Economics • Banking & FinanceMedium
What distinguishes Non-Banking Financial Companies from scheduled commercial banks in the Indian financial architecture?
A. Non-Banking Financial Companies are legally permitted to accept demand deposits payable on demand like checking accounts
B. Non-Banking Financial Companies cannot issue checks drawn upon themselves and do not form part of the payment and settlement system✓ Correct Answer
C. Non-Banking Financial Companies are regulated exclusively by the Securities and Exchange Board of India rather than the central bank
D. Non-Banking Financial Companies are statutorily exempt from maintaining any form of capital adequacy norms
💡 Solution & Explanation
Non-Banking Financial Companies provide various financial services and credit facilities but cannot accept demand deposits payable on demand or issue checks drawn on themselves. Consequently, they do not participate directly in the payment and settlement system managed by the central bank. They are registered under the Companies Act and regulated by the Reserve Bank of India under Chapter III B of the Reserve Bank of India Act, 1934. Commercial banks, by contrast, perform both deposit-taking and payment-settlement functions.
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