Differentiate between Banks & NBFC's.

Sl. No. Particulars Banks NBFC 1 Definition Banking is acceptance of deposits withdrawable by cheque or demand; NBFCs cannot accept demand deposits NBFC is a financial Institution that is into Lending or Investment or collecting monies under any scheme or arrangement 2 Regulations BR Act, 1949 and RBI Act, 1934 lay down stringent controls over banks Governed by Companies Act, 2013 and RBI Act, 1934 3 Scope Scope of business for banks is limited by sec 6 (1) of the BR Act There is no bar on NBFCs carrying activities other than financial activities 4 Registration and Licensing Licensing requirements are quite stringent. Transfer of shareholding is controlled by RBI. Formation of NBFC is easy. Acquisition of NBFCs is procedurally regulated and are subject to approval 5 Loan Sanction Process Comparatively Stringent Easier and faster 6 Restrictions on business No non-banking activities can be carried Cannot provide checking facilities 7 Overdraft Facility Available in some banks Not available 8 Privileges Can exercise powers of recovery under SARFAESI and DRT law None, except some NBFCs, specified by Central Government, have powers under SARFAESI or DRT law 9 Foreign investment Up to 74% allowed to private sector banks Up to 100% allowed (only 18 activities) 10 Maintenance of Reserve Ratios It is compulsory for banks to maintain reserve ratios NBFC-Ds have to maintain a certain ratio of deposits in specified securities; no such requirement for non-deposit taking companies 11 Priority sector lending requirements Certain minimum exposure to priority sector required Priority sector norms are not applicable to NBFCs