NBFC vs. Bank — What's the Difference?
By Tayyaba Rehman — Published on December 14, 2023
NBFC (Non-Banking Financial Company) offers financial services but can't accept demand deposits. Banks are regulated institutions that provide a wider range of services, including accepting deposits and granting loans.
Difference Between NBFC and Bank
Table of Contents
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Key Differences
NBFC (Non-Banking Financial Company) and Bank are both entities in the financial sector, but they operate under different regulatory environments and offer different services. NBFCs provide some bank-like services but have specific limitations set by regulators.
NBFCs primarily lend and make investments. They play a crucial role in promoting inclusive growth by serving diverse financial needs, especially of the unbanked segments. However, unlike Banks, they cannot accept demand deposits, which are funds deposited at a depository institution that are payable on demand.
When it comes to regulation, NBFCs are generally less strictly regulated compared to Banks. This is because Banks have a broader impact on the economy, given their ability to accept deposits and the consequent need to protect depositors' interests.
Lastly, the services offered by NBFCs can often be more niche-focused, targeting specific sectors or customer groups. On the contrary, Banks provide a wider range of financial services, including but not limited to loans, deposits, and transactional services.
Comparison Chart
Nature
Financial institution
Financial institution
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Demand Deposits
Cannot accept
Can accept
Regulation
Generally less strictly regulated
Strictly regulated
Range of Services
Limited to lending, investments, etc.
Wide range (loans, deposits, etc.)
Credit Creation
Doesn't have the ability
Has the ability
Compare with Definitions
NBFC
A company providing financial services without holding a banking license.
In the absence of banks in rural areas, many rely on NBFCs for loans.
Bank
A place where people and businesses can store or borrow money.
Before traveling, she deposited her valuables in the bank's safe.
NBFC
A non-deposit accepting finance entity.
When buying my house, I compared loan offers from both banks and NBFCs.
Bank
A piled-up mass, as of snow or clouds; a heap
A bank of thunderclouds.
NBFC
An institution similar to a bank but without deposit-taking capabilities.
I took a vehicle loan from an NBFC known for their competitive rates.
Bank
A steep natural incline.
NBFC
A financial entity that offers lending and investment services.
The NBFC helped finance my startup when traditional banks declined.
Bank
An artificial embankment.
NBFC
An organization in the finance sector not governed by banking regulations.
The NBFC offered specialized services tailored to small business needs.
Bank
The slope of land adjoining a body of water, especially adjoining a river, lake, or channel.
Bank
A large elevated area of a sea floor.
Bank
(Games) The cushion of a billiard or pool table.
Bank
The lateral inward tilting, as of a motor vehicle or an aircraft, in turning or negotiating a curve.
Bank
A business establishment in which money is kept for saving or commercial purposes or is invested, supplied for loans, or exchanged.
Bank
The offices or building in which such an establishment is located.
Bank
The funds of a gambling establishment.
Bank
The funds held by a dealer or banker in certain games, especially gambling games.
Bank
The reserve pieces, cards, chips, or play money in some games, such as poker, from which the players may draw.
Bank
A supply or stock for future or emergency use
A grain bank.
Bank
(Medicine) A supply of human fluids or tissues, such as blood, sperm, or skin, that is stored in a facility for future use.
Bank
A place of safekeeping or storage
A computer's memory bank.
Bank
A set of elevators.
Bank
A row of keys on a keyboard.
Bank
A bench for rowers in a galley.
Bank
A row of oars in a galley.
Bank
(Printing) The lines of type under a headline.
Bank
To border or protect with a ridge or embankment.
Bank
To pile up; amass
Banked earth along the wall.
Bank
To cover (a fire), as with ashes or fresh fuel, to ensure continued low burning.
Bank
To construct with a slope rising to the outside edge
The turns on the racetrack were steeply banked.
Bank
To tilt (an aircraft) laterally and inwardly in flight.
Bank
To tilt (a motor vehicle) laterally and inwardly when negotiating a curve.
Bank
(Games) To strike (a billiard ball) so that it rebounds from the cushion of the table.
Bank
(Sports) To play (a ball or puck) in such a way as to make it glance off a surface, such as a backboard or wall.
Bank
To rise in or take the form of a bank.
Bank
To tilt an aircraft or a motor vehicle laterally when turning.
Bank
To deposit in a bank.
Bank
To store for future use.
Bank
To transact business with a bank or maintain a bank account.
Bank
To operate a bank.
Bank
To arrange or set up in a row
"Every street was banked with purple-blooming trees" (Doris Lessing).
Bank
(countable) An institution where one can place and borrow money and take care of financial affairs.
Bank
(countable) A branch office of such an institution.
Bank
(countable) An underwriter or controller of a card game.
Bank
(countable) A fund from deposits or contributions, to be used in transacting business; a joint stock or capital.
