Consider the following statements with respect to Non-Banking Financial Companies (NBFCs):
1. NBFCs do not form part of the payment and settlement system.
2. Deposit insurance facility is available to depositors of NBFCs.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Explanation Statement 1 is correct: Non-Banking Financial Companies (NBFCs) do not participate in the payment and settlement system, which is typically reserved for scheduled banks and other financial institutions that are authorized by the Reserve Bank of India (RBI). NBFCs, while they provide financial services like loans and investments, are not directly involved in systems like electronic funds transfers, which are a part of the payment and settlement system.
Statement 2 is not correct: Deposit insurance, provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), is available only to depositors of scheduled commercial banks and not to depositors of NBFCs. NBFCs are not eligible for DICGC coverage, meaning depositors in NBFCs do not have insurance on their deposits in case the company fails.
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