NBFCs — Set 2
Banking · NBFC · Questions 11–20 of 60
NBFCs that accept public deposits are known as?
Correct Answer: C. NBFC-D
NBFCs authorized to accept deposits from the public are categorized as NBFC-D (Deposit-taking). These entities are subject to stricter regulations regarding liquidity and capital adequacy. Most NBFCs in India are actually non-deposit-taking entities.
What does 'SI' stand for in 'NBFC-ND-SI'?
Correct Answer: D. Systemically Important
SI stands for Systemically Important. Non-deposit taking NBFCs with an asset size of 500 crore rupees or more are classified as systemically important. Their failure could potentially have a ripple effect on the entire financial system.
Which organization regulates 'Housing Finance Companies' in India?
Correct Answer: A. Reserve Bank of India (RBI)
While the National Housing Bank (NHB) was the original regulator, the oversight of Housing Finance Companies was shifted to the RBI in 2019. This was done to ensure better coordination and uniform regulation of all financial intermediaries. NHB now focuses more on refinancing and development.
Which entity regulates NBFCs that are primarily engaged in Venture Capital Fund activities?
Correct Answer: A. SEBI
Venture Capital Funds are regulated by the Securities and Exchange Board of India (SEBI). Although they are technically non-banking financial entities, their market nature puts them under SEBI's jurisdiction. This avoids regulatory overlap between the RBI and SEBI.
Nidhi Companies are a type of NBFC regulated by which authority?
Correct Answer: A. Ministry of Corporate
Nidhi Companies are regulated by the Ministry of Corporate Affairs under Section 406 of the Companies Act. They deal only with their members for the purpose of cultivating the habit of thrift and savings. The RBI only gives directions to them related to deposit-taking activities.
What is the maximum period for which an NBFC can accept public deposits?
Correct Answer: D. 60 months
NBFCs can accept public deposits for a maximum period of 60 months (5 years). They are not allowed to accept deposits for a period less than 12 months. This ensures that they focus on medium-term resource mobilization.
Which of the following describes an 'NBFC-Factor'?
Correct Answer: C. A company engaged in the principal business
An NBFC-Factor is a non-deposit taking entity engaged in the principal business of factoring. Factoring involves purchasing the receivables (invoices) of a business at a discount. At least 50% of its total assets should be dedicated to this factoring business.
Which NBFC category is involved in providing credit specifically to individuals or groups in rural areas for livelihood?
Correct Answer: B. NBFC-MFI
NBFC-MFI (Micro Finance Institutions) target rural and semi-urban poor to provide small loans without collateral. They often use the 'Joint Liability Group' model to ensure repayment. These institutions are vital for reducing the dependence of the poor on unorganized moneylenders.
What is the 'Principal Business' criteria for an entity to be registered as an NBFC with the RBI?
Correct Answer: A. Financial assets must be 50% of total assets and income
This is known as the 50-50 test for NBFCs. An entity is an NBFC if its financial assets constitute more than 50% of its total assets and its income from financial assets is more than 50% of its gross income. This quantitative test helps RBI identify which companies fall under its regulatory net.
Which specialized NBFC is established to buy 'bad loans' from banks?
Correct Answer: A. Asset Reconstruction Company (ARC)
Asset Reconstruction Companies (ARCs) are specialized NBFCs that purchase Non-Performing Assets (NPAs) from banks. By buying bad loans, they help banks clean up their balance sheets and focus on core banking. ARCs then attempt to recover the debt through various legal and financial mechanisms.