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.
Table of content
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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