How Is NBFC Different From a Bank?

NBCFs and Banks each act as financial intermediaries and provide somewhat identical products and services. However, there are hundreds capabilities of distinction. There are very stringent licensing regulations for banks as when in comparison with NBFCs. What is an NBFC? Basic commerce activities of a Non-Banking Financial Company consist of lending or financial leasing or […]



NBCFs and Banks each act as financial intermediaries and provide somewhat identical products and services. However, there are hundreds capabilities of distinction. There are very stringent licensing regulations for banks as when in comparison with NBFCs.

What is an NBFC?
Basic commerce activities of a Non-Banking Financial Company consist of lending or financial leasing or hire accumulate, accepting deposit or acquisition of shares, shares, bonds, and plenty others. To originate any commerce they are required to safe a license from RBI they are likely to be regulated by RBI.

Consistent with Liability, NBFC would possibly also additionally be Deposit-taking or Non-deposit taking. NBFC would possibly also additionally be of following courses:

  • Mortgage Company
  • Asset Finance Company
  • Investment Company

What is a Financial institution?
Banks have activities enjoy granting credit score, search data from deposits and provide withdrawals, curiosity rate, test clearing and plenty of usual utility products and services to their possibilities.

They dominate the financial sector of the nation and provide a hyperlink as a financial intermediary between borrowers and depositors.

Key Variations between NBFC and Financial institution
Now that we have individually analyzed the activities undertaken by each these institutions, enable us to analyze how NBFCs and banks fluctuate in nature and their functionalities.

  • NBFC is first incorporated as a firm beneath the Indian Firms Act, 1956 and then educate for NBFC license from RBI, on the plenty of hand financial institution is registered beneath Banking Regulation Act, 1949.
  • Banks are authorities licensed financial intermediary that are chartered to receive deposits and grant credit score to the public. On the opposite hand, NBFC is a firm that offers banking products and services to smaller sections of the society without keeping a financial institution license.
  • Banks are licensed to accept search data from deposits, but NBFCs will no longer be licensed to accept deposits that are repayable on search data from.
  • As NBFCs are established as corporations beneath Firms Act, 2013 they are allowed to accept as much as 100% international investments. However, banks are can finest accept international investments as much as 74% of their total amount.
  • Relish a financial institution, NBFCs construct no longer invent an integral segment of rate and settlement cycle in the nation.
  • RBI mandates the maintenance of reserve ratios enjoy CRR or SLR by banks. NBFC haven’t any longer have this kind of duty.
  • Deposit Insurance coverage and Credit Mumble Company (DICGC) provide deposit insurance coverage facility to the depositors of banks. Such facility is unavailable in the case of NBFC.
  • NBFC is no longer focused on credit score advent enjoy banks construct for their possibilities.
  • Banks provide products and services enjoy overdraft facility, the say of travelers test, switch of funds, and plenty others. Such products and services will no longer be supplied by NBFC.
  • NBFCs will no longer be allowed to say checks drawn on itself enjoy banks can.
2020pro-20
US