Guide on Differences between NBFC and Banks in India 2025

If we talk about financial services, the first word that comes to your mind will be “bank”. However, in this guide, we will introduce you to financial companies other than banks, known as NBFCs or Non-Banking Financial Companies. Also, if you stay with us till the very end, your knowledge of the financial world will be improved, as we will explain the difference between NBFC and bank.

So, let us start understanding what a bank is and then we will proceed further.

What is a Bank?

A bank is a government-regulated financial institution which is part of the payment and settlement system and can perform the following functions:

• Accepts demand deposits like savings and checking accounts
• Provide loans, credit cards and other financial services

Banks in India are regulated by the Reserve Bank of India (RBI).

Some of the popular banks are as follows:

• State Bank of India (SBI)
• HDFC Bank
• ICICI Bank
• Punjab National Bank (PNB)

What is a Non-Banking Financial Company (NBFC)?

An NBFC (Non-Banking Financial Company) is a financial institution similar to a bank, but is not part of the payment and settlement system. NBFCs provide services similar to banks, like loans, asset financing, investment products and more. Difference between commercial bank and NBFC is that it cannot accept demand deposits like banks, as it does not have a banking license. NBFCs are also regulated by the RBI, but under the Companies Act, 2013 and the RBI Act, 1934 (Chapter III B).

Common Examples of NBFCs:

• Bajaj Finance
• Tata Capital
• Muthoot Finance
• Shriram Finance

Key Difference Between NBFC and Banks

Now, to answer the question - what is difference between nbfc and bank, let us understand from the table below:

Should You Choose a Bank or an NBFC?

So, this brings us to the most important question of this article, and the answer is it depends on your needs:

• Go with a bank if you need a savings account, want lower interest loans, or need secure deposits.
• Go with an NBFC if you need quicker loan approvals, flexible eligibility, or personalised financial services.

NBFCs are especially useful for people who do not meet the strict requirements of traditional banks, like small business owners, self-employed individuals, or those with low credit scores.

Conclusion

Banks and NBFCs are both financial institutions and are beneficial for different categories of customers. Banks are ideal for everyday banking needs, deposits, withdrawals, and payments, while NBFCs are for more personalised and quick like loans (Personal Loan, Home Loan, and Business Loan) and investment options (Fixed Deposits, Digital Gold, and Unlisted Shares), particularly for those who do not strictly meet the eligibility criteria. Also, if you want multiple financial services under one roof, then with Investkraft, you can get all BFSI (Banking, Financial Services, and Insurance) services under one roof, from lending and investments to insurance and payments.

Frequently Asked Questions (FAQs)

Why are NBFCs not Considered Banks?

NBFCs are not considered banks because they cannot accept demand deposits like banks do. Also, they do not have a banking license and are not part of the payment and settlement system in India.

How Do Banks Differ From Other Financial Institutions?

Banks differ from banks as you have the option to open savings and current accounts with banks which is not available in case of other financial institutions like NBFCs.

What Makes NBFCs Different in Lending?

With NBFCs, you get the following advantages:

• Faster loan approvals
• Personalised financial services
• Relaxed eligibility criteria

Are Deposits in NBFCs Safe?

NBFC deposits, if any, carry higher risk as they are not insured by DICGC, unlike bank deposits, which are insured up to INR 5 lakhs. However, NBFCs may offer higher interest rates to attract depositors.

How Have Recent Regulations Impacted NBFCs?

The RBI’s SBR framework and new fixed deposit rules in 2025 have increased regulations for NBFCs, requiring them to maintain LCR (Liquidity Coverage Ratio) and adhere to stricter governance standards.

Author: Diwakar Kumar Singh

Diwakar Kumar Singh is an accomplished content creator with over 6 years of experience in crafting both long-form and short-form content.

 

A gold medalist in MBA (Marketing) from IMT and a qualified petroleum engineer, Diwakar brings a results-driven mindset to his work. His passion for writing enables him to produce compelling and engaging content that resonates with diverse audiences.