NBFC vs. Bank: Know the Difference
By Shumaila Saeed || Published on January 16, 2024
NBFCs (Non-Banking Financial Companies) offer financial services but cannot accept demand deposits or issue checks, unlike banks which offer a wider range of financial services including deposit acceptance and check issuance.
Key Differences
NBFCs are financial institutions that provide various banking services but do not hold a banking license, hence cannot accept demand deposits. Banks, recognized by a banking license, offer comprehensive financial services including accepting deposits and providing loans.
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Jan 16, 2024
NBFCs often target niche markets, offering services like loans, credit facilities, retirement planning, and investment advice. Banks, however, cater to a broader market, providing services including saving and checking accounts, loans, and credit cards.
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The regulation of NBFCs is generally less stringent compared to banks. While banks are strictly regulated by central banks and monetary authorities, ensuring higher levels of scrutiny in operations.
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NBFCs cannot issue checks or drafts, limiting some transaction types. In contrast, banks can issue checks and drafts, facilitating a wider range of financial transactions for their customers.
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NBFCs typically don't have access to the central bank's window for funds, relying more on wholesale funding and public deposits. Conversely, banks have access to central bank funds and a wider range of deposit and lending facilities.
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Jan 16, 2024
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Comparison Chart
Fund Access
Limited access to central bank funds
Direct access to central bank funds
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NBFC and Bank Definitions
NBFC
NBFCs operate under the regulatory ambit of a country’s financial authority but with different rules than banks.
Muthoot Finance, an NBFC, is known for its gold loan services.
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Bank
Banks operate under strict regulatory oversight and provide services like saving, checking, and loans.
Wells Fargo, a well-known bank, offers a variety of financial services.
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NBFC
NBFCs often focus on niche financial markets like microfinance.
Janalakshmi, an NBFC, serves the microfinance sector.
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Bank
Banks can issue checks and drafts, unlike NBFCs.
I received a check issued by my bank for a refund.
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NBFC
NBFC is a company offering financial services without holding a bank license.
L&T Finance is a prominent NBFC in India, offering loan services.
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Bank
Banks cater to a broader customer base with more varied financial needs.
Citibank offers services ranging from personal banking to wealth management.
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NBFC
NBFCs specialize in loans, investments, and wealth management, without accepting traditional deposits.
Bajaj Finance, an NBFC, provides specialized consumer financing.
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NBFC
NBFCs cannot issue checks or drafts.
Despite its financial services, this NBFC cannot issue a check.
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Bank
The slope of land adjoining a body of water, especially adjoining a river, lake, or channel.
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Bank
The lateral inward tilting, as of a motor vehicle or an aircraft, in turning or negotiating a curve.
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Bank
A business establishment in which money is kept for saving or commercial purposes or is invested, supplied for loans, or exchanged.
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Bank
The funds held by a dealer or banker in certain games, especially gambling games.
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Bank
The reserve pieces, cards, chips, or play money in some games, such as poker, from which the players may draw.
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Bank
(Medicine) A supply of human fluids or tissues, such as blood, sperm, or skin, that is stored in a facility for future use.
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Bank
To cover (a fire), as with ashes or fresh fuel, to ensure continued low burning.
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Bank
To construct with a slope rising to the outside edge
The turns on the racetrack were steeply banked.
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Bank
To tilt (a motor vehicle) laterally and inwardly when negotiating a curve.
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Bank
(Games) To strike (a billiard ball) so that it rebounds from the cushion of the table.
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Bank
(Sports) To play (a ball or puck) in such a way as to make it glance off a surface, such as a backboard or wall.
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Bank
To arrange or set up in a row
"Every street was banked with purple-blooming trees" (Doris Lessing).
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Bank
(countable) An institution where one can place and borrow money and take care of financial affairs.
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Bank
(countable) A fund from deposits or contributions, to be used in transacting business; a joint stock or capital.
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Bank
The sum of money etc. which the dealer or banker has as a fund from which to draw stakes and pay losses.
