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Banks and other non bank financial institutions have an important effect on the performance of the economy because they are the one to make the financial markets work. Without them, financial markets would not be able to move funds from people who save to people who have productive investment opportunities. Banks and nonbanks are almost similar since they both act as an intermediary providing services to their customers. But they are also different in some …

…bank financial institutions is required to have a banking license, while an NBFI is a deposit taking institutions which do not hold a banking license but take deposits and lend, often in closely defined areas Finally, the difference is an NBFI's risk hedging institutions, such as life and general insurers, which provide risk, cover in return for the payment of regular premiums. While in the banking sector, we are not protected of any risk return.