Podcast
Questions and Answers
What is the primary characteristic that distinguishes a non-banking financial institution from a bank?
What is the primary characteristic that distinguishes a non-banking financial institution from a bank?
Which of the following financial services is NOT facilitated by a non-banking financial institution?
Which of the following financial services is NOT facilitated by a non-banking financial institution?
According to Alan Greenspan, what role do non-banking financial institutions play in an economy?
According to Alan Greenspan, what role do non-banking financial institutions play in an economy?
What is the origin of the term 'non-bank' in the context of financial institutions?
What is the origin of the term 'non-bank' in the context of financial institutions?
Signup and view all the answers
Why do developing countries tend to view the term 'bank' as deposit-taking institutions only?
Why do developing countries tend to view the term 'bank' as deposit-taking institutions only?
Signup and view all the answers
What is a key difference between non-bank financial institutions and banks?
What is a key difference between non-bank financial institutions and banks?
Signup and view all the answers
How do non-bank financial institutions enhance competition in the financial services industry?
How do non-bank financial institutions enhance competition in the financial services industry?
Signup and view all the answers
What is a common way for non-bank financial institutions to fund their operations?
What is a common way for non-bank financial institutions to fund their operations?
Signup and view all the answers
What type of accounts do non-bank financial companies typically offer?
What type of accounts do non-bank financial companies typically offer?
Signup and view all the answers
What has been observed in the growth of non-banking financial companies in recent years?
What has been observed in the growth of non-banking financial companies in recent years?
Signup and view all the answers
Study Notes
Non-Banking Financial Institutions (NBFIs)
- NBFIs are financial institutions that do not have a full banking license and are not supervised by a national or international banking regulatory agency.
- They facilitate bank-related financial services such as investment, risk pooling, contractual savings, and market brokering.
Examples of NBFIs
- Hedge funds
- Insurance firms
- Pawn shops
- Cashier's check issuers
- Check cashing locations
- Payday lending
- Currency exchanges
- Microloan organizations
Role of NBFIs in the Economy
- NBFIs provide multiple alternatives to transform an economy's savings into capital investment.
- They act as backup facilities should the primary form of intermediation fail.
Origin of the Term "Non-Bank"
- The term "non-bank" likely originated from "non-deposit taking banking institution".
- Language differences and adoption of western banking systems may have led to the term "non-bank" being used differently in English and non-English speaking countries.
Operations of NBFIs
- NBFIs are not covered under a country's banking regulations.
- They supplement banks by providing infrastructure to allocate surplus resources to individuals and companies with deficits.
- NBFIs introduce competition in the provision of financial services.
Services Offered by NBFIs
- Loans and credit facilities
- Private education funding
- Retirement planning
- Trading in money markets
- Underwriting stocks and shares
- Wealth management
- Managing portfolios of stocks and shares
- Discounting services
- Advice on merger and acquisition activities
Funding of NBFIs
- NBFIs are not allowed to take deposits from the general public.
- They find other means of funding their operations, such as issuing debt instruments.
- They only take fixed deposit or time deposits, not current or saving accounts.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge of non-banking financial institutions, their roles, and services. Learn about NBFCs, their functions, and examples of such institutions.
