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Activities of Non Banking Financial Companies (NBFC) are akin to that of banks but there are a few differences. Which of the following are correct regarding NBFCs?
1. NBFC cannot accept demand deposits.
2. Deposit insurance facility is not available to depositors of NBFCs.
3. NBFCs are part of the payment and settlement system.
1. NBFC cannot accept demand deposits.
2. Deposit insurance facility is not available to depositors of NBFCs.
3. NBFCs are part of the payment and settlement system.
Select the correct code from below.
- a)2 and 3 only
- b)1 and 3 only
- c)1 and 2 only
- d)All the above
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
Activities of Non Banking Financial Companies (NBFC) are akin to that ...
Major difference between Banks and NBFCs are as follows:
i. NBFC cannot accept demand deposits.
ii. NBFCs do not form part of the payment and settlement system and cannot issue chequesdrawn on itself.
iii. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is notavailable to depositors of NBFCs, unlike in case of banks.
Most Upvoted Answer
Activities of Non Banking Financial Companies (NBFC) are akin to that ...
Activities of Non-Banking Financial Companies (NBFC)
Non-Banking Financial Companies (NBFCs) are financial institutions that provide banking services and financial products similar to banks, but there are a few differences between the two. NBFCs play a crucial role in the financial system by catering to the diverse financial needs of individuals and businesses, especially those who may not have access to traditional banking services.
Correct statements regarding NBFCs:
1. NBFCs cannot accept demand deposits: Unlike banks, NBFCs are not allowed to accept demand deposits. Demand deposits are funds that can be withdrawn by the depositor at any time without any prior notice. This restriction ensures that NBFCs do not directly compete with traditional banks in terms of deposit mobilization.
2. Deposit insurance facility is not available to depositors of NBFCs: Unlike bank deposits that are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a certain limit, deposits with NBFCs do not enjoy the same level of deposit insurance protection. This means that if an NBFC fails or faces financial distress, depositors may not be able to recover their entire deposit amount.
3. NBFCs are part of the payment and settlement system: NBFCs play a crucial role in the payment and settlement system by facilitating various financial transactions. They offer services such as money transfer, issuance of prepaid payment instruments, and providing merchant services. These activities contribute to the smooth functioning of the payment and settlement system in the country.
Therefore, the correct code regarding NBFCs is (c) 1 and 2 only, as NBFCs cannot accept demand deposits and deposit insurance facility is not available to their depositors. However, NBFCs are an integral part of the payment and settlement system.
It is important to note that while NBFCs may engage in activities similar to banks, they are regulated by the Reserve Bank of India (RBI) under the provisions of the Reserve Bank of India Act, 1934. The regulatory framework for NBFCs aims to maintain financial stability, protect the interests of depositors, and ensure the soundness of the financial system.
Non-Banking Financial Companies (NBFCs) are financial institutions that provide banking services and financial products similar to banks, but there are a few differences between the two. NBFCs play a crucial role in the financial system by catering to the diverse financial needs of individuals and businesses, especially those who may not have access to traditional banking services.
Correct statements regarding NBFCs:
1. NBFCs cannot accept demand deposits: Unlike banks, NBFCs are not allowed to accept demand deposits. Demand deposits are funds that can be withdrawn by the depositor at any time without any prior notice. This restriction ensures that NBFCs do not directly compete with traditional banks in terms of deposit mobilization.
2. Deposit insurance facility is not available to depositors of NBFCs: Unlike bank deposits that are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a certain limit, deposits with NBFCs do not enjoy the same level of deposit insurance protection. This means that if an NBFC fails or faces financial distress, depositors may not be able to recover their entire deposit amount.
3. NBFCs are part of the payment and settlement system: NBFCs play a crucial role in the payment and settlement system by facilitating various financial transactions. They offer services such as money transfer, issuance of prepaid payment instruments, and providing merchant services. These activities contribute to the smooth functioning of the payment and settlement system in the country.
Therefore, the correct code regarding NBFCs is (c) 1 and 2 only, as NBFCs cannot accept demand deposits and deposit insurance facility is not available to their depositors. However, NBFCs are an integral part of the payment and settlement system.
It is important to note that while NBFCs may engage in activities similar to banks, they are regulated by the Reserve Bank of India (RBI) under the provisions of the Reserve Bank of India Act, 1934. The regulatory framework for NBFCs aims to maintain financial stability, protect the interests of depositors, and ensure the soundness of the financial system.
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Activities of Non Banking Financial Companies (NBFC) are akin to that of banks but there are a few differences. Which of the following are correct regarding NBFCs?1. NBFC cannot accept demand deposits.2. Deposit insurance facility is not available to depositors of NBFCs.3. NBFCs are part of the payment and settlement system.Select the correct code from below.a)2 and 3 onlyb)1 and 3 onlyc)1 and 2 onlyd)All the aboveCorrect answer is option 'C'. Can you explain this answer?
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Activities of Non Banking Financial Companies (NBFC) are akin to that of banks but there are a few differences. Which of the following are correct regarding NBFCs?1. NBFC cannot accept demand deposits.2. Deposit insurance facility is not available to depositors of NBFCs.3. NBFCs are part of the payment and settlement system.Select the correct code from below.a)2 and 3 onlyb)1 and 3 onlyc)1 and 2 onlyd)All the aboveCorrect answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Activities of Non Banking Financial Companies (NBFC) are akin to that of banks but there are a few differences. Which of the following are correct regarding NBFCs?1. NBFC cannot accept demand deposits.2. Deposit insurance facility is not available to depositors of NBFCs.3. NBFCs are part of the payment and settlement system.Select the correct code from below.a)2 and 3 onlyb)1 and 3 onlyc)1 and 2 onlyd)All the aboveCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Activities of Non Banking Financial Companies (NBFC) are akin to that of banks but there are a few differences. Which of the following are correct regarding NBFCs?1. NBFC cannot accept demand deposits.2. Deposit insurance facility is not available to depositors of NBFCs.3. NBFCs are part of the payment and settlement system.Select the correct code from below.a)2 and 3 onlyb)1 and 3 onlyc)1 and 2 onlyd)All the aboveCorrect answer is option 'C'. Can you explain this answer?.
Activities of Non Banking Financial Companies (NBFC) are akin to that of banks but there are a few differences. Which of the following are correct regarding NBFCs?1. NBFC cannot accept demand deposits.2. Deposit insurance facility is not available to depositors of NBFCs.3. NBFCs are part of the payment and settlement system.Select the correct code from below.a)2 and 3 onlyb)1 and 3 onlyc)1 and 2 onlyd)All the aboveCorrect answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Activities of Non Banking Financial Companies (NBFC) are akin to that of banks but there are a few differences. Which of the following are correct regarding NBFCs?1. NBFC cannot accept demand deposits.2. Deposit insurance facility is not available to depositors of NBFCs.3. NBFCs are part of the payment and settlement system.Select the correct code from below.a)2 and 3 onlyb)1 and 3 onlyc)1 and 2 onlyd)All the aboveCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Activities of Non Banking Financial Companies (NBFC) are akin to that of banks but there are a few differences. Which of the following are correct regarding NBFCs?1. NBFC cannot accept demand deposits.2. Deposit insurance facility is not available to depositors of NBFCs.3. NBFCs are part of the payment and settlement system.Select the correct code from below.a)2 and 3 onlyb)1 and 3 onlyc)1 and 2 onlyd)All the aboveCorrect answer is option 'C'. Can you explain this answer?.
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