An often heard question from the laymen is what is the difference between a bank and non-banking finance company? Like for an example- There is a difference between ICICI bank and Mahindra Finance. Yes! Banks and other non-banking financial institutions differ in some functional area.
Banks and NBFCs are basically financial intermediaries. Banks are regulated under the Banking Regulation Act though most of the laws of Companies Act are also applicable to banks. NBFCs are registered under the Companies Act. Both are regulated by the RBI. Main differences between banks and NBFCs are:
Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself
Bank is a financial institution whose liabilities (i.e., deposits) are widely accepted as a means of payment in the settlement of debt. On the very other hand, on-bank financial intermediaries are those institutions whose liabilities are not accepted as means of payment for the settlement of debt.
Banks are termed as creators of credit through money multiplier activity whereas NBFCs are not.
|Initial capital||Min. Rs. 5 Crore||Min. Rs. 10 Lakh||Min. Rs. 2 Crore|
|Members||7/2||7 at the time of registration and after registration min 200.||7/2|
|Recommended for||Poor and lower income group.||Member based Mutual benefit society||Commercial Banking Business|
|Governing Laws||RBI Act. 1934||Companies Act. 2013||RBI Act. 1934|
|Operations||PAN India||PAN India||PAN India|
|Loan Limit||Maximum Rs. 50,000||0||0|
|Registration time||Maximum 180 Working days||Maximum 20 Working days||Maximum 90 Working days|
|Registering Authority||ROC & RBI||Registrar of Companies||ROC & RBI|