NBFC License

Quickest Registration in India

Setting up Business Plans & Policies

Drafting Financial Services

Legal Consultancy At Every Step

& more.

NBFC Registration

  • This field is for validation purposes and should be left unchanged.

Process of Registration

Online Application

An online application is to make in the prescribed format with the information regarding the demanded document and enclosures which generate a company application reference number.

 

Documents submission

A hard copy of the above-mentioned application along with the demanded documents and enclosures to the concerned regional office of RBI.

Documents to the central office of RBI

After the verification and the approval of the submitted application and the docuemnts, the regional office sends the application to the central office of RBI, which goes through the crucial examination to grant the certificate.

Certificate Granted

If the terms and conditions under section 45-1 A of the RBI act, 1937 are fully satisfied the Certificate will be granted.

 

What is a NBFC?

NBFC or Non-Banking Financial Company is a type of finance-related organization that gives different monetary and non-financial services to individuals, business enterprises, entrepreneurs, and so forth. They are not the same as the Cooperative and Commercial Banks, They don’t have to hold a financial permit however should carefully follow the standards and guidelines given by RBI from time to time.

NBFCs, most usually, work in the field of industrial and commercial loans and advances, hire-purchasing, investment funds, deposits, debentures, chit fund business, leasing, insurance business, instruments of the capital & money markets like bonds, stocks, and various other similar activities.

India’s financial division has demonstrated steady development for as far back as two decades. The NBFC part of this sector has changed immensely in the course of recent years. What’s more, NBFCs have been at the forefront in driving new credit disbursals for the nation’s underserved retail and MSME market.

NBFC License must be taken from RBI u/s 45-IA of the RBI Act of 1934. The budgetary foundation wishing to be enlisted as NBFC must, first, be appropriately enrolled either according to the Companies Act of 2013, or prior Act of 1956. RBI carefully directs and guarantees that the NBFCs are complying with the arrangements and guidelines given in Chapter III B of the RBI Act. The principal business activity of NBFCs is to raise capital from the open contributors and financial specialists and lend these further to the borrowers.

NBFCs are the scaffolds that connect the investors or depositors with the borrowers. They have improved as an option in contrast to the banking and money related area by giving budgetary answers for the unbanked and sloppy sections of society.

Principal Business

Rule business has not been characterized by the RBI Act. In this way, RBI, trying to bring clearness, has characterized financial activity. It has characterized that principal business will be considered as budgetary if the organization satisfies the accompanying conditions:

  • Its Total Assets include of more than 50% financial assets.
  • Income from financial resources establishes more than 50% of the gross income.
    This is also known as 50-50 criteria.

But 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 immovable property.

Documents Required For Company Registration

  • Certified Copy of Certificate of incorporation (CoI): Take a Certified Copy of CoI, MoA (Memorandum of Association), and AoA (Article of Association) from the Regional ROC (Registrar of Companies)
  • Updated KYC: Latest KYC details, income proof, credit report, and Net-worth Certificate of Directors and shareholders.
  • Net Worth Certificate: Collect updated net worth certificate of Directors, member/shareholders, and Company.
  • Education: Education & qualification proof of the Directors.
  • Company’s Details: Company’s PAN & GST number. Documents in support of the address of the company.
  • Bank Account: Details of the bank account of the company. This must have at least Rs. 2 crore deposited as the minimum NOF requirement. And well audited for the last 3-years.
  • Banker’s Report: A report to be obtained from the bank confirming the No Lien remark on the Initial Fixed Deposit of Rs 2 crore.
  • Organizational Structure: Complete plan of the organization hierarchy and decision-making process. The proposed criteria on which a loan application will get approved or rejected.
  • Underwriting model: A detailed action plan, for the next 5-years, about the loan products, complying with the Fair Practices Code, credit, and risk assessment policy.
  • Board Resolution: The board’s resolution approving the formation of NBFC.
  • IT Policy: The planned system and Information technology policy.

How NBFCs are Different from Bank

Because both NBFC and Banks are both involved in financial activities but some features are different in them. Some of them are:

  • Acceptance of Deposits.
  • Cheques drawn on itself.
  • Being a part of the payment and settlement system.
  • Facility of insuring Deposits, available with Deposit Insurance and Credit Guarantee Corporation. Applicable only to bank deposits.

