What is the difference between a bank and NBFC?

Non Banking Financial Companies (NBFC’s) were incorporated under the Company Act of 1956 whereas the Banks were incorporated under the Banking Companies Act. Banks can issue Demand Drafts, but NBFC’s are not allowed to issue Demand Drafts. Unlike Banks, NBFC cannot accept Demand Deposits. You can read about the Types of Non Banking Financial Institutions – Functions & Objectives in the given link.

The Fixed deposits of banks are not rated by rating agencies, whereas the fixed deposits of NBFC’s are usually rated by rating agencies.

Further readings:

  1. NBFCs & IBC: RSTV – Big Picture Discussion on the RBI’s move to resolve NBFCs under insolvency law
  2. Insolvency And Bankruptcy Code (IBC) – IBC Amendment Bill 2021 [UPSC Notes GS III]

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