Non Banking Financial Companies (NBFCs)

Economic Affairs

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Indian Economy - Understanding the basics of Indian economic system

Consider the following statements about Non-bank financial companies (NBFCs)

1. These are financial institutions that provide banking services and hold a banking license issued by RBI.

2. NBFC cannot accept demand deposits.

3. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is availableto depositors of NBFCs.

Which of the statements given above is/are correct?

1 and 2 only

2 only

2 and 3 only

1, 2 and 3

Non-bank financial companies (NBFCs) are financial institutions that provide banking services without meeting the legal definition of a bank, i.e. one that does not hold a banking license.
The Reserve Bank of India is entrusted with the responsibility of regulating and supervising the Non-Banking Financial Companies by virtue of powers vested under Reserve Bank of India Act,1934.
NBFC cannot accept demand deposits (they can accept term deposits).
NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself.
Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
The NBFCs do the business of loans and advances, acquisition of shares, stock, bonds, debentures, securities issued by Government.