NBFCs — Set 4
Banking · NBFC · Questions 31–40 of 60
Which of the following is a 'Hybrid' NBFC that provides both banking and non-banking services through subsidiaries?
Correct Answer: C. Core Investment
Core Investment Companies (CICs) are specialized NBFCs that hold investments in their group companies. They generally do not trade in their holdings and focus on long-term investment. They act as holding companies for large financial conglomerates.
What is the minimum asset size for an NBFC to be called 'Systemically Important'?
Correct Answer: D. Rs. 500 Crore
NBFCs with an asset size of 500 crore rupees or more as per the last audited balance sheet are systemically important. They have more stringent reporting and capital requirements due to their size. The RBI monitors them closely to prevent any systemic risk to the economy.
Can NBFCs accept NRI deposits?
Correct Answer: C. No, they are generally not allowed to accept NRI
NBFCs are generally not permitted to accept deposits from Non-Resident Indians (NRIs). This is a policy designed to manage foreign exchange flows and maintain domestic financial stability. Banks, however, have specific schemes like NRE and NRO accounts for this purpose.
What is the 'Statutory Reserve' requirement for NBFCs in India?
Correct Answer: C. They must transfer 20% of net profit to a reserve fund.
Under Section 45-IC of the RBI Act, every NBFC must create a reserve fund and transfer at least 20% of its net profit every year. This ensures that the company builds a buffer of internal funds over time. This reserve helps in maintaining the financial health of the institution.
Which type of NBFC provides financial assets against a security interest in movable or immovable property?
Correct Answer: D. Asset Finance Company
An Asset Finance Company (AFC) is an NBFC whose principal business is the financing of physical assets that support productive activity. These assets include automobiles, tractors, lathe machines, and generators. They help in the mechanization and development of various sectors.
Which of the following is NOT a type of loan provided by an NBFC?
Correct Answer: D. Current Account Overdraft
Current account overdrafts are specialized banking products linked to demand deposits. Since NBFCs cannot open current accounts, they cannot provide this specific facility. They focus more on term-based lending like gold loans or leases.
What is the primary objective of an 'Infrastructure Debt Fund' (IDF-NBFC)?
Correct Answer: B. To facilitate the flow of long-term debt
Infrastructure Debt Funds (IDF-NBFCs) are set up to channel long-term debt into the infrastructure sector. They typically take over loans from banks after the project has completed a year of commercial operation. This frees up bank capital for new projects.
Which of the following describes the 'Leasing' business of an NBFC?
Correct Answer: A. Giving an asset on rent for a specific
Leasing involves an NBFC (lessor) giving an asset to a customer (lessee) for use against periodic payments. The ownership remains with the NBFC while the user benefits from the asset. This is a common way for businesses to acquire machinery without a large upfront cost.
Do NBFCs need to maintain a Capital to Risk-Weighted Assets Ratio (CRAR)?
Correct Answer: A. Yes, to ensure they have enough capital against
Yes, NBFCs are required to maintain a minimum CRAR (usually 15%) to ensure they have sufficient capital to cover their credit and market risks. This ratio measures the company's capital in relation to its assets weighted by risk. It is a fundamental safeguard for the financial stability of the firm.
Which regulator oversees the NBFCs specifically engaged in the business of 'Stock Broking'?
Correct Answer: B. SEBI
Stock broking companies are primarily regulated by the Securities and Exchange Board of India (SEBI). Although they are financial entities, their operation in the capital market falls under SEBI's mandate. This specialized regulation ensures investor protection in the stock market.