Banking Questions

What is a Non -banking Financial Company (NBFC)? Difference between NBFC and banks?A NBFC is a company registered under the companies act, 1956 which is involved in the business of loans, shares/stocks, etc. Non-banking financial companies are financial institutions that provide banking services, but do not hold a banking license. These institutions are not allowed to take deposits from the public. NBFCs do offer all sorts of banking services, such as loans and credit facilities, retirement planning, money markets, underwriting, and merger activities. The basic difference between bank and NBFC is:- - They can’t accept demand deposits. - They are not a part of the payment and settlement system and can’t issue cheques drawn on themselves - They are not registered in the banking act and don’t have a banking license. - They don’t have to maintain CRR, SLR or CASA like banks.

What is the difference between nationalized banks and private banks? A nationalized bank is owned by the govt. of that country and is also known as public sector bank whereas a private sector bank is owned by an independent individual or company.

What are the Non Performing assets of a company? A NPA is an obligation payable to the bank which has not been made or the interest and principal amount has not been paid on the due time. NPA is the loan or credit provided by the bank to its customers which could not be recovered in due time. Thus NPA is somehow not yielding any income to the lender either in the form of principal or interest payments. NPA is also known as “bad debts”. NPA is shown at the assets side of the balance sheet whereas deposits are shown at the liability side. If there is any recent story or news regarding NPA, then revise it thoroughly. For ex:- Recently, United bank of India was marred in loss due to its rising NPA. So was the case with Kotak Mahindra Bank.