Get NBFC Registration in India Expert help

Non-Banking Financial Companies (NBFC) are primarily companies that are involved in financial activities like giving loans, providing advances, some NBFC’s can receive deposits, acquiring of stocks and shares, lease, hire-purchase, insurance business and chit business. Though an NBFC and a bank appear similar, there are few notable differences between the two –

·         An NBFC cannot issue cheques on itself

·         An NBFC is not covered under facilities like Deposit Insurance and Credit Guarantee Corporation.

·         An NBFC cannot function as a normal bank in terms of accepting demand deposits.

The Reserve Bank of India has complete jurisdiction over NBFC’s in India. Hence it is mandatory for an NBFC to acquire the NBFC registration or RBI license before the start of operations except for ones that are regulated by other bodies like the National Housing Bank, Insurance Regulatory and Development Authority of India, Securities, and Exchange Board of India, MCA or state governments.

NBFC Registration procedure            

In order to obtain NBFC registration from RBI, the company needs to fulfill certain criteria:-

·         The said NBFC needs to be mandatorily registered with the Ministry of Corporate Affairs as a private limited company or a public limited company, under the Companies Act 2013.

·         The minimum net owned fund of the company needs to be Rs. 200 lakh (2 crores)

·         One of the full-time directors of the said company needs to be from NBFC or banking background

·         The CBIL records of Directors need to be absolutely clean.

·         The principal business of the company needs to be a financial activity which means that the financial assets of the company are more than 50% of the total assets of the company and the income so derived from these assets should be more than 50% of the total income of the company.

NBFC Registration process constitutes of the following key steps:-

a.    The process starts with the approval of the company name from MCA. Post name approval, the NBFC needs to be registered with the Registrar of Companies. The Memorandum of Association and Articles of Association need to be drawn up before Incorporation. The object of the NBFC needs to be clearly mentioned in INC-1 as financing.

b.    The newly formed NBFC now is required to open a company bank account and the subscription amount needs to be deposited in the new account.

c.    To meet the criteria of Rs. 2 crores as net owned funds, the newly formed NBFC attain this amount by issuing shares to existing shareholders or new shareholders.

d.    The net owned fund of Rs. 2 crores once achieved needs to be deposited with the bank as a fixed deposit.

e.    An application form in the prescribed format needs to be now submitted online at RBI Website (COSMOS) or offline at the regional office of RBI. For applicants applying online, the hardcopy of the application form along with the required documents needs to be submitted at the regional office of RBI.

f.     The documents that need to be submitted are:-

·         Copies of the Incorporation certificate

·         Copies of Memorandum and Articles of Association highlighting the principle business clause.

·         Individual director profiles

·         PAN card copy of the NBFC

·         The fixed deposit certificate and bankers certificate copies

·         Banker’s report

·         Board resolution to the effect of the authorized signatory; absence of public deposit; no NBFC activity is being carried out; formulation of the code of Fair Practises.

·         Statutory auditors certification with respect to the NBFC not holding public deposit; not carrying out NBFC operations and confirming Net owned funds;

·         Complete details of the bank and company account

·         Audited balance sheet and P&L statement of last three years or for period available.

·         Detailed information on the Management

The requisite NBFC registration fee also needs to be deposited online for processing of the application. All the above documents and other related documents are scrutinized closely by RBI before the NBFC registration or RBI license is granted.

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