Non-Bank Financial Institution

- NBFI is a financial institution that does

not have a full banking license or is not
supervised by a national or international
banking regulatory agency.
 Greater reach
 Flexibility in tapping resources
 Retail services to small and medium business
 Important component of financial
 Savings and Loans Association
- also known as S&Ls or thrifts, resemble banks in
many respects. Most consumers don’t know the differences
between commercial banks and S&Ls. By law, savings and
loan companies must have 65% or more of their lending in
residential mortgages, though other types of lending is
allowed.
 Credit Unions

- are another alternative to regular commercial banks.

Credit unions are almost always organized as not-for-profit
cooperatives. Like banks and S&Ls, credit unions can be
chartered at the federal or state level.
 Private Banks
- Private banks target high net-worth individuals and do not
encourage, or in many cases accept, people of lesser means
opening accounts.
 Investment and Merchant Banks

- While investment banks may be called “banks”, their

operations are far different than deposit-gathering commercial
banks. Complicating matters further, many major commercial
banks bought investment banks, and some investment banks
have reorganized themselves as commercial banks, in many
cases to make themselves eligible for government-funded ball-
outs.
 Shadow Banks

- The housing bubble and subsequent credit crisis brought

attention to what is commonly called “the shadow banking
system”. This is a collection of investment banks, hedge funds,
insurers and other non-bank financial institutions that replicate
some of the activities of regulated banks, but do not operate in the
same regulatory environment.
 Islamic Banks
- exist to fill the need for financial services that are
compliant with Islamic rules concerning interest.
 Industrial Banks

- are a special category of financial institution that

exists for very specific purpose. Industrial banks are
financial institutions owned by non-financial institutions.
 - RBI Act. 1934, it is mandatory that every
NBFI should be registered with RBI to commence
or carry on any business of non-banking financial
institution.
 Brokers of loanable funds
 Stabilize the capital market
 Provide liquidity
 Introduces competition in the provision of
financial services
 Support investment in property
 Offers most sorts of banking services
Based on their liability structure, NBFIs have been divided
into two categories:
 Category A: NBFIs accepting public deposits or the
quasi-banking function
 Category B: NBFIs not raising public deposits or the
non-quasi banking function
 Risk pooling institutions
- insurance companies underwrite economic risks
associated with illness, death, damage and other risks of
loss. In return to collecting an insurance premium,
insurance companies provide a contingent promise of
economic protection in the case of loss.
 Contractual savings institutions

- also called “institutional investors” give individuals

the opportunity to invest in collective investment vehicles
(CIV) as a fiduciary rather than a principal role. Collective
investment vehicles pool resources from individuals and
firms into various financial instruments including equity,
debt, and derivatives.
 Market Makers
- are broker-dealer institutions that quote a buy and
sell price and facilitate transactions for financial assets.
 Specialized sectorial financiers

- they provide a limited range of financial services to

a targeted sector.
 Financial service providers

- include brokers (both securities and mortgages),

management consultants, and financial advisors, and they
operate on a fee-for-service basis.