You see that non banking finance companies like Nishthta Leasing handle almost half of all financial assets. Banks now have less than 40% of these assets.
Non-bank financial intermediaries took care of 49% of assets in 2021.
Banks’ share went down to 38%.
Sector | Growth Rate (%) |
|---|---|
NBFI | 8.5 |
Banks | 3.3 |
These differences affect how you pick in the financial market.
Key Takeaways
Non-banking finance companies, or NBFCs, give people loans and leasing. They do not have a full banking license. NBFCs can help if banks do not approve your request.
Banks offer more services than NBFCs. Banks have savings accounts and credit cards. Banks follow more rules to keep your money safe.
Knowing how NBFCs and banks are different helps you choose wisely. You can decide where to get help with money or services.
What Is a Non Banking Finance Company?
NBFC Definition
You might hear about non banking finance companies a lot. These companies do not have a full banking license. You cannot open a savings account with them. You also cannot write checks at these companies. They give financial services like loans and leasing. They also offer insurance and microloans. Non banking finance companies help people and businesses get money. Sometimes banks say no, but NBFCs can help. You see NBFCs as insurance firms and microfinance providers. Some NBFCs are leasing companies.
Tip: If you need a loan and banks say no, a non banking finance company could help you.
Bank Definition
Banks are financial institutions with a full banking license. You can put your money in a bank. You can take out cash and use checks there. Banks must follow strict rules from regulatory agencies. They offer many services like savings accounts and checking accounts. Banks also give credit cards. Banks keep your money safe and make payments easy. They are important for the economy.
Core Distinctions
It is important to know how non banking finance companies and banks are different. The table below shows their differences:
Aspect | Non-Banking Finance Companies (NBFCs) | Banks |
|---|---|---|
Legal Status | Not legally a bank | Legally recognized as banks |
Banking License | Do not have a full banking license | Have a full banking license |
Regulatory Supervision | Not supervised by banking regulatory agencies | Supervised by banking regulatory agencies |
Services Offered | Facilitate bank-related financial services | Offer a full range of banking services |
Non banking finance companies do not take deposits like banks do. Banks have more rules and offer more services. NBFCs focus on lending, leasing, and insurance. You should think about these differences before you choose where to get financial help.
Non Banking vs. Bank: Key Differences
Licensing & Regulation
It is important to know who allows financial companies to work. Banks and non banking finance companies follow different rules. Banks need a license from the Banking Regulation Act of 1949. Non banking finance companies must register under the Companies Act of 2013. They also need a Certificate of Registration from the Reserve Bank of India (RBI). Banks have more rules and get checked more often by regulators. Non banking finance companies have fewer rules, but the RBI still checks them.
Here is a quick look at the main differences:
Aspect | Non-Banking Finance Companies | Banks |
|---|---|---|
Incorporating Law | Companies Act, 2013 | Banking Regulation Act, 1949 |
License Requirement | RBI Certificate of Registration | Bank License |
Foreign Ownership | Up to 100% | Up to 74% for private banks |
Main Activities | Leasing, hire-purchase | Accept deposits, give loans |
Note: State and federal regulators also check both banks and non banking finance companies, but banks get more attention because they handle public money.
Deposit-Taking Ability
Most non banking finance companies do not let you open a savings account. Only a few can take deposits, and they must follow strict RBI rules. Most non banking finance companies give loans, leasing, or insurance. Banks are different because they take deposits from people. You can keep your money safe in a bank and earn interest.
Category | Description |
|---|---|
Deposit-taking NBFCs | |
Non-Deposit-taking NBFCs | Cannot accept public deposits, offer other financial services |
Banks | Accept deposits and provide loans |
Non Banking Services
Non banking finance companies give services that banks do not. You can get microloans, insurance, or leasing from them. Some focus on real estate loans, payday loans, or investment banking. Others help with credit ratings, management advice, or trading stocks. Many non banking finance companies use technology to reach people who do not use banks.
