NBCFs and Banks each act as monetary intermediaries and provide fairly similar services. But, there area unit several points of distinction. There area unit terribly tight licensing laws for banks as compared to NBFCs.
What is associate NBFC?
Principal business activities of a Non- Banking monetary Company accommodates disposition or monetary leasing or rent purchase, acceptive deposit or acquisition of shares, stocks, bonds, etc. To initiate any business {they area unit|they're} needed to amass a license from tally and that they are regulated by tally.
Based on Liability, NBFC is Deposit-taking or Non-deposit taking. NBFC is of following categories:
Loan Company
Asset nondepository financial institutionInvestment Company
What is a Bank?
Banks perform activities like granting credit, demand deposits and supply withdrawals, interest payment, cheque clearing and alternative general utility services to their customers. They dominate the monetary sector of the country and supply a link as a monetary negotiant between borrowers and depositors.
Key variations between NBFC and Bank
Now that we've singly analyzed the activities undertaken by each these establishments, allow us to analyze however NBFCs and banks disagree in nature and their functionalities.
NBFC is initial incorporated as a corporation beneath the Indian firms Act, 1956 so apply for NBFC license from tally, on the opposite hand bank is registered beneath Banking Regulation Act, 1949.
Banks area unit government approved monetary negotiant that area unit chartered to receive deposits and grant credit to the general public. However, NBFC could be a company that gives banking services to smaller sections of the society while not holding a bank license.
Banks area unit approved to just accept demand deposits, however NBFCs don't seem to be approved to just accept deposits that area unit owed on demand. As NBFCs area unit established as firms beneath firms Act, 2013 they're allowed to just accept up to 100% foreign investments. But, banks area unit will solely settle for foreign investments up to seventy four of their total quantity.
Like a bank, NBFCs don't kind associate integral a part of payment and settlement cycle within the country. RBI mandates the upkeep of reserve ratios like CRR or SLR by banks. NBFC haven't any such obligation.
Deposit Insurance and Credit Guarantee Corporation (DICGC) give deposit insurance facility to the depositors of banks. Such facility is inaccessible within the case of NBFC. NBFC isn't concerned in credit creation like banks do for his or her customers. Banks give services like bill of exchange facility, the difficulty of travellers cheque, transfer of funds, etc. Such services don't seem to be provided by NBFC.
Banks area unit government approved monetary negotiant that area unit chartered to receive deposits and grant credit to the general public. However, NBFC could be a company that gives banking services to smaller sections of the society while not holding a bank license.
Banks area unit approved to just accept demand deposits, however NBFCs don't seem to be approved to just accept deposits that area unit owed on demand. As NBFCs area unit established as firms beneath firms Act, 2013 they're allowed to just accept up to 100% foreign investments. But, banks area unit will solely settle for foreign investments up to seventy four of their total quantity.
Like a bank, NBFCs don't kind associate integral a part of payment and settlement cycle within the country. RBI mandates the upkeep of reserve ratios like CRR or SLR by banks. NBFC haven't any such obligation.
Deposit Insurance and Credit Guarantee Corporation (DICGC) give deposit insurance facility to the depositors of banks. Such facility is inaccessible within the case of NBFC. NBFC isn't concerned in credit creation like banks do for his or her customers. Banks give services like bill of exchange facility, the difficulty of travellers cheque, transfer of funds, etc. Such services don't seem to be provided by NBFC.