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Bank
(countable) In certain games, such as dominos, a fund of pieces from which the players are allowed to draw.
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Bank
A safe and guaranteed place of storage for and retrieval of important items or goods.
Blood bank; sperm bank; data bank
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Bank
(countable) A device used to store coins or currency.
If you want to buy a bicycle, you need to put the money in your piggy bank.
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Bank
An elevation, or rising ground, under the sea; a shallow area of shifting sand, gravel, mud, and so forth (for example, a sandbank or mudbank).
The banks of Newfoundland
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Bank
A mass noun for a quantity of clouds.
The bank of clouds on the horizon announced the arrival of the predicted storm front.
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Bank
(mining) A deposit of ore or coal, worked by excavations above water level.
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Bank
A row or panel of items stored or grouped together.
A bank of switches
A bank of pay phones
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Bank
A row of keys on a musical keyboard or the equivalent on a typewriter keyboard.
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Bank
(computing) A contiguous block of memory that is of fixed, hardware-dependent size, but often larger than a page and partitioning the memory such that two distinct banks do not overlap.
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Bank
The regular term of a court of law, or the full court sitting to hear arguments upon questions of law, as distinguished from a sitting at nisi prius, or a court held for jury trials. See banc
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Bank
(music) A bench, or row of keys belonging to a keyboard, as in an organ.
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Bank
(intransitive) To deal with a bank or financial institution, or for an institution to provide financial services to a client.
He banked with Barclays.
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Bank
To conceal in the rectum for use in prison.
Johnny banked some coke for me.
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Bank
(transitive) To cover the embers of a fire with ashes in order to retain heat.
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Bank
(transitive) To raise a mound or dike about; to enclose, defend, or fortify with a bank; to embank.
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Bank
To provide additional power for a train ascending a bank (incline) by attaching another locomotive.
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Bank
A mound, pile, or ridge of earth, raised above the surrounding level; hence, anything shaped like a mound or ridge of earth; as, a bank of clouds; a bank of snow.
They cast up a bank against the city.
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Bank
The margin of a watercourse; the rising ground bordering a lake, river, or sea, or forming the edge of a cutting, or other hollow.
Tiber trembled underneath her banks.
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Bank
An elevation, or rising ground, under the sea; a shoal, shelf, or shallow; as, the banks of Newfoundland.
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Bank
The lateral inclination of an aëroplane as it rounds a curve; as, a bank of 45° is easy; a bank of 90° is dangerous.
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Bank
A group or series of objects arranged near together; as, a bank of electric lamps, etc.
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Bank
The tilt of a roadway or railroad, at a curve in the road, designed to counteract centrifugal forces acting on vehicles moving rapiudly around the curve, thus reducing the danger of overturning during a turn.
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Bank
A bench, as for rowers in a galley; also, a tier of oars.
Placed on their banks, the lusty Trojan sweepNeptune's smooth face, and cleave the yielding deep.
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Bank
An establishment for the custody, loan, exchange, or issue, of money, and for facilitating the transmission of funds by drafts or bills of exchange; an institution incorporated for performing one or more of such functions, or the stockholders (or their representatives, the directors), acting in their corporate capacity.
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Bank
A fund to be used in transacting business, especially a joint stock or capital.
Let it be no bank or common stock, but every man be master of his own money.
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Bank
The sum of money or the checks which the dealer or banker has as a fund, from which to draw his stakes and pay his losses.
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Bank
In certain games, as dominos, a fund of pieces from which the players are allowed to draw; in Monopoly, the fund of money used to pay bonuses due to the players, or to which they pay fines.
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Jan 06, 2024
Bank
To raise a mound or dike about; to inclose, defend, or fortify with a bank; to embank.
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Jan 06, 2024
Bank
To build (a roadway or railroad) with an inclination at a curve in the road, so as to counteract centrifugal forces acting on vehicles moving rapiudly around the curve, thus reducing the danger of vehicles overturning at a curve; as, the raceway was steeply banked at the curves.
