BANKING GENERAL KNOWLEDGE
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Detailed explanation-1: -NBFCs are incorporated under the Companies Act, 1956. NBFCs can be classified into two broad categories, viz., (i) NBFCs accepting public deposit (NBFCs-D) and (ii) NBFCs not accepting/holding public deposit (NBFCs-ND).
Detailed explanation-2: -All NBFCs are not entitled to accept public deposits. Only those NBFCs to which the Bank had given a specific authorisation and have an investment grade rating are allowed to accept/ hold public deposits to a limit of 1.5 times of its Net Owned Funds.
Detailed explanation-3: -Traditionally, there are four types of bank deposits in India, which are-Current Account, Recurring Deposits, Savings Accounts, and Fixed Deposit Accounts. Each type has its advantages.
Detailed explanation-4: -Public deposits take care of both medium and short-term financial requirements of a business. As the depositors receive higher interest rate than that offered by banks, the cost of deposits to the company is less than the cost of borrowings from banks.
Detailed explanation-5: -The Reserve Bank regulates the deposit acceptance only of banks, cooperative banks and NBFCs. It is not legally permissible for other entities to accept public deposits.