, primary dealer and holding companies | No |
Unauthorised deposit scheme or fake finance company? Report it on RBI's Sachet portal, and to the police or the State's Economic Offences Wing.
History of NBFC regulation
For over three decades, RBI regulates NBFCs under Chapter IIIB of the RBI Act, mainly their deposit-taking.
An ordinance, later the RBI (Amendment) Act, 1997, makes registration with RBI compulsory for every NBFC. From 1997 RBI stops licensing new NBFCs to take public deposits.
RBI defines "principal business" with the 50-50 test.
Regulation of housing finance companies moves from NHB to RBI.
Minimum net owned funds for a new NBFC become ₹10 crore; existing ones have until 31 Mar 2027.
RBI issues the Digital Lending Directions, 2025.
RBI's directory of digital lending apps goes live.
RB-IOS 2026 comes into force, covering deposit-taking and larger customer-facing NBFCs.
FAQs
What is the full form of NBFC?
Non-Banking Financial Company: a company registered with RBI that lends or invests but is not a bank.
Is an NBFC a bank?
No. It can't accept demand deposits, isn't part of the payment and settlement system, can't issue cheques drawn on itself, and its deposits aren't insured by DICGC.
Is my fixed deposit in an NBFC safe?
It is not insured and RBI doesn't guarantee it. Place it only with an NBFC that RBI has specifically allowed to take deposits, and weigh the higher rate against the higher risk.
What is the maximum interest an NBFC can pay on deposits?
12.5% a year, as stated by RBI on 15 Sep 2026. A higher offer is a warning sign.
Is there a cap on the interest an NBFC charges on loans?
No. RBI has deregulated it, but the NBFC must disclose the rate clearly, including in the Key Facts Statement.
How do I know if a loan app is legal?
Find the lender's name in the app, check that lender on RBI's NBFC list, and look for the app in RBI's directory of digital lending apps. A legal loan is always paid into your own bank account.
Can I cancel a digital loan after taking it?
Yes, within the cooling-off period (at least one day) by repaying the principal and the proportionate APR, without penalty. A disclosed one-time processing fee may be kept.
Where do I complain about an NBFC?
To the NBFC first. If it doesn't resolve it within 30 days, go to the RBI Ombudsman at cms.rbi.org.in, if the NBFC is covered by RB-IOS.
Are chit funds and Nidhi companies NBFCs regulated by RBI?
No. They are exempt from RBI registration. Chit funds are regulated by State Governments, and Nidhi companies under the Companies Act.
Official sources
- RBI – All you wanted to know about NBFCs (updated 15 Sep 2026) (accessed 31 Oct 2026)
- RBI – List of NBFCs registered with RBI and cancelled registrations (accessed 31 Oct 2026)
- RBI – Reserve Bank of India (Digital Lending) Directions, 2025 (accessed 31 Oct 2026)
- RBI – Key Facts Statement (KFS) for Loans & Advances, 15 Apr 2024 (accessed 31 Oct 2026)
- PIB – Measures to strengthen the digital lending ecosystem (DLA directory from 1 Jul 2025) (accessed 31 Oct 2026)
- RBI – Digital lending apps deployed by regulated entities (accessed 31 Oct 2026)
- RBI – Reserve Bank – Integrated Ombudsman Scheme, 2026 (coverage of NBFCs) (accessed 31 Oct 2026)
- RBI – Regulation of Housing Finance Companies moves to RBI, 13 Aug 2019 (accessed 31 Oct 2026)
- RBI – Amendments to the RBI Act for NBFCs, 9 May 1997 (accessed 31 Oct 2026)
- RBI – Sachet portal (accessed 31 Oct 2026)
- National Housing Bank – Grievance redressal (accessed 31 Oct 2026)
- Ministry of Home Affairs – National Cybercrime Reporting Portal (accessed 31 Oct 2026)
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