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This document defines and describes various types of non-bank financial institutions (NBFIs). NBFIs do not have full banking licenses and are not supervised by banking regulators. They include savings and loans associations, credit unions, private banks, investment banks, shadow banks, Islamic banks, and industrial banks. The document also discusses the roles of NBFIs such as providing liquidity, competition, and various banking services. NBFIs are divided into those that accept public deposits and those that do not. Other financial institutions mentioned include insurance companies, collective investment vehicles, market makers, specialized sectorial financiers, and financial service providers.
This document defines and describes various types of non-bank financial institutions (NBFIs). NBFIs do not have full banking licenses and are not supervised by banking regulators. They include savings and loans associations, credit unions, private banks, investment banks, shadow banks, Islamic banks, and industrial banks. The document also discusses the roles of NBFIs such as providing liquidity, competition, and various banking services. NBFIs are divided into those that accept public deposits and those that do not. Other financial institutions mentioned include insurance companies, collective investment vehicles, market makers, specialized sectorial financiers, and financial service providers.
This document defines and describes various types of non-bank financial institutions (NBFIs). NBFIs do not have full banking licenses and are not supervised by banking regulators. They include savings and loans associations, credit unions, private banks, investment banks, shadow banks, Islamic banks, and industrial banks. The document also discusses the roles of NBFIs such as providing liquidity, competition, and various banking services. NBFIs are divided into those that accept public deposits and those that do not. Other financial institutions mentioned include insurance companies, collective investment vehicles, market makers, specialized sectorial financiers, and financial service providers.
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.