Q.1 What is the primary function of a Non-Banking Financial Company (NBFC)?
Accepting deposits from the public
Providing financial services like loans and credit
Issuing currency notes
Regulating banks
Explanation - NBFCs primarily provide financial services like loans, credit facilities, retirement planning, and investment products, but they cannot issue currency or fully regulate banks.
Correct answer is: Providing financial services like loans and credit
Q.2 Which of the following is NOT allowed for an NBFC?
Accepting demand deposits
Providing loans and advances
Leasing and hire purchase
Asset financing
Explanation - NBFCs cannot accept demand deposits like commercial banks. They can provide loans, leasing, and asset financing.
Correct answer is: Accepting demand deposits
Q.3 Who regulates NBFCs in India?
SEBI
RBI
IRDAI
Ministry of Finance
Explanation - The Reserve Bank of India (RBI) regulates NBFCs in India to ensure financial stability and compliance with regulations.
Correct answer is: RBI
Q.4 NBFCs are required to maintain a minimum Net Owned Fund (NOF). What does NOF indicate?
Total deposits collected
Shareholder's capital and reserves
Loan disbursed
Total income earned
Explanation - Net Owned Fund (NOF) represents the owned funds of an NBFC, including capital and reserves, which indicates financial strength.
Correct answer is: Shareholder's capital and reserves
Q.5 Which type of NBFC is primarily engaged in providing infrastructure finance?
Asset Finance Company
Loan Company
Infrastructure Finance Company
Microfinance Institution
Explanation - Infrastructure Finance Companies (IFCs) primarily provide long-term finance for infrastructure projects like roads, power, and ports.
Correct answer is: Infrastructure Finance Company
Q.6 Which of the following NBFC types is focused on lending to small borrowers and micro-entrepreneurs?
Investment Company
Microfinance Institution
Infrastructure Finance Company
Asset Finance Company
Explanation - Microfinance Institutions (MFIs) provide small loans to low-income individuals or micro-entrepreneurs who do not have access to traditional banking services.
Correct answer is: Microfinance Institution
Q.7 NBFCs differ from banks in which of the following aspects?
NBFCs cannot issue cheques drawn on themselves
NBFCs offer loans and credit
NBFCs invest in government securities
NBFCs can operate ATMs
Explanation - NBFCs cannot issue cheques or demand drafts like banks. They focus on lending, asset financing, and investment services.
Correct answer is: NBFCs cannot issue cheques drawn on themselves
Q.8 What is the main purpose of the RBI’s prudential norms for NBFCs?
To increase profits of NBFCs
To ensure financial stability and protect depositors
To reduce the number of NBFCs
To allow NBFCs to issue bonds freely
Explanation - Prudential norms set by RBI are meant to ensure financial stability, minimize risks, and protect customers and investors.
Correct answer is: To ensure financial stability and protect depositors
Q.9 Which of the following is a key difference between NBFCs and banks regarding deposit insurance?
NBFC deposits are insured by DICGC
NBFC deposits are not insured
NBFC deposits are insured by RBI
NBFC deposits are insured by SEBI
Explanation - Deposits with NBFCs are not covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme, unlike banks.
Correct answer is: NBFC deposits are not insured
Q.10 An NBFC engaged in buying and selling of securities is classified as:
Loan Company
Investment Company
Microfinance Institution
Infrastructure Finance Company
Explanation - Investment Companies primarily deal with investments in stocks, bonds, and other securities for income and growth.
Correct answer is: Investment Company
Q.11 Which ratio is important for NBFCs to maintain for financial soundness?
CRR
CAR
SLR
Repo Rate
Explanation - Capital to Risk-weighted Assets Ratio (CRAR or CAR) ensures NBFCs maintain adequate capital to absorb risks.
Correct answer is: CAR
Q.12 Which NBFC category provides vehicles, machinery, and equipment financing?
Loan Company
Asset Finance Company
Infrastructure Finance Company
Investment Company
Explanation - Asset Finance Companies (AFCs) provide loans for purchasing vehicles, machinery, and industrial equipment.
