NBFC MBA Notes

[pooja]

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I am doing MBA degree and I am in final year making project report on the topic Non-Banking Financial Company (NBFC) searching for notes. Will you provide details about NBFC MBA Notes along with Difference between BANK & NBFC so I can put details in my report?

[pawan]

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Indian government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business.

NBFCs can be classified into two broad categories:

NBFCs accepting public deposit (they hold a deposit accepting certificate of registration).
NBFCs not accepting/holding public deposit (they do not hold such a certificate).

Difference between BANK & NBFC:

NBFCs lend and make investments and hence their activities are similar 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

Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

Non-Banking Financial Companies are doing functions akin to that of banks, however there are a few differences:

An NBFC cannot accept demand deposits (which are payable on demand), like the savings and current accounts.

It is not a part of the payment and settlement system and as such cannot issue cheques to its company customers and

Deposit insurance facility is not available for NBFC depositors unlike in case of banks (It means the public deposits with them are unsecured. In case a NBFC defaults in repayment of deposit, the depositor can approach Company Law Board or Consumer Forum or file a civil suit to recover the deposits).