Types of NBFCs

NBFCs have been broadly classified on the following basis:

Liabilities:

  • The deposit accepting NBFCs and
  • Non-Deposit accepting NBFCs , (Non-deposit taking NBFCs are classified further as per their size:)
  • systemically important (NBFC-NDSI) and
  • others

Activities:

  • Factors
  • Mortgage Guarantee Companies
  • Investment Credit Company
  • Infrastructure Debt Fund
  • Micro Finance Institution
  • Non-Operative Financial Holding Company
  • Systemically Important Core Investment Company

Application for an NBFC License can be made in any of the following classes:

  • Non-Banking Financial Companies – Factors (NBFC-Factors): These are NBFCs that have considering as their principal business activity. Factoring is a financial transaction. A sort of borrower finance wherein an element can sell its invoice or bills (accounts receivables) to an outsider (NBFC-Factor) at a rebate. It is additionally usually known as bill discounting or invoice financing.
  • Non-Banking Financial Companies – Mortgage Guarantee Companies (NBFC-MGC): NBFC-MGC must be enlisted with RBI as a Mortgage Guarantee Company. Its principal business is that of allowing a home loan ensure. This assurance is accommodated reimbursing an extraordinary lodging credit and intrigue gathered on it. Up to the ensured sum to a loan boss foundation, when a trigger occasion occurs. The base NOF necessity and financial asset criteria are distinctive for this sort of NBFC.
  • Non-Banking Financial Companies – Any monetary association carrying on as its essential business-resource account, the finance is given by advances/progresses or something else, for any action other than its own and procuring protections. Also, its activities must not fall under some other category characterized by RBI.
  • Non-Banking Financial Companies – Infrastructure Finance Companies (NBFC-IFC): These kinds of Companies put resources into the debt securities of infrastructure companies or public private association projects, having least NOF of Rs. 300 crore. The principal business and rating necessities are also extraordinary for such NBFCs.
  • Non-Banking Financial Companies – Microfinance Institution (NBFC-MFI): A non-store taking NBFC loaning on a momentary premise to low-income groups in India, with at least 85% of its benefits, for example, qualifying resources fulfilling a couple of conditions:
    • the loan provided to a debtor with a Rural Household Annual Income not as much as Rs. 60,000, or Urban and Semi-Urban Household Income of not over Rs. 1,20,000.
    • The amount of lending doesn’t exceed Rs. 35,000 in the primary cycle and Rs. 50,000 in every consequent cycle.
    • The absolute commitment of the debtor doesn’t exceed Rs. 50,000.
    • in the event that the sum is more than Rs. 15,000, an advance term of at least two years, with prepayment without punishment,
    • Loan to be extended with no home loan,
    • The aggregate of loans provided for income generation must not be under 75% of the absolute credit given by the MFI,
    • The frequency of repayment, whether weekly, fortnightly or regularly scheduled payments, to be chosen by the debtor.
  • Non-Banking Financial Companies – Non-Operative Financial Holding Company (NBFC-NOFHC): b. Non-Banking Financial Companies – Systemically Important Core Investment Company (NBFC-SI-CIC): These NBFCs acquire shares, stocks, and securities. The transactions must satisfy the underneath conditions: The financial association through which advertiser or promoting groups will be allowed to set up another bank. It is a completely claimed NOFHC that will hold the bank just as every other organization associated in financial services, controlled by RBI or other regulators, to the different permissible under the appropriate administrative remedies.
  • Non-Banking Financial Companies – Systemically Important Core Investment Company (NBFC-SI-CIC): These NBFCs acquire shares, securities and stocks. The transactions must fulfill the below conditions:
    • It holds in any event 90% of its Total Assets as interest in value or inclination offers, and debt/loans in group organizations,
    • Its interests in the value stock/shares (counting instruments that are convertible into equity shares within a period of not over 10-years from the date of issue, in group companies, form not less than 60% of its Total Assets,
    • It does not exchange in its interests in stocks, debt or loans in group organizations with the exception by the method for square deal for sale for weakening or disinvestment,
    • No financial action, which is listed u/s 45-I(c) & 45-I (f) of the RBI Act, is being completed by it. Other than for interest in bank deposits, money market instruments, government securities loans to and investments in debt issuances of group companies or ensures pronounced for the benefit of grouped organizations,
    • Its asset size is Rs. 100 crore or above,
    • It acknowledges public funds.

