Banks alone cannot cater all the sections of the society. That is why NBFC came into being, both in public and private sector, to complement banks in providing finance to people.
• Banks are authorized under the government financial intermediary that purpose at providing banking services to the general people. Whereas NBFCs provides banking services to people without carrying a bank license. • An NBFC is incorporated under the Companies Act whereas a bank is registered under Banking Regulation Act, 1949. • NBFCs are not eligible to accept deposits which are repayable on demand whereas banks which accept demand deposits. • NBFC allows foreign Investments up to 100%. Whereas in case of private sector banks they are eligible for foreign investment, but which would be not more than 74%. • Banks are an essential part of payment and settlement cycle while NBFC is not a part of this system. • It is necessary for banks to maintain reserve ratios like CRR or SLR. Whereas in case of NBFC it is not required to maintain reserve ratios. • Deposit insurance facility is allowed to the depositors by Deposit Insurance and Credit Guarantee Corporation (DICGC). In case of NBFC, this type of facility shall not be available.
A NBFC cannot accept demand deposits.
A NBFC is not a part of the payment and settlement system and as such a NBFC cannot issue cheques drawn on itself.
Deposit insurance facility of the Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors, unlike banks.
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