Prelims 9875

With reference to Non-banking financial Company(NBFC) consider the following statements?
1. NBFCs are part of the payment and settlement system.
2. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is available to depositors of NBFCs.
Which of the statement(s) given above is/are correct?
A.
1 only
B.
2 only
C.
Both 1 and 2
D.
Neither 1 nor 2
Explanation :
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
NBFCs lend and make investments and hence their activities are akin to that of banks but there are a few differences as given below: NBFC cannot accept demand deposits. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

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