NBFCs — Set 1
Banking · NBFC · Questions 1–10 of 60
What is the full form of NBFC in the context of the Indian financial system?
Correct Answer: C. Non-Banking Financial Company
NBFC stands for Non-Banking Financial Company. These are institutions that provide various financial services similar to banks but do not hold a full banking license. They are registered under the Companies Act of 1956 or 2013.
Under which act are NBFCs primarily registered in India?
Correct Answer: A. Companies Act, 1956/2013
NBFCs are primarily registered as companies under the Companies Act, 1956 or 2013. This registration allows them to engage in the business of loans, advances, and acquisition of shares. However, their financial activities are regulated by the Reserve Bank of India.
Which of the following is a core difference between a bank and an NBFC?
Correct Answer: B. NBFCs cannot accept demand deposits.
A major distinction is that NBFCs cannot accept demand deposits like savings or current accounts. Banks use these deposits as a primary source of funds for daily transactions. NBFCs typically rely on term deposits or market borrowings.
Do NBFCs form a part of the Payment and Settlement System in India?
Correct Answer: B. No, they cannot issue cheques drawn on
NBFCs do not form part of the payment and settlement system. Consequently, they cannot issue cheques drawn on themselves like commercial banks do. This limitation defines their role as financial intermediaries rather than full payment service providers.
Which facility is NOT available to depositors of NBFCs, unlike bank depositors?
Correct Answer: D. Deposit Insurance facility
Depositors in NBFCs do not have the protection of the Deposit Insurance and Credit Guarantee Corporation (DICGC). In banks, deposits up to 5 lakh rupees are insured against failure. This makes bank deposits relatively safer for small retail investors.
What is the minimum Net Owned Fund (NOF) required for an NBFC to commence business (as per standard general rules)?
Correct Answer: B. Rs. 2 Crore
The standard minimum Net Owned Fund (NOF) required for the registration of a new NBFC is 2 crore rupees. This requirement ensures that the entity has sufficient capital to support its financial activities. Certain specialized categories might have different capital requirements.
An NBFC is prohibited from carrying out which of the following activities?
Correct Answer: A. Industrial activity
The business of an NBFC does not include any institution whose principal business is agricultural or industrial activity. They are also restricted from the purchase or sale of any goods (other than securities). Their focus is strictly on financial intermediation and services.
Which type of NBFC is specifically engaged in the business of acquiring shares and securities?
Correct Answer: A. Investment Company
An Investment Company is an NBFC whose principal business is the acquisition of securities. These securities include shares, stocks, bonds, and debentures issued by the government or local authorities. They play a vital role in the mobilization of capital in the economy.
What is an NBFC-MFI primarily focused on?
Correct Answer: D. Microfinance and small loans
NBFC-MFI stands for Non-Banking Financial Company-Micro Finance Institution. They provide small-scale credit to low-income individuals who do not have access to formal banking. These institutions are critical for promoting financial inclusion in rural areas.
Which category of NBFC provides at least 75% of its total assets as infrastructure loans?
Correct Answer: B. NBFC-IFC
Infrastructure Finance Company (NBFC-IFC) deploys at least 75 percent of its total assets in infrastructure loans. These companies must have a minimum Net Owned Fund of 300 crore rupees. They support large-scale national projects like roads and power plants.