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What is the Difference Between a Bank and NBFC?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

The difference between a Bank and NBFC is that the former is a government-authorized financial intermediary, while the latter operates without having a bank license. A bank provides banking services to the public. An NBFC, on the other hand, is a company that provides financial/banking services to people without having bank authorization.

Difference Between a Bank and NBFC

NBFC stands for Non-Banking Financial Institution in India and has been formed and registered under the Companies Act of 1956. The major difference between NBFC and Bank has been illustrated in the table given below:

Bank NBFC
Incorporated under Banking Regulations Act, 1949 Incorporated under the Companies Act, 1956
Is a government-authorized organization Doesn’t need a bank license to operate
Can issue Demand Draft Can not issue Demand Draft
Creates credit Does not create credit
Provides transaction services Does not provide transaction services
Can accept demand deposits Cannot accept demand deposits
Form part of the payment and settlement system Does not form part of the payment and settlement system
Can make cheques payable to itself Cannot make cheques payable to itself
Depositors can use the Deposit Insurance and Credit Guarantee Corporation’s deposit insurance facility Depositors cannot use the Deposit Insurance and Credit Guarantee Corporation’s deposit insurance facility

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