Question

Which of the following statements are true regarding Banking & Non Banking Financial institutions

1. Non-banking institutions cannot issue self-drawn cheques and demand drafts.
2. Non-banking institutions are not licensed and do not provide financial services.
3. Banking institutions offer services to deposits and lend money.
4. Non-bank financial companies offer most sorts of banking services, such as loans and credit facilities,

• A. i, iv
• B. ii, iv
• C. i only
• D. All

Answer 1

Answer:

A. i, iv

Banking Institutions:

• Banking institutions are financial intermediaries that are licensed to accept deposits from the public and provide various financial services such as checking accounts, savings accounts, and lending services.
• They are involved in the core functions of the financial system, including facilitating payments, providing credit, and safeguarding deposits.
• Banks play a critical role in the economy by channeling funds from savers to borrowers, thereby facilitating economic growth and development.
• They are subject to specific regulatory guidelines and often provide a wide array of financial products and services to both individuals and businesses.

Non-Banking Financial Institutions (NBFCs):

• Non-banking financial institutions, on the other hand, do not hold a full banking license and, therefore, cannot accept traditional deposits like banks.
• However, they are involved in providing various financial services such as money transfers, loans, insurance, venture capital, and other forms of financial products.
• NBFCs complement the role of banks by offering specialized services that may not be provided by traditional banks.
• They also contribute to the financial system's diversity and offer alternative sources of funding and investment for individuals and businesses.
• While they are regulated, their operational framework is distinct from that of traditional banks.