Page 62 - Quick Insights Book 2022

Non-Banking Financial Companies (NBFCs) 15

REGULATIONS APPLICABLE TO NBFC

A Non-Banking Financial Company (NBFC) is a company
registered under the Companies Act, 1956 and is engaged
in the business of loans and advances, acquisition of shares/
stock/ bonds/debentures/securities issued by Government or
local authority or other securities of like marketable nature,
leasing, hire- purchase, insurance business, chit business but
does not include any institution whose principal business is
that of agriculture activity, industrial activity, sale/ purchase/
construction of immovable property. A non-banking institution
which is a company and which has its principal business of
receiving deposits under any scheme or arrangement or any
other manner, or lending in any manner is also a non-banking
financial company.

The legal framework of Non-banking companies is provided
in Chapter IIIB, IIIC and Chapter V of the Reserve Bank of
India Act, 1934. Chartered Accountants can be engaged in
conducting a compliance audit that would include detailed
examination of applicability of various laws, regulations and
directions, scrutiny of various records including financial
statements, balance sheets etc. and issuance of report on
compliance or non-compliance of laws by these establishments
along with remedial action, wherever required. Examination
of total compliance adherence would start from the top of the
organizational hierarchy and go down into the core business
processes of a company’s operations.

SCOPE OF WORK UNDER NBFC
 To carryout end use verification of beneficiaries by
carrying out field visits to ensure eligibility status &
proper end use of funds by examination of records/ visits
Non-Banking  as deemed appropriate as per the NBFC Schemes.
If so desired by the NBFC, to undertake periodic visit to
Financial Companies the office and field areas of the lending institutions and
as a rule, the gap between any two visits to a particular
(NBFCs) Micro Finance Institution (MFI) should not be more than
six months. Frequent visits may require for some of the
cases, as advised by the NBFC from time-to-time.
 Field visit should, inter alia, involve visiting office of
the borrower entity of NBFC, discussions with Chief
Executives/Management of the lending institution,
discussion with staff and participatory discussions with
clients of borrower entity.
 Reporting to NBFC in the prescribed format regarding
the work undertaken as per directions of NBFC from
time-to-time.
 Valuation of Properties like Land & Building

Quick Insights on Professional Opportunities for Chartered Accountants 49