Q. With reference to Non-Banking Financial Companies (NBFCs) in India, consider the following statements:
1.NBFCs can accept demand deposits and issue cheques like banks.
2.NBFCs are required to register with the RBI, but those regulated by sector-specific regulators like SEBI or IRDA are exempted.
3.Public deposits with NBFCs are not insured under the deposit insurance scheme.
Which of the statements given above is/are correct?
Quarterly-SFG-Jan-to-March
Red Book

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: B
Notes:

Explanation:

  • NBFCs cannot accept demand deposits (like savings or current accounts) and cannot issue cheques, as they are not part of the payment and settlement system.
  • NBFCs are generally required to register with the RBI. However, those regulated by other specific regulators (e.g., SEBI, IRDA, NHB) are exempt to avoid dual regulation.
  • NBFC depositors do not have deposit insurance cover like banks. Hence, public deposits with NBFCs are considered unsecured, and depositors have to pursue legal remedies in case of default.

Source– 11th NCERT: Economics: Indian Economic Development and TMH Indian Economy by Ramesh Singh

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