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Q64 (IAS/2026) Economy › Money, Banking & Inflation Official Key

Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India:
1. NBFCs cannot accept demand deposits.
2. All the NBFCs operating in India have to be registered with the RBI.
3. NBFCs form part of the payment and settlement system and can issue cheque drawn on itself.
4. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of deposit taking NBFCs.

Result
Your answer: —  ·  Correct: A

Explanation

Statement 1 is correct: Non-Banking Financial Companies (NBFCs) are prohibited from accepting demand deposits (such as savings and current accounts) as they are not full-fledged banks.

Statement 2 is incorrect: Not all NBFCs operating in India are registered with the Reserve Bank of India (RBI). To avoid dual regulation, certain categories of NBFCs are regulated by other authorities and exempted from RBI registration. For example, Venture Capital Funds and Merchant Banking companies are regulated by SEBI, Insurance companies by IRDAI, and Nidhi companies by the Ministry of Corporate Affairs.

Statement 3 is incorrect: Unlike commercial banks, NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on themselves.

Statement 4 is correct: The deposit insurance facility provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC) covers deposits in commercial and cooperative banks but is not available to depositors of deposit-taking NBFCs.

Therefore, only statements 1 and 4 are correct.

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PROVENANCE & STUDY PATTERN

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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India: 1. NBFCs cannot accept demand deposits. 2. All…
At a glance
Origin: From standard books Fairness: High fairness Books / CA: 10/10 · 0/10
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This is a pure standard-book question testing the fundamental differences between Banks and NBFCs. If you have read any standard economy textbook (Vivek Singh or Nitin Singhania), this is a straightforward sitter. The focus is strictly on functional boundaries and regulatory exceptions.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Can Non-Banking Financial Companies (NBFCs) in India accept demand deposits?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 7: Money and Banking > EL DIFFERENCE BETWEEN BANKS AND NBFCs > p. 187
Presence: 5/5
“• Unlike Banks, NBFCs cannot accept demand deposits. • Unlike Banks, NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself. • Deposit Insurance Facility is not available to investors/depositors of NBFCs. • NBFCs are not required to maintain Reserve Ratios prescribed by RBI (CRR, SLR, etc.).”
Why this source?
  • NBFCs are prohibited from accepting demand deposits.
  • These entities do not form part of the payment and settlement system.
  • They are unable to issue cheques drawn on themselves.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 2.17 Indian Financial System > p. 81
Presence: 5/5
“• 1. The financial institutions in India are broadly divided into two categories viz. Banks and Non-Banking Financial Institutions (NBFI). The basic difference between a Bank and a NBFI is Banks accept demand deposits and NBFIs do not accept demand deposits. Banks issue cheques but NBFIs cannot issue cheques drawn on itself.• 2. Banks are classified into commercial and cooperative. Commercial banks operate on the commercial (profit) principles while the basis of operation for cooperative banks is on cooperative lines i.e., service to its members and the society. Cooperative banks provide a higher rate of interest on deposits as compared to commercial banks.• 3.”
Why this source?
  • The inability to accept demand deposits is the primary distinction between Banks and Non-Banking Financial Institutions.
  • Banks accept demand deposits while NBFIs do not.
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SIMILAR QUESTIONS

IAS · 2010 · Q24 Relevance score: 7.31

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 ?

CDS-II · 2022 · Q68 Relevance score: 6.54

Which one of the following statements about Non-Banking Financial Companies (NBFCs) is not correct?

IAS · 2024 · Q42 Relevance score: 5.10

Consider the following statements : 

1. In India, Non-Banking Financial Companies can access the Liquidity Adjustment Facility window of the Reserve Bank of India.

 2. In India, Foreign Institutional Investors can hold the Government Securities (G-Secs). 

3. In India, Stock Exchanges can offer separate trading platforms for debts.

 Which of the statements given above is/are correct ?

IAS · 2025 · Q4 Relevance score: 3.59

Consider the following statements : I. The Reserve Bank of India mandates all the listed companies in India to submit a Business Responsibility and Sustainability Report (BRSR). II. In India, a company submitting a BRSR makes disclosures in the report that are largely non-financial in nature. Which of the statements given above is/are correct?

CAPF · 2010 · Q62 Relevance score: 3.21

Consider the following statements : 1. Non Resident Indians (NRIs) can not maintain both Rupee and foreign currency accounts in India. 2. The National Commission for Women has recommended that registration of marriages of NRIs be made mandatory. Which of the statements given above is/ are correct ?