Question

UPSC Prelims 2026 Question:

Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India:

1. NBFCs cannot accept demand deposits.

All the NBFCs operating in India have to be registered with the RBI.

NBFCs form part of the payment and settlement system and can issue cheque drawn on itself. 4. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of deposit-taking NBFCs.

Which of the statements given above is/are correct?

1. 1 and 4
2. 1, 2 and 3
3. 4 only
4. 2, 3 and 4

Answer (Detailed Solution Below)

Option 1: 1 and 4

Detailed Solution

Answer: 1

Explanation:

NBFCs (Non-Banking Financial Companies) are companies registered under the Companies Act and engaged in financial activities such as loans, advances, investments, leasing, hire-purchase, etc.

NBFCs cannot accept demand deposits. Unlike banks, they are not allowed to offer deposits withdrawable on demand. So, statement 1 is correct.
Not all NBFCs operating in India are required to be registered with the Reserve Bank of India. Certain categories regulated by other regulators such as SEBI, IRDAI, chit funds, nidhi companies, etc., are exempted from RBI registration requirements. So, statement 2 is not correct.
NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on themselves. So, statement 3 is not correct.
The Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance facility is not available to depositors of deposit-taking NBFCs. So, statement 4 is correct.

Therefore, option (1) is the correct answer.

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