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Jan 06, 2024
Bank
To tilt sidewise in rounding a curve; - said of a flying machine, an aërocurve, or the like.
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Bank
A financial institution that accepts deposits and channels the money into lending activities;
He cashed a check at the bank
That bank holds the mortgage on my home
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Bank
Sloping land (especially the slope beside a body of water);
They pulled the canoe up on the bank
He sat on the bank of the river and watched the currents
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Bank
A supply or stock held in reserve for future use (especially in emergencies)
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Bank
A building in which commercial banking is transacted;
The bank is on the corner of Nassau and Witherspoon
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Bank
An arrangement of similar objects in a row or in tiers;
He operated a bank of switches
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Bank
A container (usually with a slot in the top) for keeping money at home;
The coin bank was empty
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Bank
The funds held by a gambling house or the dealer in some gambling games;
He tried to break the bank at Monte Carlo
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Bank
A slope in the turn of a road or track; the outside is higher than the inside in order to reduce the effects of centrifugal force
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Bank
A flight maneuver; aircraft tips laterally about its longitudinal axis (especially in turning);
The plane went into a steep bank
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Bank
Do business with a bank or keep an account at a bank;
Where do you bank in this town?
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Bank
Have confidence or faith in;
We can trust in God
Rely on your friends
Bank on your good education
I swear by my grandmother's recipes
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Bank
A bank is a licensed financial institution that offers a wide range of services including deposit acceptance and lending.
Chase Bank provides both checking accounts and mortgage loans.
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Bank
Banks have access to central bank funds and protection schemes like deposit insurance.
Bank of America is part of the FDIC deposit insurance program.
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Repeatedly Asked Queries
What is an NBFC?
A financial institution offering services like loans without a banking license.
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Jan 16, 2024
Are NBFCs covered by deposit insurance?
Generally, NBFCs are not covered by deposit insurance schemes.
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Jan 16, 2024
What services do banks offer?
Banks offer deposits, loans, checking accounts, and other financial services.
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Jan 16, 2024
Can NBFCs accept savings deposits?
No, NBFCs cannot accept savings or demand deposits.
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Jan 16, 2024
Can NBFCs issue credit cards?
Typically, NBFCs do not issue credit cards; that's more common with banks.
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Jan 16, 2024
Do banks offer loan services?
Yes, banks provide a variety of loan services.
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Do NBFCs provide investment services?
Yes, many NBFCs offer investment and wealth management services.
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Jan 16, 2024
Are banks part of the central banking system?
Yes, banks are integral to the central banking system.
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Can NBFCs offer mortgage loans?
Yes, some NBFCs specialize in mortgage loans.
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Are banks allowed to invest in the stock market?
Banks can invest in the stock market subject to regulatory guidelines.
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What is the main difference between NBFCs and banks?
The key difference lies in their ability to accept deposits and issue checks.
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Jan 16, 2024
Do banks have stricter regulations than NBFCs?
Yes, banks are under stricter regulatory oversight.
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Can banks provide insurance services?
Some banks offer insurance services through their subsidiaries.
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Do NBFCs offer checking accounts?
No, NBFCs do not offer traditional checking accounts.
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Are banks required to maintain reserve ratios?
Yes, banks are required to maintain certain reserve ratios.
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Can NBFCs participate in payment and settlement systems?
NBFCs have limited roles in payment and settlement systems.
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Jan 16, 2024
Are NBFCs subject to the same interest rate rules as banks?
NBFCs often have different interest rate structures and regulations.
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Jan 16, 2024
Do NBFCs have access to central bank liquidity?
No, NBFCs generally do not have direct access to central bank funds.
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Jan 16, 2024
Do banks provide financial advice?
Yes, many banks offer financial advice and planning services.
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Jan 16, 2024
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About Author
Written by
Shumaila SaeedShumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.
Hifza Nasir
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