NBFCs raise their resources from which of the following 1 Loans from Banks 2 By issuance of bonds in...........

Economic Affairs Non Banking Financial Companies (NBFCs)

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NBFCs raise their resources from which of the following ?

1. Loans from Banks.

2. By issuance of bonds in the financial markets.

3. Through External Commercial Borrowing (ECB).

4. Mutual Funds.

Select the correct answer using the code given below:

1 only

1 and 2 only

1 and 3 only

1, 2, 3 and 4

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Explanation:

Explanation:

Non Banking Financial Companies:
NBFCs borrow from banks and then lend. They also issue bonds in financial markets to raise money and then this money then lends at a higher interest rate. NBFCs also borrow from abroad through debt financing (called ECB). Mutual funds also invest in NBFCs which means, NBFCs issue debt papers to mutual funds and then this money they lend.
But, the main wholesale funding sources of the NBFCs comprise mainly of:

Banks (primarily via term loans and rest through non-convertible debentures and commercial paper) and
Debt mutual funds (via non-convertible debentures and commercial paper).
Debentures are long-term unsecured debt financial instruments (they are similar to bonds in functioning). Some debentures have a feature of convertibility into shares after a certain point of time. The debentures which can't be converted into shares or equities are called non-convertible debentures and earn a higher interest rate.
Commercial Paper (CP) is an unsecured money market debt instrument issued in the form of a promissory note for less than one year.