UPSC Previous Year Question | Prelims GS | 2026

Consider the following statements about the Non-Banking Financial Companies (NBFCs) in India: 1. NBFCs cannot accept demand deposits. 2. All the NBFCs operating in India have to be registered with the Reserve Bank of India (RBI). 3. 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

Correct Answer

1 and 4

Explanation

NBFCs cannot accept demand deposits, making statement 1 correct. Statement 2 is incorrect because not every entity that may fall within the broad description of a non-bank financial company is necessarily required to be registered with RBI; exemptions and statutory categories exist. Statement 3 is incorrect because NBFCs do not form part of the payment and settlement system in the same manner as banks and cannot issue cheques drawn on themselves. Statement 4 is correct because DICGC deposit insurance is applicable to insured banks and is not available for deposits accepted by NBFCs. Hence 1 and 4 are correct.

Topics: banking regulation, economy, financial institutions, nbfcs