What is the difference between NBFCs and Banks?

Non-banking finance companies (NBFCs) and banks are financial institutions. The NBFC was registered under the Companies Act of 1956. Their activities include acquisitions of shares, bonds, stocks, debentures, securities issued by the government, insurance, hire purchase, and many more.

Banks accept deposits, while NBFC cannot accept deposits from customers. NBFC does not perform any form of payment and settlement system, while banks perform different forms of payment, which include drawing of cheques, withdrawal form counter, and so much more. Banks issue demand drafts while NBFC cannot issue any.

Deposit with NBFC is not insured, and the repayment is not guaranteed by RBI. NBFC also lend and make an investment; banks also give an opportunity for investments and loans. Banks have different deposit systems, such as savings, current, and fixed.

Both NBFC and Banks are known to be companies that deal with finances. Banks will have the ability to provide self-drawn cheques. They can also demand drafts. NBFC stands for Non-Banking Financial Company. While they will not be able to provide some of the services that banks can, they can still lend money to those who are in need.

Another difference between the two is the ability to take deposits. The bank will be able to take deposits and save the money of people. NBFCs will not be able to do that. Take note that the interest rates may also differ so this is something that you have to think about.