A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company).

NBFCs are doing functions akin to that of banks, however there are a few differences:

1. a NBFC cannot accept demand deposits; 
2. it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and 
3. deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.

Please see the following documents for more information:

Mani loses money - The Reserve Bank Staff College, located in Chennai is a premier training institute of the Reserve Bank of India. It presents this brochure prepared for creating awareness amongst common man about the aspects of investments in Non-Banking Financial Companies (NBFCs.)