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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Jan 16, 2024
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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Jan 06, 2024
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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Jan 06, 2024
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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Jan 16, 2024
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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Jan 16, 2024
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.
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