What is the Difference Between a Bank and NBFC?

By Shivank Goel|Updated : November 8th, 2022

The primary difference between a bank and an NBFC is that a bank is a government-authorized financial intermediary that provides banking services to the public. An NBFC, or 'Non-Banking Financial Company,' on the other hand, is a company that provides financial/banking services to people without having a bank licence. Under the Companies Act of 1956, NBFCs were formed.

Differences between a Bank and an NBFC

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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FAQs on Difference Between a Bank and NBFC

  • The difference between a bank and an NBFC is that a bank is a government-authorized entity that provides banking services to the people whereas an NBFC is a company providing banking services to the people without holding a bank license.

  • No, unlike a bank, NBFCs can not issue any demand drafts.

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