Bank
The sum of money etc. which the dealer or banker has as a fund from which to draw stakes and pay losses.
Bank
Money; profit.
Bank
(countable) In certain games, such as dominos, a fund of pieces from which the players are allowed to draw.
Bank
A safe and guaranteed place of storage for and retrieval of important items or goods.
Blood bank; sperm bank; data bank
Bank
(countable) A device used to store coins or currency.
If you want to buy a bicycle, you need to put the money in your piggy bank.
Bank
(hydrology) An edge of river, lake, or other watercourse.
Bank
An elevation, or rising ground, under the sea; a shallow area of shifting sand, gravel, mud, and so forth (for example, a sandbank or mudbank).
The banks of Newfoundland
Bank
(geography) A slope of earth, sand, etc.; an embankment.
Bank
(aviation) The incline of an aircraft, especially during a turn.
Bank
(rail) An incline, a hill.
Bank
A mass noun for a quantity of clouds.
The bank of clouds on the horizon announced the arrival of the predicted storm front.
Bank
(mining) The face of the coal at which miners are working.
Bank
(mining) A deposit of ore or coal, worked by excavations above water level.
Bank
(mining) The ground at the top of a shaft.
Ores are brought to bank.
Bank
A row or panel of items stored or grouped together.
A bank of switches
A bank of pay phones
Bank
A row of keys on a musical keyboard or the equivalent on a typewriter keyboard.
Bank
(computing) A contiguous block of memory that is of fixed, hardware-dependent size, but often larger than a page and partitioning the memory such that two distinct banks do not overlap.
Bank
(pinball) A set of multiple adjacent drop targets.
Bank
A bench, as for rowers in a galley; also, a tier of oars.
Bank
A bench or seat for judges in court.
Bank
The regular term of a court of law, or the full court sitting to hear arguments upon questions of law, as distinguished from a sitting at nisi prius, or a court held for jury trials. See banc
Bank
A kind of table used by printers.
Bank
(music) A bench, or row of keys belonging to a keyboard, as in an organ.
Bank
(uncountable) slang for money
Bank
(intransitive) To deal with a bank or financial institution, or for an institution to provide financial services to a client.
He banked with Barclays.
Bank
(transitive) To put into a bank.
I'm going to bank the money.
Bank
To conceal in the rectum for use in prison.
Johnny banked some coke for me.
Bank
To roll or incline laterally in order to turn.
Bank
(transitive) To cause (an aircraft) to bank.
Bank
(transitive) To form into a bank or heap, to bank up.
To bank sand
Bank
(transitive) To cover the embers of a fire with ashes in order to retain heat.
Bank
(transitive) To raise a mound or dike about; to enclose, defend, or fortify with a bank; to embank.
Bank
To pass by the banks of.
Bank
To provide additional power for a train ascending a bank (incline) by attaching another locomotive.
Bank
To arrange or order in a row.
Bank
A mound, pile, or ridge of earth, raised above the surrounding level; hence, anything shaped like a mound or ridge of earth; as, a bank of clouds; a bank of snow.
They cast up a bank against the city.
Bank
A steep acclivity, as the slope of a hill, or the side of a ravine.
Bank
The margin of a watercourse; the rising ground bordering a lake, river, or sea, or forming the edge of a cutting, or other hollow.
Tiber trembled underneath her banks.
Bank
An elevation, or rising ground, under the sea; a shoal, shelf, or shallow; as, the banks of Newfoundland.
Bank
The face of the coal at which miners are working.
Bank
The lateral inclination of an aëroplane as it rounds a curve; as, a bank of 45° is easy; a bank of 90° is dangerous.
Bank
A group or series of objects arranged near together; as, a bank of electric lamps, etc.
Bank
The tilt of a roadway or railroad, at a curve in the road, designed to counteract centrifugal forces acting on vehicles moving rapiudly around the curve, thus reducing the danger of overturning during a turn.
Bank
A bench, as for rowers in a galley; also, a tier of oars.
Placed on their banks, the lusty Trojan sweepNeptune's smooth face, and cleave the yielding deep.
Bank
The bench or seat upon which the judges sit.
Bank
A sort of table used by printers.
Bank
A bench, or row of keys belonging to a keyboard, as in an organ.
Bank
An establishment for the custody, loan, exchange, or issue, of money, and for facilitating the transmission of funds by drafts or bills of exchange; an institution incorporated for performing one or more of such functions, or the stockholders (or their representatives, the directors), acting in their corporate capacity.
Bank
The building or office used for banking purposes.
Bank
A fund to be used in transacting business, especially a joint stock or capital.
Let it be no bank or common stock, but every man be master of his own money.
Bank
The sum of money or the checks which the dealer or banker has as a fund, from which to draw his stakes and pay his losses.
