Banks
- Banks are the financial institutions which are empowered by the government to do financial activities like to accept a deposit, Grant credit, to manage withdrawals pay interest, to clear cheques, to provide general services to the clients.
- Banks are the top organization which controls the whole financial system of the country.
- Banks act as a financial mediator between the depositors and the borrowers.
- Banks are responsible for the creating credit, mobilization of funds, safe and time bound transfer of finance.
- Banks help in smooth functioning of the economy.
NBFC
- NBFC is a company which is registered under the companies act, 1956 and it is under the control of central bank (Reserve bank of India).
- NBFC is not a bank but it is engaged in a lending fund as well as many other activities which are similar to banking like to provide loans and advances, credit facility, saving and various schemes etc.
- NBFC also provides services to the business corporation like an acquisition of shares, stocks, debentures, bonds, and securities issued by the government.
- It also facilitates services like hire purchase, leasing, venture capital finance, housing finance, and insurance
Difference between Banks and NBFC
Basis
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Banks
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NBFC
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Meaning
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Bank is a government entitled financial intermediary which aims to provide banking services to customers.
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NBFC is a company which provides services similar to banking services to people without holding a bank license.
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Registered under
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A bank is registered under banking regulation act, 1949.
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NBFC is registered under company’s act 1956.
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Deposit
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Banks accept and lend deposit.
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NBFC do not accept and lend deposit.
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Investment
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In banks a foreign investment is limited up to a certain fixed limit.
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In NBFC, Foreign investment is allowed up to 100 percent.
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Payment system
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Payment and settlement is the core activity of banks.
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In NBFC, the payment system is not a part of the activity.
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Demand draft
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Bank can issue self-demand draft on itself.
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NBFC cannot issue self-demand draft their own.
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Cheque drawn
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Banks can draw a self-cheque by their own.
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NBFC cannot draw self-cheque their own.
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Credit creator
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Banks can create credit through multiplier financial activities.
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NBFC cannot do it.
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Transaction services
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Bank provides a variety of transaction services.
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NBFC does not facilitate transaction services.
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