🏦 1. Non-Banking Financial Companies (NBFCs)
What They Do:
- Give loans, fund assets (like cars/homes), and invest.
- But: They can’t accept savings/demand deposits like banks.
Link to Banking:
- Banks lend money to NBFCs → NBFCs lend to customers banks can’t reach (e.g., small vendors).
Example: Bajaj Finance, Mahindra Finance.
🛡️ 2. Insurance Sector
What They Do:
- Protect you from risks (life, health, accidents).
Types: LIC (life), ICICI Lombard (general insurance).
Link to Banking:
- Banks sell insurance (bancassurance).
- Banks insure their own assets (e.g., branches, ATMs).
📈 3. Capital Markets
What They Do:
- Let you buy/sell stocks, bonds (e.g., NSE, BSE).
Link to Banking:
- Banks invest in bonds/shares.
- Help companies raise funds via IPOs (e.g., Paytm IPO).
🤝 4. Mutual Funds
What They Do:
- Pool money from investors to buy stocks/bonds.
Example: SBI Mutual Fund, HDFC Mutual Fund.
Link to Banking:
- Banks sell mutual funds (e.g., Axis Bank → Axis Mutual Fund).
🧓 5. Pension Funds
What They Do:
- Help you save for retirement (e.g., NPS – National Pension System).
Link to Banking:
- Banks open NPS accounts and manage payouts.
💳 6. Payment Systems & FinTech
What They Do:
- Enable digital payments (UPI, Paytm, Razorpay).
Link to Banking:
- UPI apps need banks to process transactions.
Example: Google Pay works with your bank account.
🌍 7. Foreign Exchange (Forex) Market
What They Do:
- Exchange currencies for travel/trade (e.g., ₹ to $).
Link to Banking:
- Banks handle forex for exporters/importers.
🌾 8. Microfinance Institutions (MFIs)
What They Do:
- Give small loans to low-income groups (e.g., rural women).
Example: Bandhan Bank (started as an MFI).
Link to Banking:
- Banks fund MFIs → MFIs lend to villages.
🧩 Why Banking Links Matter
| Sector | Banking Connection | Impact |
|---|---|---|
| NBFCs | Banks fund them | Reaches small businesses |
| FinTech | Banks process payments | Faster UPI transactions |
| MFIs | Banks provide capital | Reduces rural poverty |
| Mutual Funds | Banks distribute them | More investment options |
Key Benefits:
- Boosts financial inclusion (villages, poor).
- Fuels economic growth by linking savings → investments.
❓ FAQs for Exams/Interviews
Q: What’s the difference between banks and NBFCs?
A: NBFCs can’t take savings deposits or issue checks.
Q: How do FinTechs depend on banks?
A: UPI apps like PhonePe need bank accounts to transfer money.
Q: What is bancassurance?
A: Banks selling insurance (e.g., SBI selling SBI Life Insurance).
📌 Key Terms to Remember
- NPS: National Pension System.
- IPO: Initial Public Offering (company’s stock market debut).
- UPI: Unified Payments Interface (instant bank-to-bank apps).
- MFI: Microfinance Institution.