Non-Banking Financial Company - NBFC

Non-Banking Financial Company - NBFC

• Non-banking financial companies, or NBFCs, are financial institutions that provide banking services, but do not hold a banking license. These institutions are not allowed to take deposits from the public. Nonetheless, all operations of these institutions are still covered under banking regulations

• NBFCs do offer all sorts of banking services, such as loans and credit facilities, retirement planning, money markets, underwriting, and merger activites. The number of non-banking financial companies has expanded greatly in the last several years as venture capital companies, retail and industrial companies have entered the lending business. 

  what is the difference between a bank and a non banking        finance company?

•  what is the difference between a bank and a non banking finance company? Say for example, what would be the difference between ICICI Bank and Mahindra Finance. Yes, banks and other non banking financial institutions differ in some functional area.
• NBFCs lend and make investments and hence their activities are akin to that of banks.
  
  However there are a few differences as given below:
  
• NBFC cannot accept demand deposits;
• NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself
• NBFC cannot issue Demand Drafts like banks
• Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
• While banks are incorporated under banking companies act, NBFC is incorporated under company act of 1956

Other features of NBFCs are

• The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.
• The deposits with NBFCs are not insured.
• The repayment of deposits by NBFCs is not guaranteed by RBI.

  Banks are incorporated under banking companies act but while as NBFC are incorporated under company act of 1956....Banks can issue cheques on its name but while as NBFC cannot do so.....Banks can accept deposit from general public contrary Nbfc cannot do the same.

• base rate : Base rate is the minimum rate at which a bank can lend