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Why NBFCs are a Critical Part of the Indian Economy?

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NBFCs are a Critical Part of the Indian Economy

Why NBFCs are a Critical Part of the Indian Economy?

Most of the entrepreneurs want to understand the role of NBFCs in India before getting NBFC registration. For knowledge, the NBFCs (Non-Banking Financial Companies) are the companies that provide loans to the ones in need and similar services to their customers. They basically deal with the business of loans and funds along with the business of financial services, namely acquisition of shares, stock, bonds, debentures. A notable fact about them is that they do not include any institution whose principal business is that of agriculture, industrial activity, purchase or sale of any goods (other than in securities) or providing any services and sale/purchase/construction of an immovable property.

They play an important role in promoting the inclusive growth of the economy and the country as a whole by providing many contributions of its own by catering and fulfilling the financial needs of the customers who don’t want to make themselves part of the banking schemes. They provide innovative financial services to Micro, Small, and Medium Enterprises (MSMEs) most suitable to their business requirements and play some critical parts in the development of the economy by generating wealth and employment, providing financial support to the rural and weaker sections of the economy and society who are in need for them.

In this era too, where currently we stand facing off against the Covid-19 which has wrecked-havoc in the functioning of the world, where India itself is no exception. All the economies are suffering due to this, and it’s no surprise that the market researchers foresaw this whole situation way before it even happened. The condition is so bad that it brought down economies in a few months! People are not able to earn, the companies are not able to function, the employees are not getting any work, and the whole economy is suffering in the grand scheme of things. In this grave and dire situation, the NBFCs are the ones who are rising to support and boost the economies in the right direction and allow the markets to stand in a better condition. This makes NBFC registration in India a profitable prospect.

Roles of NBFCs:

1) Generation of Employment: It generates employment in the economy by working jointly with the government in the public sectors and firms. Also, the NBFCs provide funds to the private sectors which in the end results to making their business more funds for expansion, meaning they create even more funds altogether.

2) Raises standards of living: It provides financial services to the lower background and weaker sections of the society by providing them with bank credits and raises funds from the public to make more suitable conditions for companies to provide employment. More employment will mean more income, meaning more purchasing power and high standards.

3) Mobilizes and gathers resources: They create a balance between the distribution of assets and intraregional income by turning savings into investing practices.

4) Long-Term Credit: Provides long term credit with interest rates which are suitable for the development of the economy and its sustainable growth. It works to raise the economy to an extensively high level.

And others like:

  1. Aid in Employment Generation.
  2. Help in the development of Financial Markets.
  3. Helps in Attracting Foreign Grants.
  4. Helps in Breaking Vicious Circle of Poverty by serving as government’s instrument.
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