Categories of NBFCs

1. Nidhi Company
 Nidhi Company is one of the category of Non Banking Financial Company
(NBFC) which does not require any Reserve Bank of India (RBI) license.
Nidhi Company works through its members. It can accept deposits and
lends loans to its members only.
Nidhi is the safest and the cheapest way of raising funds from the
General public (just by registering them as members).
 The alternatives of Nidhi (like Non Banking Financial Companies (NBFC’s)
will need a capital of at least two crores) are very costly. Through, very
business friendly, Nidhi is yet to be common between the business
communities.
It is incorporated with following objectives:
 to promote savings among its member
 To lend Loans and receive money for the purpose from its members.
 Since Nidhis come under NBFCs, the RBI is empowered to issue
directions to them in matters relating to their deposit acceptance
activities. However, since Nidhis deal with their shareholder-members
only, RBI has exempted such notified firms from the core provisions of
the RBI Act and other directions applicable to NBFCs.
Requirements for Nidhi Company
1. A Nidhi company has to be a public company;
2. It must have a minimum paid up equity share capital of Rs.5,00,000/-;
3. no issuances of preference shares.
4. The objective of such a firm would be to imbibe in the members a habit of
thrift and saving and the services would only be restricted to its members;
5. The name must have Nidhi Limited
2.Venture Capital Fund
 Venture capital funds are investment funds that manage the money of
investors who seek private equity stakes in startup and small- to
medium-sized enterprises with strong growth potential.
 These investments are generally characterized as high-risk/high-return
opportunities.
 In the past, venture capital investments were only accessible to professional
venture capitalists, although now accredited investors have a greater ability
to take part in venture capital investments.
 The money provided by VCFs is termed as venture capital. In India, the VCFs
are regulated by the SEBI.

 For the VCFs, they get money from a variety of sources, including private
and public pension funds, corporations and wealthy individuals, both
domestic and foreign etc.

 Small money investing individuals called angel investors are also well
engaged in startup financing. Recent regulation by SEBI in India places angel
investors as a subcategory of VCFs.

 Examples: Intel Capital, Fulcrum, Bain Capital, Qualcomm etc.

Following are the main features of VCFs:
 They finance new and quickly growing business ventures or entities
 VCFs takes higher risks with the expectation of higher rewards while
making investment
 The VCFs often purchase equity securities of the entities they invests
money
 VCFs help the development of new products or services and acquire
technologies
 The VCFs take active participation in the companies they invest and thus
helps the growth
 The VCF investment is long term in nature in the investing entity.
3. Merchant Banking
Merchant Banking is a combination of Banking and consultancy services.
It provides consultancy to its clients for financial, marketing, managerial and legal
matters.
Consultancy means to provide advice, guidance and service for a fee.
 It helps a businessman to start a business.
 It helps to raise (collect) finance.
 It helps to expand and modernize the business.
 It helps in restructuring of a business.
 It helps to revive sick business units.
 It also helps companies to register, buy and sell shares at the stock exchange.