Non Banking Financial Institutions - Types with Examples | UPSC (2024)

FAQs

What are examples of non-banking financial institutions? ›

Examples of nonbank financial institutions include insurance firms, venture capitalists, currency exchanges, some microloan organizations, and pawn shops. These non-bank financial institutions provide services that are not necessarily suited to banks, serve as competition to banks, and specialize in sectors or groups.

Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration under Section 45 ...

Non-depository Corporations, for example, mutual funds, insurance companies, provident funds, asset management companies, and securities companies, etc.

The non-banking financial institution which comes under the category of financial institutions cannot accept deposits into savings and demand deposit accounts. A bank is a financial institution which can accept deposits into various savings and demand deposit accounts, and give out loans.

Some financial institutions provide certain banking services but do not accept deposits. These nondepository financial institutions include insurance companies, pension funds, brokerage firms, and finance companies. They serve both individuals and businesses.

Non-banks tend to offer services such as lending, currency exchange, underwriting, and more. However, unlike their banking compatriots, they cannot accept traditional deposits.

Many banks also offer non-deposit accounts or products that are not insured by the FDIC. Stocks, bonds, and mutual funds are examples of non-deposit investment products. These carry some level of risk, meaning that you could lose some or all of the money that you invest in these products.

Investment banks, mortgage lenders, money market funds, insurance companies, hedge funds, private equity funds, and P2P lenders are all examples of NBFCs. Since the Great Recession, NBFCs have proliferated in number and type, playing a key role in meeting the credit demand unmet by traditional banks.

Is a credit union a non-bank financial institution? ›

Key Takeaways. Credit unions are financial cooperatives that provide traditional banking services to their members. Credit unions have fewer products than traditional banks, but offer clients access to better rates and more ATM locations.

Non-Banking Financial Company Explained

NBFCs in the United States generally fall under the regulations of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The legislation was passed in 2010 among the broad financial reform within the United States as a response to the 2008 Global Financial Crisis.

Since 1985, Casinos that have Gross Annual Gaming Revenues in excess of $1,000,000 are considered to be Financial Institutions and are subject to the requirements of the Bank Secrecy Act (BSA).