UPSC Prelims 2026 · Question 64 of 96
UPSC Prelims 2026 question on Non Banking Financial Companies Features
- ExamUPSC CSE
- Year2026
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicBanking
- DifficultyEasy
- TypeStatement
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?
Show answer
Answer: A. 1 and 4
Verdict
Statements 1 and 4 are correct, so the answer is Option (a).
Analysis
Non-Banking Financial Companies (NBFCs) are financial institutions that provide services similar to banks but do not possess a full banking license. They are governed by the Reserve Bank of India under the RBI Act, 1934.
Statement by statement
Statement 1 is correct: Unlike banks, NBFCs are not allowed to accept demand deposits such as savings or current account deposits. However, certain categories of NBFCs may accept time or term deposits, subject to regulatory provisions. This is one of the key differences between NBFCs and commercial banks.
Statement 2 is incorrect: Not every NBFC in India is required to obtain registration with the RBI. Certain categories, including housing finance companies, insurance companies, chit fund companies, and some others, fall under the jurisdiction of different regulators and do not require RBI registration.
Statement 3 is incorrect: NBFCs are excluded from the payment and settlement system and therefore cannot issue cheques drawn on themselves.
Statement 4 is correct: Deposits with NBFCs are not covered by deposit insurance provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC). DICGC protection applies only to deposits held in banks.