About the Non-Banking Financial Companies (NBFCs) in India - Prelims MCQs

About the Non-Banking Financial Companies (NBFCs) in India - Prelims MCQs

1) Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India: 1. NBFCs cannot accept demand deposits. 2. All the NBFCs operating in India have to be registered with the RBI. 3. NBFCs form part of the payment and settlement system and can issue cheque drawn on itself. 4. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of deposit taking NBFCs. Which of the statements given above is/are correct? a) 1 and 4 b) 1, 2 and 3 c) 4 only d) 2, 3 and 4 Correct Answer: (a) 1 and 4 Explanation: Statement 1 is correct: Unlike commercial banks, NBFCs are legally prohibited from accepting demand deposits (Savings Accounts and Current Accounts). They can only accept term deposits (time deposits), and even then, only specific "Deposit-taking NBFCs" (NBFC-D) authorized by the RBI are allowed to do so. Statement 2 is incorrect: This is a classic absolute statement trap ("Al…