Quickest Registration in India
Setting up Business Plans & Policies
Drafting Financial Services
Legal Consultancy At Every Step
Process of Registration
What is a NBFC?
The precise meaning of a “Principle business” has not been defined by the RBI Act. Therefore, RBI, in an attempt to bring clarity, has defined financial activity. It has defined that the principle business will be considered as a financial activity only if the company fulfills the following conditions::
- It’s Total Assets include more than 50% of the financial assets.
- Income from financial resources establishes more than 50% of the gross income.
This is also known as the “50-50” criteria.
But the following activities are not considered of being financial in nature:
- Agricultural activity,
- Industrial activity,
- Purchase/sale of any goods and services (excluding securities), and
- Sale/purchase/construction of the immovable property.
How NBFCs are Different from Bank
Both NBFCs and Banks are involved in financial activities but some features are different among both of them, like:
- Acceptance of Deposits.
- Cheques were drawn on itself.
- Being a part of the payment and settlement system.
- The facility of insuring Deposits, available with Deposit Insurance and Credit Guarantee Corporation. Applicable only to bank deposits.
Pre-Conditions of NBFC Registration
As per the Section 45-IA of RBI, the following conditions must be satisfied for a company to be enrolled as an NBFC:
- Registration: The financial institution should be built up as an organization under Section 3 of the Companies Act, 2013 or the past Companies Act, 1956.
- Director’s Qualifications: At least 1/3rd of the Directors must hold a minimum of 10-years of experience in finance. What’s more, is that he/she should be utilized as a full-time Director.
- Unique Business Plan: A business strategy must be prepared to task for the next 5-years.
- Net Owned Fund (NOF):The Company must have a minimum of Rs.2 crores as it’s NOF. It must contain only equity paid-up share capital. Preference share capital is not to be incorporated. The premium on shares & reserves, if any, will be incorporated. But it should not be a borrowed fund. However, gifts from the life partner can be included in the NOF. Minimum NOF requirements vary for particular NBFCs (NBFC-MFIs, NBFC Factors, and CICs).
- Lean Credit History: The CIBIL score of the “company, it’s Directors, and it’s individual members” must be acceptable. They should not have any write-offs or default on the reimbursement of advances to an NBFC/Bank.
- FDI Compliance: If any foreign investment is anticipated, then the company should be in compliance.
Process of Applying for NBFC License
After your company has been incorporated and has gathered the basic NOF amount, then you have to follow the below-mentioned system to get it registered as an NBFC with RBI:
An application is to be submitted online. With the necessary documents. A Company Application Reference Number (CARN) is generated upon successful submission. This reference number is of use for every single future request and correspondence.
It would be ideal if you make sure to keep the necessary minimal capital in a deposit account, liberated from all liabilities. This sum is kept in a Fixed Deposit (FD). RBI shall verify this amount, with the concerned bank and then approve your application.
RBI Conditions for Granting NBFC License
- The NBFC can cover it’s present or future investors in full as and when their claims collect.
- It’s tasks are not to be conveyed in an adverse enthusiasm to it’s current or future financial specialists.
- The general character of the administration and the Board shall not be biased to the interest of the public or investors.
- It has an adequate capital structure and earning potential.
- The public interest will be served by licensing this company as an NBFC.
- The grant of CoR shall not be troublesome to the activity of the financial sector. And it must be consistent with the monetary stability, economic growth, and other relevant policies of the RBI.
Compliances Required by NBFCs after CoR
- Appointing a Statutory Auditor (CA with 5+ years of experience),
- Statutory Audit,
- Tax Audit,
- Income Tax Returns Filing,
- GST Returns Filing,
- ROC Returns,
- All other Compliances/Returns required by a competent authority.
Compliances for NBFCs by RBI
- Adoption of Fair Practice Code,
- CIC Registration,
- C-KYC Registration,
- CERSAI Registration,
- FIU-IND Registration,
- COSMOS Registration,
- Secretarial compliances,
- Compliance of KYC Anti-money Laundering,
- Filing NBS-9 on COSMOS, the online platform of RBI.