NBFCs lend and make investments and hence their activities are akin to that of banks; however, there are a few differences between them. Explain.

NBFCs lend and make investments and hence their activities are akin to that of banks; however, there are a few differences as given below: NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself; NBFC cannot accept demand deposits; deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks. In terms of Section 45-IA of the RBI Act, 1934, no Non-Banking Financial Company can commence of carry on business of a non-banking financial institution without obtaining a certificate of registration from the Reserve Bank. However, in terms of the powers given to the Reserve Bank, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956 or formed under section 406 of the Companies Act, 2013, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982, Housing Finance Companies regulated by National Housing Bank, Stock Exchange or a Mutual Benefit company.