Examples of non banking services:
Microloans for small businesses
Leasing for cars or equipment
Payday loans
Investment banking
Credit rating and financial advice
Fintech solutions for fast loans
Banks usually give savings accounts, checking accounts, and credit cards. They help most people, but non banking finance companies often help those who cannot use banks.
Risk & Consumer Protection
You should learn about risks before picking a financial company. Non banking finance companies can face more risk because they need banks for money during hard times. If one company has problems, it can affect others. Non banking finance companies may not always share all business details, so it can be hard to know the risks.
Banks have strong rules to keep your money safe. Regulators check banks often and make them keep enough cash. Both banks and non banking finance companies must follow consumer protection laws, but banks usually have more checks and stronger controls.
Aspect | Non-Bank Mortgage Lenders | Banks |
|---|---|---|
Must be licensed and trained | Exempt from these requirements | |
Consumer Exams | Regular state and CFPB exams | Fewer exams for small banks |
Dodd-Frank Protections | Must follow all rules | Some small banks are exempt |
Tip: Always ask about consumer protection and check if the company is licensed before you borrow or invest.
Customer Reach
Non banking finance companies often help people who do not use banks. They serve the underbanked and unbanked with special products like microloans and insurance. Many use technology to reach more customers, even in far places. Banks help most people and offer many services, but they may not meet everyone’s needs.
Feature | Non-Bank Financial Institutions | Banks |
|---|---|---|
Service Focus | Broad range of services | |
Target Audience | Underbanked, unbanked | General public |
Innovation | Use technology | Traditional methods |
Deposit Acceptance | Usually do not accept deposits | Accept deposits |
Example Services | Microloans, leasing, insurance | Savings, loans, credit cards |
If you need a loan fast or cannot get one at a bank, a non banking finance company might be a good choice.
Misconceptions & Impact
Common Myths
Some people think non banking finance companies are just like banks. This is not true. You cannot open a savings account at most non banking finance companies. You also cannot write checks there. Some people worry these companies are not safe. Many non banking finance companies follow strict rules from the Reserve Bank of India. Some people believe only banks can give loans. Non banking finance companies also give loans. Sometimes they help people banks do not help.
Remember: Non banking finance companies and banks both help with money, but they do it in different ways.
Why Differences Matter
It is important to know how these two types of financial institutions are different. This helps you make better choices for your money. Non banking finance companies and banks each have a special job in the economy.
Non banking finance companies give you more choices if you cannot use a bank.
They help more people and businesses get money when banks say no.
These companies make banks work harder, which helps the economy grow.
Having both banks and non banking finance companies makes the financial system stronger. This helps everyone when the economy has problems.
When you know these differences, you can pick the right place for your savings, loans, or insurance. You protect yourself and your business by choosing the best option for your needs.
You can see that non banking finance companies and banks are not the same. The table below shows the main differences:
Aspect | NBFCs | Banks |
|---|---|---|
Regulation | Less strict | Very strict |
Deposit Insurance | Not insured | Insured by DICGC |
Payment System Role | Smaller | Main player |
Credit Rating | Required | Not always needed |
This information helps you compare what each one offers. Non banking finance companies give you more options and personal help. Banks keep your money safe and help you pay for things. Both are important for a strong economy.
Pick a company that fits what you need.
Look at interest rates and services.
Make sure the company has a license.
Talk to people who have used these services.
Read reports and reviews about the company.
Ask questions before you choose.
Always do your homework before picking a financial company. This helps you make good choices with your money.
FAQ
What is the main difference between a bank and a non banking finance company?
You can open a savings account at a bank. You cannot do this at a non banking finance company.
Can you trust non banking finance companies with your money?
You should check if the company has a license from the RBI. Licensed companies follow rules and protect your money.
Who should use a non banking finance company?
You may choose a non banking finance company if banks do not approve your loan.
You can use them for special services like microloans or leasing.
