| Consider the following: |
| 1. There are two broad categories of NBFCs, namely deposit taking NBFCs and non-deposit taking NBFCs. |
| 2. Non-banking Finance companies as a whole account for 13.1 per cent of the total credit in the country. Which of these statements is/are correct? |
A) Only 1
B) Only 2
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: C
Solution :
[c] NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below: (i) NBFC cannot accept demand deposits; (ii) NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself; (iii) Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks. NBFCs are categorized a) in terms of the type of liabilities into Deposit and Non-Deposit accepting NBFCs, [b] non-deposit taking NBFCs by their size into systemically important and other non-deposit holding companies (NBFC-NDSI and NBFC-ND) and c) by the kind of activity they conduct. India Ratings expects NBFCs to account for 17.1 percent of the total credit in the country by 2018-19, compared with 13.1 per cent at the end of 2014-15 and 9.4 percent in 2005-06. Most of this growth is expected to be at the cost of government-owned banks, whose share is estimated to fall to an all-time low of 58.6 per cent by 2018-19 (against 64.5 percent last year).
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