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NBFC Registration

Register Non-banking financial company

> Rs. 6,00,000 + Govt. Fees

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NBFC Registration

What is a NBFC?

A Non-Banking Financial Company (NBFC) is a company that is registered under the Companies Act 1956/Companies Act 2013. These companies does not possess a banking license, yet are involved in various financial services. These services include:

Loan and credit facilities
Asset Financing
Acquisition of shares/stocks/bonds
Hire-purchase
Insurance business
Chit business
Currency exchange
Peer to peer lending
Hedge funds

But if a company is engaged in other activities, then it is not considered a NBFC. These activities are:

Agriculture activity
Industrial activity
Purchase/sale of any goods
Providing any services and sale/purchase/construction of immovable property

Difference between NBFCs and banks

There are few differences between NBFCs and Banks, and these are:

NBFCs doesn’t have the authority to accept demand deposits
Moreover, NBFCs are not a part of the payments & settlements systems and it cannot issue cheques drawn on itself
The facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs

Classification of NBFC

There are different types of NBFCs currently operating in India.

On the basis of authorization to take deposits:

Deposit taking (Type-1)
Non-deposit taking (Type-2)

In the case of non-deposit taking NBFC, the ND is suffixed to its name, i.e. NBFC-ND.

If the total asset site of any NBFC is Rs.100 crore, then it is classified as Systematically Important NBFC. It is because, they bear the burden of the financial stability of the country.

Further classification of NBFCs on the basis of their activities are as follows:

Regulators of NBFC

Company type	Regulators
NBFCs registered with RBI	Regulation, supervision, surveillance and enforcement under RBI
NBFC regulated by other regulators	Depends on the type of institution
Housing Finance Institutions	National Housing Bank
Merchant Banking Company/Venture Capital Fund Company/Stock Broking/Collective Investment Schemes (CIS)	Securities Exchange Board of India
Nidhi Companies and Mutual Benefit Companies	Ministry of Corporate Affairs
Chit Fund Companies	State Government
Insurance Companies	Insurance Regulatory and Development Authority
Non-Banking Non-Finance Companies	Regulation, supervision, surveillance and enforcement under the Companies Act 1956.

Pre-requirements of NBFC

A company should be registered as per the rules, regulations, and provisions mentioned in the Companies Act 2013 or the previous Companies Act 1956.

Registered under the section 3 of the Act
It should have a minimum net owned fund of Rs.2 crore and not be the borrowed fund. (This minimum owned fund is different in the case of other specialized NBFCs like NBFC-MFIs, NBFC Factors, CICs, as it is decided on the kind of NBFC.) A gift from the spouse is considered as owned fund.
At least 1/3 of the directors should have experience in Finance
There must be a detailed plan for the next 5 years

NBFCs as sponsors of IDF-MF

In this case, the minimum owned fund should be at least Rs.3 crore, CRAR of 15% and NPA not more than 3% of net advances.
In addition to this, this company should have existed for the last 5 years and profitable in last 3.

Process of Registration

Fee of Registration

Government fee for NBFC registration is Rs.3,50,000 approx. In addition to this, you have to pay professional fee to NBFC consultant. And total of this could amount to Rs.15 lakh if you consider other sources of NBFC registration. But at LegalRaasta, we charge Rs.6,00,000 + Government fee for the registration.

Documents Required for NBFC Registration

Significant documents required for NBFC Registration in India are as follows:

Documents related to the administration and management of the company
Company Incorporation Certificate
The MoA and the AoA of the applicant company or firm
Documents describing the location of the company
Detailed information about Directors or Partners of the Company
Accounts of the company well-audited for last three consecutive years
Board Resolution in favour of NBFC formation
Bank Account with a minimum paid up equity share capital of INR-2 Crore
Income tax PAN, etc.
Other relevant documents on request

Advantages of NBFCs

These companies has the authority to provide loan and credit facilities
NBFCs can also trade in money market instruments
In addition to this, these companies can take part in wealth management such as managing portfolio of stocks and shares
Autonomy of underwriting shares and stocks and other obligations
These companies are the last resorts for many borrowings.
And they are pumping in huge amounts of money in country wide projects
These are much faster than banks in their functioning
There is less dependency on bank branches, as the NBFCs have used great technological advancements like use of mobile phones and the internet.
The digital initiatives made by these NBFCs has presented it with the opportunity to reach larger audience within seconds
NBFCs have also formed partnerships including the government and used their database and identify customer worthiness. Thus reducing the risks and maximizing the profits.
Investing in property with NBFCs is advantageous due to flexible rates, easy repayment, acceptable property collaterals with quick and easy processing.

Role of NBFCs

The NBFCs can lend both secured and unsecured based on their alternative lending models. These play a significant role in providing financial services in the Indian economy. These have undergone much changes in the recent years. And presently, they have adopted high-end tech-based business model. Some of the roles offered by them are:

These companies create a favorable balance in the financial needs of the country. As most of the applicants are rejected by the traditional banks of the country.
In addition to this, the NBFCs provides loans on the basis of the alternative credit scoring model.
Many Indian Fin-tech Companies have been using NBFC model to offer financial services