Dr.

Ram Manohar Lohiya National Law University

Lucknow

CORPORATE LAW

ROUGH DRAFT
ON

NBFC - A HOUSE DIVIDED UNTO ITSELF

Submitted to:

Submitted by:

Dr. Manish Singh

Soumil Pastore

Assisstant Professor (Law)

Roll No. 138

Dr. R.M.L.N.L.U.

B.A.LLB. (Hons)
Semester V

INTRODUCTION

NBFCs (Non Banking Financial Companies) are reported periodically to be under the RBI
(Reserve Bank of India) lens for one reason or the other. Under the circumstances, any effort
by RBI to rationalize the regulatory framework of NBFCs is highly welcome. Of particular
concern to RBI appears to be the exposure of those NBFCs that even while not accepting
deposits from the public are still raising resources banks and financial institutions and
diverting to the stock market.
The evolution of RBI as the banking sector regulator to also being the regulator for NBFCs
has not been well planned. A particularly manifest evidence of this is the confusion in
legislation and in policy reflected in the multiplicity of overlapping and irrational
classifications of the various types of NBFCs. The most apt illustration of this is the fact that
whereas the Reserve bank of India Act 1934 does itself define the term NBFC, there is a
different definition of the same term viz. NBFC in the Non-Banking Financial Companies
Acceptance of Public Deposits (Reserve Bank) Directions, 1988 that the RBI itself has
issued under sections 45 J, 45K, 45M and 45MA of the aforesaid Act of 1934.

AIM AND OBJECTIVES

The project attempts to deal with:
1. NBFC meaning and their definition in RBI Act and APD directions
2. The services provided regulation and classification.
3. Comparison between the two definitions of NBFC in RBI Act and APD directions.
4. The issue as to why NBFC is a house divided unto itself.

STATEMENT OF PROBLEM
The project deals with the question: Why is NBFC a House Divided unto Itself?

REVIEW OF LITERATURE
1. Avtar Singh; Company Law, 15th Ed., Eastern Book Company.
2

2. Stephen Girvin, Sandra Frisby and Alastair Hudson; Charlesworths Company Law,
18th Ed., Sweet & Maxwell, South Asian Edition.
3. Dr. N.V. Paranjape; Company Law, Central Law Agency.

CONCEPTUAL FRAMEWORK
The project attempts to explain NBFC, its meaning, services provided, definitions of NBFC
in RBI Act and other statutues and discusses the issue of NBFC being a house divided unto
itself.

RESEARCH QUESTION
1. What is meant by the term NBFC, Its Meaning, classification and services provided?
2. What are the definitions of NBFC in RBI Act and other statutues?
3. Why has RBI made NBFC a house divided unto itself by adopting an incongruous
definition of an already defined term in its own parent statute?

RESEARCH METHODOLOGY
The research methodology proposed to be used in this project is doctrinal as it consists of all
theoretical part. I have used primary and secondary sources of information. Primary sources
include books from Dr. Madhu Limaya Library and secondary sources include article and
web sources.

UTILITY OF RESEARCH
It will help in giving a better understanding of the NBFCs meaning, services provided,
classification and helps to decide the issue as to why has RBI made NBFC a house divided
unto itself by adopting an incongruous definition of an already defined term in its own parent
statute.

TENTATIVE CHAPTERIZATION
1.
2.
3.
4.
5.
6.

INTRODUCTION
HISTORICAL BACKGROUND
SERVICES PROVIDED
CLASSIFICATION
NBFC UNDER THE RBI ACT
REGULATORY FRAMEWORK OF NBFCS
3

7. NBFC UNDER ACCEPTANCE OF PUBLIC DEPOSITS (RESERVE BANK)

DIRECTIONS, 1998 (APD DIRECTIONS)
8. COMPARISON OF THE TWO DEFINITIONS
9. CONCLUSION
10. BIBLIOGRAPHY

BIBLIOGRAPHY
Primary Sources:
4. Avtar Singh; Company Law, 15th Ed., Eastern Book Company.
5. Stephen Girvin, Sandra Frisby and Alastair Hudson; Charlesworths Company Law,
18th Ed., Sweet & Maxwell, South Asian Edition.
6. Dr. N.V. Paranjape; Company Law, Central Law Agency.

Secondary Sources:
1. http://www.scribd.com/doc/18490480/Handbook-for-Laws-on-NBFC
2. http://www.legalserviceindia.com/articles/nbfc.htm
3. http://www.investopedia.com/terms/n/nbfcs.asp