Introduction to NBFCs

Non-Banking Financial Institutes or NBFCs are one of the major contributors to the 12.5% rise in GDP from the finance sector. NBFC registration procedures have been made very simplistic and easy to perform. Before we delve into the details, however, let’s briefly describe what NBFCs are NBFC are legal entities under RBI regulations, which provide loan/credit facilities to the public. Even though NBFCs are under regulations of RBI, they are separate entities from banks. An infamous incident with Sahara group, however, has made RBI tighten the Annual Compliances of NBFCs and they need to met carefully to ensure smooth day-to-day operations of the organization after registration procedure is complete. There is a list of prerequisites of NBFC registration.

Registration procedure for NBFC companies is not extremely complicated. They can be registered with the Ministry of Corporate Affairs prior to approval from RBI. This makes the incorporation procedure simplistic and hassle-free.

Prerequisites of NBFC Registration

There are a few requirements and prerequisites of NBFCs which have to be fulfilled to get registered with the MCA. Here we list down those prerequisites.

  • The organization should be a Registered Company under the Companies Act, 2013 and should follow ROC Compliances.
  • Net owned funds of the company should be Rs. 2 Crore or more
  • At least One Full-time Director of the company should be from an NBFC/Banking background.
  • CIBIL records should be clean
  • Understanding of NBFC business, Compliances, RBI regulations, Taxation, Disclosures for eg. Obligations under PML rule

These prerequisites put together should serve enough for registration procedure of NBFCs. To obtain a certified NBFC license, an application has to be filed online and offline. In addition to the prerequisites of NBFC license from RBI requires a comprehensive list of documents. Given below is the list of Documents required to apply for NBFC license.

Documents for NBFC license

  • Certified copies of Certificate of Incorporation and Certificate of Commencement of Business in case of public limited companies.`
  • Certified copies of up-to-date Memorandum of Association and Articles of Association of the company. Details of clauses in the memorandum relating to financial business.
  • Copy of PAN/CIN alotted to the company.
  • Directors’ profile, separately filled up and signed by each director.
  • Certificate from the respective NBFC/s where the Directors have gained NBFC experience.
  • CIBIL Data pertaining to Directors of the company
  • Financial Statements of the last 2 years of Unincorporated Bodies, if any, in the group where the directors may be holding directorship with/without substantial interest.
  • Board Resolution specifically approving the submission of the application and its contents and authorizing signatory.
  • Board Resolution to the effect that the company has not accepted any public deposit, in the past (specify period)/does not hold any public deposit as on the date and will not accept the same in future without the prior approval of Reserve Bank of India in writing.
  • Board resolution stating that the company is not carrying on any NBFC activity/stopped NBFC activity and will not carry on/commence the same before getting registration from RBI.
  • Certified copy of Board resolution for the formulation of “Fair Practices Code”.
  • Statutory Auditors Certificate certifying that the company is/does not accept/is not holding Public Deposit.
  • Statutory Auditors Certificate certifying that the company is not carrying on any NBFC activity.
  • Statutory Auditors Certificate certifying net owned fund as on date of the application.
  • Details of Authorised Share Capital and the latest shareholding pattern of the company including the percentages.
  • Copy of Fixed Deposit receipt & bankers certificate of no lien indicating balances in support of Net Owned Funds.
  • Details of the bank balances/bank accounts/complete postal address of the branch/bank, loan/credit facilities etc. availed.
  • Last three years Audited balance sheet and Profit & Loss account along with directors & auditors report or for such shorter period as are available (for companies already in existence).
  • The business plan of the company for the next three years giving details of its (a) thrust of business, (b) market segment and (c) projected balance sheets, cash flow statement, asset/income pattern statement without any element of public deposits.
  • Source of the startup capital of the company substantiated with documentary evidence.
  • Self-attested Bank Statement/Income Tax returns etc.

Process too lengthy and tedious? Finding it hard to keep up with ROC compliances? Follow our blog to stay up to date with the latest such as prerequisites of NBFC.

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