Non-Banking Financial Companies (NBFCs) are fast emerging as an important segment of Indian Financial System. It is an heterogeneous group of institutions other than commercial and co-operative banks performing financial intermediation in a variety of ways,like accepting deposits, making loans and advances,leasing, hire purchases etc.
NBFCs raise funds from the public directly or indirectly and lend them to the ultimate spenders.They advances loans to the various wholesale and retail traders, small-scale industries and self employed persons.Thus they have broadened and diversified the range of products and services offered by a Financial sector.
Difference between NBFCs and Banks:
- An NBFCs can’t accept demand deposits.
- An NBFCs is not a part of the payment and settlement system and as such an NBFCs cannot issue cheques drawn on itself.
- Deposit insurance facility of deposit insurance and credit, guarantee corporation is not available for NBFC depositors unlike in case of Banks.