Wednesday, April 6, 2011

Finance Company

Finance companies are multiplying in the country like locust. They are contributing significantly to pool the distributed deposits where commercial banks could not play an effective role. The interest rates  provided by finance companies  are comparatively higher than the banks but still as the decisions and works are done much faster than the banks, people who are in hurry do not care the higher interest rates and the heavier service charges levied by them.
Earlier, finance companies were categorized into non-banking institutions and were allowed to collect deposits only on fixed deposit account, but the umbrella act under BFIA 2006 removed the barriers to make it competitive and allowed it to collect deposits in savings and current accounts also. BFIA 2006 classifies finance companies into class-C licensed institutions. The major function of Finance Companies are to collect deposits in current, savings and fixed term deposit accounts, provide short term and long term credit to businessmen and small industries. Provide installment loans to purchase consumer goods like computer, car, motorbike, refrigerator, washing machine etc.

No comments:

Post a Comment