Question

    Identify the incorrect statement about NBFC (Nonbanking

    finance company)
    A NBFCs can accept demand deposits Correct Answer Incorrect Answer
    B NBFCs cater to medium- and long-term needs of an industry Correct Answer Incorrect Answer
    C NBFCs are registered under the Companies act Correct Answer Incorrect Answer
    D NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    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 themselves; iii. the deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in the case of banks As NBFCs cannot accept demand deposits, therefore this is the option i.e A

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