Q. Consider the following statements regarding the Non-Banking Financial Companies (NBFCs):
1.NBFCs cannot accept deposits repayable on demand.
2.NBFCs are allowed to offer interest rates higher than banks.
3.Deposit insurance facility is available for deposits with NBFCs.
4.The RBI has the power to cancel the Certificate of Registration of an NBFC.
How many of the above statements are correct?

[A] Only one

[B] Only two

[C] Only three

[D] All four

Answer: C
Notes:

Explanation – Deposit insurance facility is not available for deposits with NBFCs. Unlike banks which are covered under deposit insurance (up to a specific limit), deposits with NBFCs are not insured.

  • NBFCs are not allowed to accept deposits that are repayable on demand. They can only accept deposits for a minimum period of 12 months and a maximum period of 60 months.
  • NBFCs can offer higher interest rates on deposits compared to banks, subject to a ceiling rate prescribed by the RBI. Currently, the maximum interest rate an NBFC can offer is 12.5% per annum.
  • The RBI has the authority to cancel the registration of an NBFC under certain circumstances, such as failure to pay the required premium for three consecutive periods or if the NBFC is prohibited from accepting fresh deposits.

Source: The Hindu

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