Q. Consider the following statements regarding Non-Banking Financial Companies (NBFCs) in India:
1.An NBFC cannot commence business without the prior registration and obtaining a Certificate of Registration (CoR) from the RBI.
2.NBFCs are prohibited from accepting term deposits for a period of less than 12 months.
3.Every NBFC is subject to the maintenance of CRR and SLR requirements, similar to commercial banks.
Which of the statements given above is/are correct?
Answer: B
Notes:
Explanation:
Statement 1: Correct. As per the RBI’s regulations under the RBI Act, 1934, no NBFC can start or carry on business without obtaining a Certificate of Registration from the RBI.
Statement 2: Correct. NBFCs are not allowed to accept or renew public deposits for a period less than 12 months or exceeding 60 months. This is to differentiate their deposit-taking function from banks, which accept short-term demand and saving deposits.
Statement 3: Incorrect. Unlike commercial banks, NBFCs are not required to maintain CRR and SLR. This is one of the key regulatory distinctions between banks and NBFCs, allowing NBFCs greater flexibility in their liquidity management.