Pre-Conditions of NBFC Registration

As per the Section 45-IA of RBI, 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 least 10-year involvement in finance. What’s more he/she should be utilized as a full-time Director.
  • Unique Business Plan: A business strategy must be detailed and prepared for task for the next 5-years.
  • Net Owned Fund (NOF): The Company must have minimum of Rs. 2 Crore as its NOF. It must contain just 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, blessings from the life partner can be remembered for the NOF.  The least NOF requirement varies for particular NBFCs (NBFC-MFIs, NBFC Factors, and CICs).
  • Lean Credit History: The CIBIL score of the company, its Directors and its individuals must be acceptable. They should not have any write-offs or wilfully defaulted on the reimbursement of advances to NBFC/Bank.
  • FDI Compliance: If any foreign investment is envisioned, the company should be in consistence with the FEMA Act.

Process of Applying for NBFC License

After your company has been joined and has gathered the base NOF, you have to follow the underneath 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 during every single future request and correspondences

The hard copies of the documents are to be sent to the Regional Office of RBI also the form as uploaded online, under whose jurisdiction your company falls.

The regional office sends the application to the central office of the RBI, once the submitted documents are found to be alright. Then, the application and the documents are verified and thorough background verification is conducted

In the event that the organization meets all the terms and conditions determined in Section 45-I A of the RBI Act, the NBFC License will be conceded

It would be ideal if you make sure to keep the necessary least capital in a store account, liberated from all liabilities. By and large, this sum is kept in a Fixed Deposit (FD). RBI will check this sum, after your application, as the store of the organization with the concerned bank

RBI Conditions for Granting NBFC License

For NBFC enrollment, the company will apply in the configuration as indicated by the RBI. Before enrolling the company as NBFC, RBI may assess the financial & different books to fulfill the accompanying conditions:

  • That the NBFC can cover its present or future investors in full as and when their claims collect.
  • That its tasks are not liable to be conveyed in any way adverse to the enthusiasm of its current or future financial specialists.
  • The general character of the administration and the Board shall not be biased to the enthusiasm of the public or investors.
  • It has adequate capital structure and winning potential.
  • Public interest will be served by permitting this company as an NBFC.
  • The award of CoR will not be troublesome to the activity of the financial sector. And is predictable with fiscal stability, economic growth and considering such other pertinent strategies of RBI.

Compliances Required by NBFCs after CoR

There are certain compliances to be met after the NBFC License process is complete. The guidelines, circulars, and notifications, from the RBI, published in the public domain from time to time, are also mandatorily to be complied with.

  • 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.

Penalty of Non-Compliance with RBI Regulations

RBI is approved to make strict regulatory move if a company has loaning, accepting deposits or making investments as its main business, yet has not acquired a CoR of NBFC. An overwhelming punishment or fine can get forced on it. Or then again it can even be oppressed in an official courtroom.
RBI welcomes detailing of any element which does money related exercises however doesn’t figure in the rundown of approved NBFCs on RBI site. Likewise, reasonable move will be made for negation of the arrangements of the RBI Act, 1934.
Additionally, RBI continually surveys showcase insight reports, grievances, and special case reports from statutory evaluators of the organizations, data got through State Level Coordination Committee Meetings (SLCC), and so forth. To get some answers concerning organizations damaging its arrangements. RBI additionally takes an interest in sharing of this data with all the financial segment controllers and requirement organizations in the SLCC gatherings

Why Choose LegalRaahi

30+ Offices in India

10+ Years Experience

Economical and Fast

Money Back Guarantee

Featured In

People using our services

Frequently Asked Questions

What is an NBFC?
What is required to get NBFC License from RBI?
What is the difference between NBFCs & banks?
How to get NBFC License?
What documents are required to get registered as an NBFC?
Does RBI regulate all financial companies?
What are the powers of RBI on NBFCs?
What action is taken if financial institutions do not register with RBI?
What action is taken if financial institutions do not register with RBI?
What regulations are applicable to ND-NBFCs with an asset size of less than Rs. 500 crore?
What is Public Fund? Is it the same as Public Deposits?
What compliances are required by the NBFCs?
What is RNBC?
Can all NBFCs accept deposits?
What is the maximum interest an NBFC can pay on deposits?
NBFC can accept a deposit for how much duration?