✅A NBFC is a financial institution that provides banking services without meeting the legal definition of a bank, that does not hold a banking license
✅It is established as a company registered under the Companies Act 1956 but its operations are often still covered under a country’s banking regulations
✅NBFCs may be engaged in the business of loans & credit facilities, savings products, investments & money transfer services
✅The RBI is entrusted with the responsibility of regulating and supervising the NBFC by virtue of powers vested under Reserve Bank of India Act, 1934

Difference between banks and NBFCs :

✅NBFCs business activities are akin to that of banks as they can lend & make investments
✅NBFCs cannot accept demand deposits
✅They cannot issue cheques as they do not form part of the payment & settlement system.
✅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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