Difference Wiki

NBFC vs. Bank: What's the Difference?

Edited by Huma Saeed || By Sara Rehman || Published on February 2, 2024
NBFCs (Non-Banking Financial Companies) offer financial services without holding a banking license, while Banks are licensed institutions providing a wide range of financial services including deposits.

Key Differences

NBFCs (Non-Banking Financial Companies) specialize in offering loans, credit facilities, retirement planning, and investment services, but cannot accept demand deposits. Banks, licensed by financial authorities, offer a broader range of services, including accepting deposits, offering checking and savings accounts, and providing loans.
Sara Rehman
Feb 02, 2024
NBFCs cannot issue cheques drawn on themselves and do not have access to central bank facilities. Conversely, banks are integral to the payment system, issuing cheques and having direct access to central bank services and emergency funding.
Huma Saeed
Feb 02, 2024
The regulatory framework for NBFCs is typically less stringent than for banks, with NBFCs not required to maintain reserve ratios. Banks, on the other hand, are subject to strict regulatory requirements, including maintaining reserve ratios and adhering to various banking laws and regulations.
Sara Rehman
Feb 02, 2024
NBFCs often cater to the unbanked or underbanked segments, offering specific financial products tailored to these groups. Banks offer a more universal set of financial services, catering to a broad customer base with a variety of financial needs.
Aimie Carlson
Feb 02, 2024
In terms of risk, NBFCs usually have a higher risk profile compared to banks, stemming from their credit and market policies. Banks are generally perceived as safer due to stringent regulatory compliance and oversight.
Sara Rehman
Feb 02, 2024
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Comparison Chart

Deposit Acceptance

Cannot accept demand deposits
Can accept demand deposits
Sara Rehman
Feb 02, 2024

Cheque Issuance

Cannot issue cheques
Can issue cheques
Sara Rehman
Feb 02, 2024

Regulatory Framework

Less stringent
Highly regulated
Sara Rehman
Feb 02, 2024

Core Services

Loans, investments, retirement planning
Deposits, loans, payment services
Aimie Carlson
Feb 02, 2024

Risk Profile

Generally higher risk
Lower risk due to regulation
Sara Rehman
Feb 02, 2024
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NBFC and Bank Definitions

NBFC

They specialize in providing credit and loans, without the typical banking facilities.
This NBFC focuses on providing equipment financing to the construction industry.
Huma Saeed
Jan 26, 2024

Bank

Banks are licensed institutions that accept deposits, offer loans, and provide other financial services.
The bank launched a new savings account with attractive interest rates.
Sara Rehman
Jan 26, 2024

NBFC

These institutions are regulated, but not as strictly as banks.
Our NBFC is expanding services thanks to a more flexible regulatory environment.
Sara Rehman
Jan 26, 2024

Bank

They play a crucial role in the payment and settlement system, issuing cheques and cards.
My bank's online platform makes transferring funds seamless.
Sara Rehman
Jan 26, 2024

NBFC

NBFCs contribute to financial inclusion by reaching underserved customers.
The NBFC played a key role in providing microloans in underbanked regions.
Sara Rehman
Jan 26, 2024

Bank

Banks operate under strict regulatory oversight for safety and soundness.
The bank passed its regulatory compliance audit with flying colors.
Sara Rehman
Jan 26, 2024

NBFC

NBFCs often serve niche markets not extensively covered by traditional banks.
The NBFC tailored its services to meet the needs of rural entrepreneurs.
Sara Rehman
Jan 26, 2024

Bank

They offer a range of services from personal banking to complex financial solutions.
The bank's wealth management division provides bespoke investment advice.
Janet White
Jan 26, 2024

NBFC

NBFCs are financial institutions offering services similar to banks but cannot accept demand deposits.
The NBFC offered a variety of loan products to small businesses.
Sara Rehman
Jan 26, 2024

Bank

Banks are essential in maintaining economic stability and facilitating transactions.
The bank's loan program is vital for local small business growth.
Janet White
Jan 26, 2024

Bank

A piled-up mass, as of snow or clouds; a heap
A bank of thunderclouds.
Sara Rehman
Jan 26, 2024

FAQs

Can NBFCs issue cheques?

No, NBFCs cannot issue cheques.
Sara Rehman
Feb 02, 2024

What regulatory body oversees NBFCs?

NBFCs are regulated by financial authorities but with less stringent requirements than banks.
Aimie Carlson
Feb 02, 2024

What defines a Bank?

A licensed institution that provides a wide range of financial services including accepting deposits.
Huma Saeed
Feb 02, 2024

What is an NBFC?

A financial institution offering loans and investment services but not deposit accounts.
Sara Rehman
Feb 02, 2024

Do Banks have access to central bank facilities?

Yes, banks have direct access to central bank services.
Janet White
Feb 02, 2024

What services do Banks offer?

Banks offer deposit accounts, loans, payment services, and more.
Janet White
Feb 02, 2024

What are the reserve requirements for Banks?

Banks are required to maintain certain reserve ratios as per regulatory mandates.
Sara Rehman
Feb 02, 2024

Who can access NBFC services?

Particularly those in unbanked or underbanked segments.
Janet White
Feb 02, 2024

Can NBFCs offer mortgage loans?

Yes, NBFCs can offer mortgage loans among other credit products.
Harlon Moss
Feb 02, 2024

What is the role of Banks in the payment system?

They are integral, offering services like cheque issuance and electronic transfers.
Harlon Moss
Feb 02, 2024

How do Banks contribute to the economy?

By facilitating transactions and maintaining economic stability.
Aimie Carlson
Feb 02, 2024

Do NBFCs accept demand deposits?

No, NBFCs cannot accept demand deposits.
Aimie Carlson
Feb 02, 2024

Are NBFCs considered high risk?

Generally, NBFCs have a higher risk profile compared to banks.
Sara Rehman
Feb 02, 2024

What is the primary focus of a Bank?

To provide a secure and comprehensive range of financial services.
Sara Rehman
Feb 02, 2024

What is a major difference in regulation between NBFCs and Banks?

Banks face stricter regulations, especially regarding capital and reserve requirements.
Aimie Carlson
Feb 02, 2024

Are Bank deposits insured?

Yes, typically up to a certain amount as per regulatory guidelines.
Aimie Carlson
Feb 02, 2024

What niche markets do NBFCs often serve?

Markets not extensively covered by traditional banks, like specific loan types.
Sara Rehman
Feb 02, 2024

Do NBFCs contribute to financial inclusion?

Yes, by reaching underserved or specific customer segments.
Harlon Moss
Feb 02, 2024

How do Banks support small businesses?

Through loans, credit facilities, and financial advisory services.
Aimie Carlson
Feb 02, 2024

Can NBFCs offer wealth management services?

Yes, many NBFCs offer investment and wealth management services.
Harlon Moss
Feb 02, 2024
About Author
Written by
Sara Rehman
Sara Rehman is a seasoned writer and editor with extensive experience at Difference Wiki. Holding a Master's degree in Information Technology, she combines her academic prowess with her passion for writing to deliver insightful and well-researched content.
Edited by
Huma Saeed
Huma is a renowned researcher acclaimed for her innovative work in Difference Wiki. Her dedication has led to key breakthroughs, establishing her prominence in academia. Her contributions continually inspire and guide her field.

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