NBFC Registration

Register Non-banking financial company

>Rs. 6,99,999 + Govt. Fees

>NBFC License from RBI

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NBFC Registration

What is a NBFC?

A Non Banking Financial Company can be defined as a company registered under the Companies Act, 1956. Majorly engaged in the folowing types of business:

Acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature
Loans and Advances
Hire Purchase
Insurance Business
Leasing
Chit Business

What is not included under NBFCs?

NBFCs does not include any institution whose principal business is that of:

Industrial activity
Agriculture activity
Providing any services and sale/purchase/construction of immovable property.
Purchase or sale of any goods (other than securities)

Classification of NBFCs

It is noteworthy that A non-banking institution which is a company and has a principal business of receiving deposits (under any scheme or arrangement) in one lump sum or in installments by way of contributions or in any other manner, is also a Non Banking Financial Company. Since December 2006 three broad categories of NBFCs exist in India:

Investment Companies
Loan Companies
Finance Companies

Regulation of NBFCs

Depending on the type of NBFCs registered under Section 3 of the Companies Act 1956 there are regulators as follows:

NBFCs Registered with RBI- Regulation, Supervision, Surveillance and Enforcement under RBI
NBFCs Regulated by Other Regulators- Find below the Authority for Regulation, Supervision, Surveillance and Enforcement, depending on the type of Financial Institutions:
Housing Finance Institutions-National Housing Bank
Merchant Banking Company/ Venture Capital Fund Company/ Stock Broking/ Collective Investment Schemes (CIS)-Security and Exchange Board of India
Nidhi Companies and Mutual Benefit Companies-Ministry of Corporate Affairs
Chit Fund Companies-State Government
Insurance Companies-The Insurance Regulatory and Development Authority
Non Banking Non Financial Companies- Regulation, Supervision and Surveillance under the Companies Act 1956.

Regulator: Ministry of Corporate Affairs

Enforcement Agency: State Government

Pre-Requirements for NBFC Registration

In order to obtain a proper and secure registration compulsory requirements are as follows:

Applicant company should be registered as per the Rules, