NBFCs — Set 6
Banking · NBFC · Questions 51–60 of 60
Are NBFCs allowed to accept deposits from the general public?
Correct Answer: C. Only those with a specific license from RBI can
Only a small number of NBFCs that have a specific authorization from the RBI are allowed to accept public deposits. These are called Deposit-taking NBFCs (NBFC-D). The RBI has moved toward discouraging the acceptance of public deposits by new NBFCs.
What is the primary difference between a Bank and an NBFC regarding demand deposits?
Correct Answer: C. Banks can accept demand deposits, but NBFCs
A bank can accept demand deposits (like savings/current accounts), whereas an NBFC cannot. Demand deposits are those that the customer can withdraw at any time. This is a fundamental legal distinction between the two types of institutions.
Which of the following is NOT a feature of an NBFC?
Correct Answer: D. Ability to issue cheques drawn on itself
NBFCs cannot issue cheques drawn on themselves as they are not part of the payment and settlement system. Banks have this privilege because they facilitate the movement of money through demand deposits. NBFCs focus on financing and investment instead.
Which authority regulates NBFCs in India?
Correct Answer: D. RBI
The Reserve Bank of India (RBI) is the primary regulator for most NBFCs in India. It issues the necessary Certificate of Registration and monitors their financial health. However, certain types of NBFCs like insurance or housing finance have different regulators.
What is the minimum Net Owned Fund (NOF) required for an NBFC to be registered with RBI?
Correct Answer: B. Rs. 2 Crore
The minimum Net Owned Fund (NOF) requirement for starting an NBFC is currently Rs. 2 Crore. This ensures that the institution has a stable capital base before starting financial operations. This limit has been raised over time to ensure the safety of the financial system.
What happens if an NBFC fails to repay its deposits?
Correct Answer: B. The depositors can sue the NBFC, but there is no DICGC
NBFC deposits are not covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). This means there is no sovereign guarantee for the repayment of deposits if the company fails. This makes NBFC deposits riskier than bank deposits.
Nidhi companies are a special category of NBFC. Who do they primarily deal with?
Correct Answer: B. Only their members
Nidhi companies are NBFCs that deal only with their own members. They aim to promote the habit of thrift and savings among their members. They are primarily regulated by the Ministry of Corporate Affairs.
Which type of NBFC is specifically set up to provide loans to micro-enterprises and poor individuals?
Correct Answer: D. NBFC-MFI
NBFC-MFI stands for Micro Finance Institution. These companies provide small-scale financial services to individuals or groups who lack access to traditional banking. They are crucial for financial inclusion in rural areas.
An NBFC whose principal business is providing finance by making loans or advances is called a?
Correct Answer: A. Loan Company
A Loan Company is an NBFC that mainly provides finance by giving loans or advances. It does not include companies whose principal business is asset financing. They are a common source of credit for small and medium enterprises.
What is the maximum interest rate an NBFC can offer on public deposits?
Correct Answer: B. It cannot exceed the ceiling rate
The RBI sets a ceiling or a maximum limit on the interest rate that NBFCs can offer on public deposits. This prevents them from engaging in risky behavior to pay extremely high returns. This cap is reviewed periodically by the central bank.