Get a Quote
Get a Quote and Find Services to Fit Your Needs 50000+ Satisfied Clients
5000+ Licenses & Registration
15 Branches across India
75 Years + Combined experience
For financial services, two types of institutions are famous - Non-Banking Financial institutions and Banks. These both are financial institutions that cater for the financial needs of the customers. Banks are the traditional way of investing money and many people trust banks as they are backed by the government.
The NBFC is quite a new perspective as compared to banks. These institutions provide lending services to customers without heavy paperwork and security. They cover people from lower financial backgrounds. In this article, we shared the difference between banks and NBFCs.
The NBFC is a company registered under the Companies Act, of 1956. Its business activities are providing loans and advances, acquisition of shares/ stocks/ bonds/ debentures/ securities issued by the Government or local authorities or other marketable securities. It can conduct different financial activities, only if it has an NBFC license.
The business can include leasing, hire-purchase, insurance business, and chit business. But it should not include any institution whose principal business is in agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/ purchase/ construction of immovable property.
However, a Non-Banking Financial Institution (NBFC) receives any deposit under any scheme or arrangement in one lump sum or instalments by way of contributions or in any other way, the company is known as a non-banking financial company.
Banks are financial institutions that accept deposits from customers for different accounts such as current accounts, savings accounts, joint accounts, etc. In return for these deposits, the bank provides some rate of interest on the amount as per the type of account chosen by the customers. The banks have two major types - private banks and public banks. Having a banking license is important to start providing financial services.
However, the rules for these banks are set by the Reserve Bank of India (RBI). However, these banks must follow the rules and regulations set by RBI to avoid any penalty. The Banking Companies Act of India, 1949 explains banking as accepting public money deposits for lending and investment which are then repaid on demand and withdrawn by cheque or draft.
So, the banks are the institutions that ensure that the public financial needs are fulfilled through different products and services. Below are some essential services offered by the banks are as follows:
Non-banking financial companies (NBFCs) have a lending and investments business similar to banks. But there are some differences and these are as follows:
To conclude, banks and NBFCs are both financial service providers, regulated by the Reserve Bank of India (RBI). The working models of these two are different. The primary function of banks is to accept deposits and grant loans in return for some security.
The NBFC also cater for the financial needs of customers and provides lending services. The eligibility of NBFC to provide loans is not complex as compared to the banks. NBFC does not require heavy paperwork to provide loans. The compliances of banks are strict as compared to NBFC. If you want to register an NBFC, then reach out to Registrationwala. We help you with applying to finally obtain an NBFC license.
Also Read: NBFC FD vs Bank FD
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
Want to know More ?
