NBFCs — Set 5
Banking · NBFC · Questions 41–50 of 60
What is the minimum period for which an NBFC can accept public deposits?
Correct Answer: A. 12 months
NBFCs are prohibited from accepting public deposits for a period of less than 12 months. This ensures that their deposit base is stable and not subject to high daily volatility. The maximum period for such deposits is 60 months.
Which category of NBFC manages assets of individuals and institutions as a part of their core business?
Correct Answer: D. Investment Company
An Investment Company's principal business is the acquisition and holding of securities. While they manage their own investment portfolio, they often represent the investment interests of their group or shareholders. They are key players in the institutional investment landscape.
What is the role of an NBFC in the 'Shadow Banking' system?
Correct Answer: A. They perform bank-like functions outside
Shadow banking refers to financial intermediaries that perform functions similar to banks but are not subject to the same level of strict banking regulation. NBFCs are the primary component of shadow banking in India. They complement the formal banking system by providing credit to underserved segments.
Can an NBFC accept deposits that are repayable on demand?
Correct Answer: B. No, they can only accept term deposits.
NBFCs are strictly forbidden from accepting demand deposits. Demand deposits are those that the customer can withdraw at any time, such as from a savings or current account. NBFCs are only allowed to accept term or fixed deposits.
Which entity provides 'Refinance' to NBFCs focusing on the agriculture and rural sectors?
Correct Answer: B. NABARD
NABARD (National Bank for Agriculture and Rural Development) provides refinance facilities to NBFCs that lend for agricultural and rural development. This helps these companies maintain a steady flow of credit to the primary sector. Refinancing is a key tool for sector-specific growth.
Which of the following is an example of an Asset Finance Company?
Correct Answer: A. A company financing the purchase of
A company that finances the purchase of trucks or commercial vehicles is a classic example of an Asset Finance Company. They support productive economic activity by helping businesses acquire physical assets. This category is vital for the logistics and transport industry.
Which regulatory body governs NBFCs that function as 'Pension Funds'?
Correct Answer: B. PFRDA
The Pension Fund Regulatory and Development Authority (PFRDA) regulates pension-related financial activities. Any non-banking entity acting as a pension fund manager falls under their supervision. This specialized oversight ensures the security of long-term retirement savings.
What is the requirement for an NBFC to obtain an 'Investment Grade' credit rating?
Correct Answer: D. To accept public deposits.
Every deposit-taking NBFC must have a minimum investment-grade credit rating from an approved rating agency. This rating indicates the company's ability to repay its depositors on time. Without this rating, an NBFC cannot legally accept or renew public deposits.
Which of the following is true regarding NBFCs and the Credit Information Companies (CICs)?
Correct Answer: B. NBFCs are mandatory members of all CICs.
NBFCs are required to become members of all credit information companies like CIBIL or Equifax. This allows them to report customer loan data and check the credit history of new applicants. It helps in maintaining credit discipline and reducing bad loans in the system.
What is the main advantage of NBFCs over traditional banks in India?
Correct Answer: A. They have fewer regulations and
NBFCs generally have more flexible loan appraisal processes and faster turnaround times than traditional banks. This allows them to serve customers who might be rejected by banks due to strict documentation requirements. Their customized products cater to specific niche markets.