Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India:
- 1.NBFCs cannot accept demand deposits.
- 2.All the NBFCs operating in India have to be registered with the RBI.
- 3.NBFCs form part of the payment and settlement system and can issue cheque drawn on itself.
- 4.Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of deposit taking NBFCs.
Which of the statements given above is/are correct?
Answer & explanation
Answer: (a) 1 and 4
RBI’s FAQ on NBFCs lists three differences from banks: no demand deposits, no place in the payment and settlement system (so no cheques drawn on themselves), and no DICGC deposit insurance. Statement 2 fails because some NBFCs regulated by other regulators are exempt from RBI registration.
- ✓ 1. NBFCs cannot accept demand deposits.
- ✗ 2. To avoid dual regulation, certain categories regulated by other regulators are exempt from registration with the RBI, for example NBFCs such as stock broking companies registered with SEBI, insurance companies, Nidhi companies and chit funds.
- ✗ 3. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on themselves.
- ✓ 4. DICGC deposit insurance is not available to depositors of deposit-taking NBFCs.
Remember · NBFC vs bank: no demand deposits, no cheques drawn on itself, no payment-system membership, no DICGC cover. Not every NBFC needs RBI registration.
Sources
- RBI FAQs: All you wanted to know about NBFCs (differences from banks) ↗ “NBFCs cannot accept demand deposits; (ii) 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 (DICGC) is not available to depositors of deposit taking NBFCs. … in order to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with the Reserve Bank”
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