What Are NBFCs and How Are They Different from Banks?
Understand what NBFCs are, how they work, and how they differ from banks. Learn why NBFCs matter, what services they offer, and whether they’re safe to borrow from in India.
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What Are NBFCs and How Are They Different from Banks?
In India’s growing financial ecosystem, you’ve likely come across the term NBFC—especially when applying for loans, EMIs, or digital credit. But what exactly is an NBFC, and how is it different from a traditional bank?
This blog breaks down the concept of NBFCs (Non-Banking Financial Companies) and how they compare with regular banks—so you can make informed financial decisions.
What is an NBFC?
NBFC stands for Non-Banking Financial Company. It is a financial institution registered under the Companies Act, 2013 that provides bank-like services such as:
Personal and business loans
Investment products
Leasing, hire purchase, and credit facilities
Insurance and asset financing
However, NBFCs do not have a banking license and cannot offer certain core banking services like accepting demand deposits or issuing chequebooks.
NBFCs are regulated by the Reserve Bank of India (RBI) and are critical to financial inclusion in both urban and rural areas.
Key Functions of NBFCs
Providing personal and business loans
Offering vehicle loans, gold loans, and consumer durables financing
Facilitating microfinance in rural areas
Operating investment and wealth management services
Supporting digital credit systems and instant loan apps
Differences Between NBFCs and Banks
Here is a side-by-side comparison of NBFCs and traditional banks:
| Feature | NBFC | Bank |
|---|---|---|
| Regulatory Body | RBI (limited scope) | RBI (full banking regulations) |
| Accepts Demand Deposits | No | Yes |
| Issues Cheques & Savings A/c | No | Yes |
| Provides Loans | Yes | Yes |
| Offers Credit Cards | No (except through partnerships) | Yes |
| Requires Banking License | No | Yes |
| Deposit Insurance | Not available | Covered under DICGC |
| Serves Underserved Areas | Yes, especially in rural/low-income areas | Yes |
Why Are NBFCs Important?
NBFCs play a crucial role in financial inclusion and credit accessibility in India:
They offer faster loan approvals and minimal documentation
Operate in underserved segments like gig workers, farmers, and small businesses
Promote digital lending via mobile apps and paperless KYC
Drive innovation in microfinance and consumer lending
NBFCs like Bajaj Finserv, Tata Capital, Fullerton India, and Aditya Birla Finance have become household names for quick and reliable personal loans.
Are NBFCs Safe?
NBFCs registered with RBI are regulated and monitored, though they are not as tightly regulated as banks. Always ensure you borrow from a RBI-approved NBFC and read the terms carefully.
Final Thoughts
NBFCs bridge the gap between traditional banking and evolving financial needs. They are ideal for those who seek fast, flexible, and accessible credit—especially in the digital-first economy of 2025.
At Myfinflow, we partner with leading NBFCs to help customers apply for personal loans easily, securely, and without long waiting times.
Whether you’re a salaried professional, self-employed, or in a rural area—NBFCs could be your gateway to convenient financial support.
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