Question

Q. Which of the following is/are correct about Non-Banking Financial Companies (NBFCs)?

Which of the statements given above is/are correct?

• A. 2 and 3 only
• B. 1 and 2 only
• C. 1 only
• D. 1, 2 and 3

Answer 1

The correct option is B 1 and 2 only

Explanation:

• Statement 1 is correct. NBFCs cannot accept demand deposits.
• Statement 2 is correct. NBFC depositors are not covered under the deposit insurance facilities.
• Statement 3 is incorrect. NBFCs can not issue cheques or draw a cheque on their own.

Difference between NBFCs and Banks:

Point of difference	NBFCs	Banks
Demand deposits	NBFC cannot accept demand deposits.	Banks can accept demand deposits.
Drawing a cheque	NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on themselves.	Banks form part of the payment and settlement system and can issue cheques drawn on themselves.
Deposit insurance facility	The deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs.	The deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is available to depositors of Banks.
Act of regulation	NBFCs are incorporated under the company act of 1956.	Banks are incorporated under The Banking Regulation Act 1949.