One type of company that has emerged to be a major player in the market is NBFC or Non-Banking Financial companies. NBFCs have been contributing a reported 12.5% rise in the Gross Domestic Product (GDP) and are therefore among one of the institutions with huge potential for changing the landscape of financial services. Due to an infamous incident with Sahara Group and their two subsidiary companies, RBI (Reserve Bank of India’s) has drilled down strictly on the requirements for Annual Compliance of NBFCs in the country.

Head on over to our article on Regulations governing NBFCs in India to know about the provisions RBI has arranged for NBFCs and their smooth operations along with the guidelines

What are NBFCs

In very simple words, NBFCs are institutions which provide financial services like credit facilities, loans, TFCs, investments,  retirement planning among many other services in a similar fashion to banks. NBFCs provide these facilities while legally being a separate entity from banks even though they come under banking regulations laid down by RBI. This is mainly because deposits from the general population are restricted for these institutions.

Thus, on the basis of their ability to take deposits or not, NBFCs are broadly classified as deposit taking and non-deposit taking (NBFC-ND).

The above categorization of NBFCs is at a very broad level. To know more about the types and sub-classifications of NBFCs furthermore, head on over to Classification of NBFCs.

Here’s a list of some of the well-known NBFCs in the country:

  • Muthoot Finance Limited
  • Aditya Birla Finance Limited
  • Bajaj Finserv(Bajaj Finance Limited)
  • Mahindra and Mahindra Financial Services Limited
  • Tata Capital Financial Services Limited
RBI Annual Compliance of NBFCs

Annual Compliance of NBFcs will help bring about the comprehensive evaluation of these institutes

Annual Compliance of NBFCs

The Annual Compliance of NBFCs has been streamlined and made stricter, therefore, ensuring transactions with lesser risk factors both for their consumers and the government with the disclosures of annual statements and returns.

NBFC-ND-SI (Non-Deposit category)  are required have been mandated to produce documentation of statements of capital funds as well as risk asset ratio among others. In addition to these, disclosure norms like capital adequacy and liquidity are the new additions to the in the NBFC-ND Companies Prudential Norms Directions, 2007.

  • Capital adequacy to be maintained at 15%
  • Disclosures in the Balance sheet.

Checklist for NBFC-ND(Non-Deposit taking)

Given below is the checklist of annual compliance requirements for NBFC-ND(No- Deposit ).

Serial Number Particulars Time Limit
1 Unaudited March Monthly Return/NBS7 On or before 30th June
2 Audited March Monthly Return Upon Completion
3 Statutory Auditors Certificate on Income and Assets On or before 30th June
4 Information about Cos having FDI/Foreign Funds On or before 30th June
5 Resolution of Non-acceptance of Public Deposit Before the commencement of the new Financial year
6 File Audited Annual Balance Sheet and P&L Account One month from the date of signoff
7 Declaration of Auditors to Act as Auditors of the Company Annual basis

Apart from the annual compliances, the following returns have to be filed by Non-Deposit NBFCs

  • [NBS-ALM1] Monthly Statement of Short-Term Dynamic liquidity
  • [NBS-ALM2] Half-Yearly Statement of Structural Liquidity in ALM format
  • [NBS-ALM3] Half-Yearly Statement of Intrest Rate Sensitivity in ALM format

Checklist for NBFC- D(Deposit-taking)

In contrast to Non-deposit NBFCs, NBFC-D (Deposit Taking ) institutions have to file a few returns on the basis of deposits held by the company.

  • NBS 1- Quarterly returns on Deposits in First Schedule
  •  NBFC-D type institutions have to submit quarterly returns on Prudential Norms.[NBS-2]
  • NBS 3- Quarterly return on Liquid Assets
  • An annual return of critical parameters by rejected companies in holding public deposits [NBS-4]
  • NBS 6- Monthly Return on exposure to capital market by NBFC-D with total assets of Rs. 100 crore and more
  • Half-Yearly ALM returns by institutions holding deposits worth Rs. 20 crore and more or with asset size of Rs. 100 crore and more.
  • Audited Balance sheet and Auditor’s report by NBFC-D

In conclusion, meeting the Annual Compliance of NBFCs has become a high-maintenance affair. Careful study of the procedures is a must in order to avoid being in violation of compliance requirements.

Here, at LegalRaasta, we are enthusiastic about the legalities and procedures of starting a company and meeting compliance requirements.

Shoot us an E-Mail at [email protected] or hit us up with your details for NBFC registration, therefore, allowing you to focus on your venture!