Bank of baroda

Non-Banking Finance Companies
There were 13,187 non-banking finance companies in India as of March 31, 2005, mostly in the private sector. All non-
banking finance companies are required to register with RBI in terms of The Reserve Bank of India (Amendment) Act,
1997. The non-banking finance companies, on the basis of their principal activities are broadly classified into four
categories namely equipment leasing, hire purchase, loan and investment companies and deposits and business activities
of Residuary Non-Banking Companies (RNBCs). The RBI has put in place a set of directions to regulate the activities of

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BANK OF BARODA
NBFCs under its jurisdiction. The directions are aimed at controlling the deposit acceptance activity of NBFCs. The NBFCs
which accept public deposits are subject to strict supervision and capital adequacy requirements of RBI. Out of the
NBFCs registered with RBI as of March 2005, 474 NBFCs accept public deposits.
Housing Finance Companies
Housing finance companies form a distinct sub-group of the non-bank finance companies and are regulated by National
Housing Bank (NHB). As a result of the various incentives given by the Government for investing in the housing sector in
recent years, the scope of their business has grown substantially. Until recently, Housing Development Finance Corporation
Limited was the premier institution providing housing finance in India. In recent years, several other players including
banks have entered the housing finance industry. The National Housing Bank and the Housing and Urban Development
Corporation Limited are the two Government-controlled financial institutions created to improve the availability of housing
finance in India. The National Housing Bank Act provides for refinancing and securitization of housing loans, foreclosure
of mortgages and setting up of the Mortgage Credit Guarantee Scheme. RBI has directed commercial banks to lend at
least 3.0% of their incremental deposits in the form of housing loans. Further, RBI has reduced the risk weight for loans
for residential properties to 50.0% for the purpose of determining capital adequacy. However, RBI increased this risk
weightage for loans to residential properties to 75% in December 2004. Housing loans up to certain limits prescribed by
RBI as well as mortgage-backed securities qualify for priority sector lending under RBI’s directed lending rules.