With reference to the Non-banking Financial Companies (NBFCs) in India, consider the following statements : 1. They cannot engage in the acquisition of securities issued by the government. 2. They cannot accept demand deposits like Savings Account. Which

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Q: 25 (IAS/2010)
With reference to the Non-banking Financial Companies (NBFCs) in India, consider the following statements :
1. They cannot engage in the acquisition of securities issued by the government.
2. They cannot accept demand deposits like Savings Account.
Which of the statements given above is/are correct ?

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,124,178,49,124,87,42

keywords: 

{'banking financial companies': [0, 0, 1, 0], 'nbfcs': [0, 0, 1, 0], 'securities': [0, 0, 0, 1], 'demand deposits': [0, 0, 1, 0], 'acquisition': [1, 0, 2, 7], 'savings account': [0, 0, 1, 0], 'india': [8, 1, 7, 13]}

Non-banking Financial Companies (NBFCs) in India are financial institutions that provide banking services without meeting the legal definition of a bank.

Option 1 states that NBFCs cannot engage in the acquisition of securities issued by the government. This is incorrect because NBFCs are allowed to invest in government securities as part of their business activities.

Option 2 declares that NBFCs cannot accept demand deposits like Savings Account. This is correct. Unlike traditional banks, NBFCs do not have a banking license, which is a requirement for the acceptance of deposits that are repayable on demand, such as in a Savings Account. NBFCs generally raise funds via term deposits and debentures; they do not offer a savings type account.

So, the correct answer is indeed "2 only", dismissing option 1 but affirming the validity of option 2.

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