A Non-Banking Financial Company (NBFC) is a financial institution that provides various services such as loans, advances, leasing, hire-purchase, and insurance, but does not engage in activities such as agriculture, industrial operations, or the sale of goods or services. It is also a company registered under the Companies Act 1956 and is not allowed to accept deposits from the public. Additionally, NBFCs are also known as Residuary non-banking company. What are the differences between banks and NBFCs, as both perform similar functions such as lending and investing?
1. NBFCs cannot accept demand deposits.
2. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on themselves.
3. The deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in the case of banks.