Banking and monetary regulator, Reserve Bank of India is moving towards filling the gaps which allow non banking finance companies (NBFCs) to raise funds through private placement. RBI is working together with the ministry of corporate affairs in this regard.

Provisions in Sec 67 of the Companies Act, 1956 said that if any company plans to issue equity or debt instruments (shares or debentures) to more than 49 investors then it has to do so through public issuance. The second financial stability report released by RBI however said that NBFCs have been given exemption from these provisions.

This infers that NBFCs especially the ones which are not under RBI regulation can raise funds by issuing debt or quasi debt instruments to investors, both retail and institutional through private placement.

This exemption thus allows them to raise deposits outside the regulatory framework.