In India, many financial companies lend money, but not all are equal. It’s vital to choose a lender that is a licensed NBFC (Non-Banking Financial Company). Here’s why:

1. Regulated by RBI: A licensed NBFC is registered with the Reserve Bank of India and must follow strict regulations. These rules cover how much capital the company must hold, how much it can lend, how it collects repayments, and more. RBI supervision means the NBFC is regularly monitored for safety and soundness. For borrowers, this ensures the NBFC operates transparently and follows fair practices. (In fact, NBFCs include those offering loans and even chit funds, all under RBI’s umbrella.)

2. Customer Protection: RBI-licensed NBFCs must implement grievance redressal mechanisms. If something goes wrong, you have legal recourse. They have to maintain clear accounts and cannot engage in dubious recovery tactics (for example, intimidation is prohibited). They also must disclose all charges upfront. Unlicensed moneylenders have no such oversight – dealing with them can be risky.

3. Legal Safeguards: When you take a loan from a registered NBFC, you enter a formal contract. If disputes arise, you can approach legal authorities or RBI-appointed ombudsmen. With unlicensed lenders, the loan terms may be verbal or illegal, offering no protection. Kandhavillas Fincorp, for example, being an RBI-approved NBFC, ensures every loan document is legally sound.

4. Fair Interest and Fees: Licensed NBFCs cannot arbitrarily charge any rate. RBI has guidelines that cap certain fees (like prepayment or processing fees). While NBFCs do set their interest rates, they must do so within a regulated framework (e.g., deposit-taking NBFCs in the ‘NBFC-LDS’ category have rate deregulation, but they still follow policy shifts). In short, you are less likely to get overcharged if your lender is regulated.

5. Trust and Reputation: An established NBFC has a brand and reputation to maintain. Kandhavillas Fincorp, for instance, has served Tamil Nadu for over 20 years, building trust by offering gold, agriculture, and chit loans reliably. They advertise “fair interest, quick processing, and complete transparency.” Such promises matter in lending.

6. No Unauthorized Activities: Only RBI-registered NBFCs can call themselves NBFCs and do lending as a main business. Any company not registered cannot legally collect deposits or offer loans to the public. If an outfit pretends to be an NBFC without license, any contract they make is unlawful. Always check an NBFC’s license status on the RBI website if in doubt.

In summary: Choosing a licensed NBFC like Kandhavillas Fincorp ensures you are dealing with a legally compliant, monitored, and accountable lender. Your gold, farm produce, or savings pledged against a loan is protected under law. You also benefit from RBI-backed fairness norms. This peace of mind is invaluable when borrowing. Remember, a loan is a partnership: pick a partner that has been vetted and is recognized by regulators.

Sources: RBI and industry publications explain that NBFCs are regulated by law. In practice, this means borrowers can trust licensed NBFCs to follow formal procedures and protect customers’ interests.