Non-banking financial institutions and capital market

Not all finance flows through banks. Non-banking financial institutions (NBFIs) — insurance companies, mutual funds, housing finance firms, microfinance institutions — lend, invest and insure without taking demand deposits, and the capital market lets firms raise long-term funds directly from savers through shares and bonds. Worked example: a company issuing 1000 shares at 100 each raises 100,000 of equity capital without borrowing; its shareholders own the firm and share its profits and risks, unlike bondholders who are owed fixed interest.