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Q24 (IAS/2010) Economy › Money, Banking & Inflation › Banking regulation reforms Answer Verified

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 ?

Result
Your answer: —  ·  Correct: B
Explanation

Statement (1) is incorrect. NBFCs are defined to include companies engaged in acquisition of shares, debentures, bonds or securities issued by the Government or local authorities and hence may transact in government securities as part of their investment business [1]. Statement (2) is correct. Unlike banks, NBFCs cannot accept demand deposits or offer cheque-withdrawable savings/demand accounts; they do not form part of the payment and settlement system and deposit insurance is not available to their depositors [2]. Therefore only statement 2 is correct, making option “2 only” the right choice.

Sources

  1. [1] https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=1167
  2. [2] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > EL DIFFERENCE BETWEEN BANKS AND NBFCs > p. 187
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