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Q107 (CAPF/2022) Economy › Money, Banking & Inflation › Banking structure Answer Verified

A non-banking financial company cannot

Result
Your answer: —  Â·  Correct: D
Explanation

A Non-Banking Financial Company (NBFC) is a financial institution engaged in the business of loans, advances, and the acquisition of shares or bonds [2]. While NBFCs perform activities akin to banks, they are subject to specific regulatory restrictions under the Reserve Bank of India Act, 1934. Unlike commercial banks, NBFCs cannot accept demand deposits (such as savings or current accounts) which are withdrawable on demand [3]. Furthermore, NBFCs do not form part of the payment and settlement system and, consequently, cannot issue cheques drawn on themselves [3]. While they are permitted to give loans, make investments, and borrow from banks to fund their operations, the inability to accept demand deposits and issue cheques remains a fundamental distinction between NBFCs and traditional banking institutions [2].

Sources

  1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > NON-BANKING FINANCIAL COMPANIES > p. 184
  2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > NBFCs Regulated by RBI > p. 185
  3. [3] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.17 Indian Financial System > p. 81
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SIMILAR QUESTIONS

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