Non – Banking Financial Companies are the financial institutions that offer banking services, but do not hold any banking license. A Non-Banking Institution has principal business of receiving deposits under any scheme or arrangement or in any other manner. Such deposits and can be received in one lump – sum or in installments by way of contribution.
RBI Issues Master directions and Guidelines for Non-Banking Financial corporations to hunt and resolve the risk and weaknesses in its operations. These Master direction guidelines are mainly driven by the demand and need for mitigating the cyber threats coming out of evolving technology adopted by these corporations.
The NBFC has to follow the terms and conditions of the license (such as customer protection, data security, audit function, grievance redressal, data security, audit control, corporate governance, and risk management framework).
If a company has successfully obtained its NBFC license, for them, it’s mandatory to comply with all the NBFC annual compliances. In a case where NBFC is failing to comply with the compliances, NBFC becomes liable for the hefty penalties. The penalties could be even cancellation of NBFC License.