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.
Similar Questions
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Important Questions from Money and Banking
Which one of the following is likely to be the most inflationary in its effects?
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Consider the following statements :
The effect of devaluation of a currency is that it necessarily
1. improves the competitiveness of the domestic exports in the foreign markets
2. increase the foreign value of domestic currency
3. improves the trade balance
Which of the above statements is/are correct?
Indian Government Bond Yields are influenced by which of the following?
1. Actions of the United States Federal Reserve
2. Actions of the Reserve Bank of India
3. Inflation and short-term interest rates
Select the correct answer using the code given below.
With reference to “Urban Cooperative Banks" in India, consider the following statements :
1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966
Which of the statements given above is/are correct?