Bank
In certain games, as dominos, a fund of pieces from which the players are allowed to draw; in Monopoly, the fund of money used to pay bonuses due to the players, or to which they pay fines.
Bank
A place where something is stored and held available for future use;
Bank
To raise a mound or dike about; to inclose, defend, or fortify with a bank; to embank.
Bank
To heap or pile up; as, to bank sand.
Bank
To pass by the banks of.
Bank
To build (a roadway or railroad) with an inclination at a curve in the road, so as to counteract centrifugal forces acting on vehicles moving rapiudly around the curve, thus reducing the danger of vehicles overturning at a curve; as, the raceway was steeply banked at the curves.
Bank
To deposit in a bank.
Bank
To keep a bank; to carry on the business of a banker.
Bank
To deposit money in a bank; to have an account with a banker.
Bank
To tilt sidewise in rounding a curve; - said of a flying machine, an aërocurve, or the like.
Bank
A financial institution that accepts deposits and channels the money into lending activities;
He cashed a check at the bank
That bank holds the mortgage on my home
Bank
Sloping land (especially the slope beside a body of water);
They pulled the canoe up on the bank
He sat on the bank of the river and watched the currents
Bank
A supply or stock held in reserve for future use (especially in emergencies)
Bank
A building in which commercial banking is transacted;
The bank is on the corner of Nassau and Witherspoon
Bank
An arrangement of similar objects in a row or in tiers;
He operated a bank of switches
Bank
A container (usually with a slot in the top) for keeping money at home;
The coin bank was empty
Bank
A long ridge or pile;
A huge bank of earth
Bank
The funds held by a gambling house or the dealer in some gambling games;
He tried to break the bank at Monte Carlo
Bank
A slope in the turn of a road or track; the outside is higher than the inside in order to reduce the effects of centrifugal force
Bank
A flight maneuver; aircraft tips laterally about its longitudinal axis (especially in turning);
The plane went into a steep bank
Bank
Tip laterally;
The pilot had to bank the aircraft
Bank
Enclose with a bank;
Bank roads
Bank
Do business with a bank or keep an account at a bank;
Where do you bank in this town?
Bank
Act as the banker in a game or in gambling
Bank
Be in the banking business
Bank
Put into a bank account;
She deposites her paycheck every month
Bank
Cover with ashes so to control the rate of burning;
Bank a fire
Bank
Have confidence or faith in;
We can trust in God
Rely on your friends
Bank on your good education
I swear by my grandmother's recipes
Bank
A financial institution licensed to accept deposits and grant loans.
I opened a savings account with the bank downtown.
Bank
An establishment for custody of money, which it pays out on customer's order.
She visited the bank to transfer funds to her son.
Bank
A regulated entity providing financial services, including currency exchange.
The bank offered a good rate for exchanging dollars to euros.
Bank
An institution offering credit, facilitating payments, and managing money.
He secured a business loan from the bank to expand his operations.
Common Curiosities
Are Banks more regulated than NBFCs?
Yes, Banks are more strictly regulated compared to NBFCs.
Can NBFCs accept demand deposits?
No, NBFCs are not allowed to accept demand deposits.
What is the primary function of a Bank?
A Bank's primary functions are to accept deposits and grant loans.
Can both NBFCs and Banks offer home loans?
Yes, both NBFCs and Banks can offer home loans.
Why might someone choose an NBFC over a Bank?
People might choose an NBFC for specialized financial services or if they face difficulty securing loans from traditional banks.
Which is stricter in terms of regulatory oversight, NBFC or Bank?
Banks are under stricter regulatory oversight compared to NBFCs.
What's the advantage of borrowing from an NBFC?
Borrowing from an NBFC might offer quicker processing, flexibility, and services tailored to specific customer groups.
What does NBFC stand for?
NBFC stands for Non-Banking Financial Company.
Are the funds held in a Bank safer than those in an NBFC?
Generally, Bank deposits may be perceived as safer due to stricter regulations and deposit insurance in many countries.
Can an NBFC convert itself into a Bank?
The conversion would depend on the regulatory framework of the specific country and would typically require meeting stringent criteria set by banking regulators.
Are the services offered by NBFCs typically broader or narrower than those of Banks?
NBFCs usually offer more niche-focused services, while Banks provide a broader range of services.
Do NBFCs play a role in financial inclusion?
Yes, NBFCs play a significant role in promoting financial inclusion, especially in underserved areas.
Can I open a checking account with an NBFC?
No, NBFCs cannot offer demand deposit services like checking accounts; only Banks can.
Which entity can create credit, NBFC or Bank?
Only Banks have the ability to create credit.
Do both NBFC and Bank cater to businesses and individuals?
Yes, both NBFCs and Banks provide services to businesses and individual consumers.
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Written by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
