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What is the effect of Covid–19 on NBFC Sector?

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Non-Banking Financial Company (NBFC) is a financial establishment that is formed by a group of individuals to fulfill the financial requirements of various people. They are registered under the companies act and have their rules and regulations which they must follow. One important aspect in the establishment of NBFC is obtaining NBFC Registration. Every business must obtain a license as per the guidelines mentioned.

Effect of Covid -19 on NBFC Sector

The current times of Covid – 19 has definitely had an unfavorable effect on the Indian economy and the NBFC sector has been hit by the pandemic too. The sectors that NBFCs benefits from the most are manufacturing, auto and retail businesses but since Covid-19 all the businesses are shut down with minimal to no business. Thus, NBFCs are incurring huge financial losses which is a matter of concern.

  • Companies are not in a position financially to take up loan and advances
  • Companies are unable to provide loan repayments to the NBFCs
  • As a result of shortage of finance and MSMEs inability to sustain in the industry, NBFCs are struggling to retain their asset quality requirements.

Irrespective of the current situation, NBFCs are still a profitable business and if established as per the rules and regulations, they have the capability to contribute immensely to the Indian economy.

Before acquiring an NBFC license to be able to start several business activities, it is crucial to understand several features of Non-Banking Financial Companies (NBFCs),

  • They are allowed to accept or renew public deposits for a minimum period of 12 months
  • They are not allowed to accept deposits that is repayable on demand
  • They are not allowed to charge interest rates that are higher than the ceiling rate which is prescribed by Reserve Bank of India (RBI)
  • The main purpose of an NBFC is to acquire shares, stocks, bonds, debentures and securities from the Government.

Get more information about this via visit at- Effect of Covid-19 on NBFC Sector.