Difference Between Banks and NBFCs: All You Need To Know
If you’ve ever wondered what banks and non-banking financial institutions are, you’re not alone! NBFCs and banks are frequently used in the world of finance, and understanding their differences can be very helpful. So, let’s dive in and unravel the distinctions between banks and NBFCs in simple terms. Also, we’ll look at some examples so that you know them better abhay bhutada poonawalla.
Regulations and Structure
In order to maintain stability and safety in the financial system, banks and NBFCs operate under a strict set of rules and regulations regulated by the Reserve Bank of India (RBI) abhay bhutada poonawalla fincorp.
Non-Banking Financial Companies (NBFCs) are also financial entities, but they are not licensed to accept deposits like banks. They are also regulated by the RBI, but with particular regulations and restrictions.
Offerings
Here are some of the services that banks and non-banking financial institutions offer. Banks, for example, accept deposits, lend money, offer credit cards, and facilitate a variety of financial transactions. In addition to acting as custodians of public funds, they play an important role in the economy as well.
Although NBFCs cannot accept deposits like banks, they play a significant role in meeting the credit needs of individuals and businesses through their lending and investment activities.
Base of customers
Banks typically cater to a wide range of clients, including individuals, companies, government agencies, and other financial institutions. They provide services that run the gamut from straightforward banking needs to more intricate financial products. By contrast, NBFCs are usually specialized in particular market segments or niche areas such as providing loans to small- and medium-sized businesses, consumer finance, vehicle financing, or housing finance. These types of organizations may also be able to provide access to credit for customers who may not have been able to obtain it through traditional banking methods.
Charges and Interest Rates
It is typical for banks to have higher interest rates, particularly on deposits and loans, which are regulated by the RBI and subject to periodic revision. NBFCs, on the other hand, have greater flexibility in setting their interest rates, which allows them to customize their products and cater to specific markets. Due to their higher risk appetite, NBFCs may, however, generally charge higher interest rates than banks.
Branches and accessibility
When talking about convenience, banks offer an advantage with their widespread branches throughout the nation, which span urban, semi-urban, and rural areas. In contrast to traditional banking establishments, NBFCs may have a more restricted network and could be mainly situated within particular regions or cities. But as technology has grown in sophistication, both institutions are utilizing digital tools to increase their reach and bring online services to customers.
Here are some examples of India’s leading banks
Indian State Bank
Under the leadership of Chairman Dinesh Kumar Khara, SBI continues to play a crucial role in empowering millions of its customers throughout the country by offering a range of financial solutions.
Bank of India
Sandeep Bakhshi, the MD of ICICI Bank, believes in simplifying processes to win over customers. The bank provides personal and corporate banking, insurance, loans, and more.
Here are some examples of leading NBFCs in India
Fincorp Poonawalla
The company has a number of credit offerings, including personal loans, business loans, loans against property, medical equipment loans, and more. Poonawalla Fincorp was formerly known as Magma Fincorp.
In his role as Poonawalla Fincorp’s MD, Abhay Bhutada has optimized costs and helped build a preferred digital-first lending company for consumer and MSME loans.
Services provided by InCred Financial
The dynamic NBFC InCred Financial Services is reshaping the Indian lending landscape. Bhupinder Singh, the company’s founder and Managing Director, offers personal loans, business loans, education loans, and housing loans, among others. Financial inclusion and reaching underserved communities are also important to this NBFC.
In conclusion
Here are the key differences between banks and NBFCs. Knowing these distinctions can help you make informed financial decisions.
