NBFC Functions: Identifying Prohibited Activities
Non-Banking Financial Companies (NBFCs) are financial institutions that provide banking-like services but do not hold a full banking license. They play a crucial role in the financial system but have specific limitations compared to commercial banks.
Key NBFC Activities
NBFCs are authorized to perform several financial functions, including:
- Providing various types of loans and advances.
- Making strategic investments in stocks, bonds, and other financial instruments.
- Facilitating the acquisition of shares and securities.
Prohibited NBFC Activities
A key distinction between NBFCs and banks lies in their ability to accept deposits. NBFCs are generally restricted from performing the following activity:
- Accepting demand deposits: Unlike commercial banks, NBFCs cannot accept funds that are payable on demand, such as current account deposits or savings account deposits. This restriction is fundamental to their regulatory framework.
Therefore, accepting demand deposits is the function that cannot be performed by NBFCs among the given options.
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