NBFCs and banks are both financial institutions that provide loans and other financial services. However, there are some key differences between them:
- License: Banks are regulated by the Reserve Bank of India (RBI) and must have a banking license. NBFCs are not required to have a banking license, but they are regulated by the RBI under the Non-Banking Financial Companies Act, 1997.
- Products and services: Banks can offer a wider range of products and services than NBFCs. Banks can accept deposits, provide loans, and offer other financial services, such as investment banking and insurance. NBFCs are more specialized and typically focus on a narrower range of products and services, such as housing finance or leasing.
- Regulation: Banks are subject to more regulation than NBFCs. This is because banks are considered to be more systemically important, meaning that their failure could have a significant impact on the financial system.
- Capital requirements: Banks are required to maintain higher capital requirements than NBFCs. This is because banks are considered to be more risky, as they are exposed to more credit risk.
MCQs on the difference between NBFCs and banks
- Which of the following is not a key difference between NBFCs and banks?
- License
- Products and services
- Regulation
- Capital requirements
- Which of the following institutions is required to have a banking license?
- NBFC
- Bank
- Both
- None
- Which of the following institutions is subject to more regulation?
- NBFC
- Bank
- Both
- None