NBFC (Non-Banking Financial Company)

RBI Act, 1934 — Chapter III-B; SARFAESI Act, 2002 — Section 2(d)

A company registered under the Companies Act and regulated by the RBI under the RBI Act, 1934, that provides financial services (loans, leases, investments) but is not a bank. NBFCs with assets ₹100 crore+ are entitled to use SARFAESI enforcement for secured loans. Microfinance NBFCs and Housing Finance Companies are special categories of NBFCs.

For an NBFC, the threshold question before any enforcement is whether it can use SARFAESI at all. In practice, only NBFCs registered with the RBI and meeting the prescribed asset-size criteria are notified as "secured creditors" entitled to invoke SARFAESI for secured loans; below that, the NBFC must fall back on a civil suit or arbitration, which is slower. NBFC recovery therefore turns heavily on RBI compliance: correct registration, layer classification, and adherence to the RBI's fair-practices, recovery-agent and KYC norms. A borrower contesting an NBFC's notice will often probe the lender's eligibility and its compliance posture, since a procedural or regulatory defect can stall enforcement. Microfinance and housing finance companies are distinct categories with their own rules. Well-advised NBFCs confirm their SARFAESI eligibility and registration status before issuing a demand notice, rather than discovering the gap in a Section 17 proceeding.