Correct answer is: Asset Finance Company
Q.13 NBFCs are required to maintain a certain level of liquidity. Which asset is primarily considered liquid?
Real estate
Government securities
Machinery
Brand equity
Explanation - Government securities are considered liquid assets because they can be easily converted into cash without significant loss of value.
Correct answer is: Government securities
Q.14 Which of the following is true about deposit-taking NBFCs?
They are not regulated by RBI
They can accept public deposits under RBI regulations
They can issue currency notes
They are the same as microfinance institutions
Explanation - Deposit-taking NBFCs can accept deposits from the public but under strict regulations by RBI, unlike banks, they cannot issue currency.
Correct answer is: They can accept public deposits under RBI regulations
Q.15 Which committee provided guidelines for classification and regulation of NBFCs in India?
Narasimham Committee
Raghuram Rajan Committee
Malegam Committee
Kelkar Committee
Explanation - The Malegam Committee provided recommendations for classification, regulation, and governance of NBFCs in India.
Correct answer is: Malegam Committee
Q.16 NBFCs can issue which of the following to raise funds?
Equity shares
Corporate bonds
Debentures
All of the above
Explanation - NBFCs can raise funds through equity, bonds, and debentures, depending on regulatory permissions and financial strategy.
Correct answer is: All of the above
Q.17 Which NBFC type provides financial services mainly to companies rather than individuals?
Loan Company
Investment Company
Infrastructure Finance Company
Microfinance Institution
Explanation - Infrastructure Finance Companies primarily serve corporate clients by funding infrastructure projects rather than individuals.
Correct answer is: Infrastructure Finance Company
Q.18 NBFCs are required to prepare which financial statements for regulatory compliance?
Profit & Loss and Balance Sheet
Cash Flow Statement only
Fund Flow Statement only
None of the above
Explanation - NBFCs must prepare standard financial statements including Profit & Loss account and Balance Sheet for transparency and regulatory compliance.
Correct answer is: Profit & Loss and Balance Sheet
Q.19 Which of the following is a risk faced by NBFCs due to loan defaults?
Liquidity risk
Credit risk
Market risk
Operational risk
Explanation - Credit risk arises when borrowers fail to repay loans, which is a major concern for NBFCs.
Correct answer is: Credit risk
Q.20 Which is a difference between an NBFC and a bank regarding payment systems?
NBFCs cannot issue cheques or participate in clearing systems
NBFCs can issue ATM cards freely
NBFCs can issue demand drafts
NBFCs can operate RTGS/NEFT directly
Explanation - NBFCs cannot issue cheques, participate in clearing systems, or operate payment systems like banks do.
Correct answer is: NBFCs cannot issue cheques or participate in clearing systems
Q.21 NBFCs engaged in hire purchase and leasing are classified as:
Asset Finance Company
Investment Company
Loan Company
Infrastructure Finance Company
Explanation - Asset Finance Companies provide finance for purchasing assets through loans, hire purchase, or leasing.
Correct answer is: Asset Finance Company
Q.22 Which of the following statements about NBFCs is correct?
All NBFCs are allowed to accept demand deposits
NBFCs are part of the payment and settlement system
NBFCs provide credit and investment services but cannot issue currency
NBFCs are regulated by SEBI
Explanation - NBFCs provide financial services such as credit, loans, and investment, but they cannot issue currency and are regulated by RBI, not SEBI.
Correct answer is: NBFCs provide credit and investment services but cannot issue currency
Q.23 Which of the following is a key regulatory requirement for NBFCs in India?
Maintaining CRR with RBI
Maintaining a minimum Net Owned Fund (NOF)
Participating in ATM networks
Issuing cheques
Explanation - NBFCs must maintain a minimum Net Owned Fund (NOF) to ensure financial stability and risk absorption.
Correct answer is: Maintaining a minimum Net Owned Fund (NOF)
Q.24 Which type of NBFC primarily invests in stocks, bonds, and other securities for generating profit?
Loan Company
Investment Company
Microfinance Institution
Asset Finance Company
Explanation - Investment Companies focus on investing in securities to generate profits and returns for stakeholders.
Correct answer is: Investment Company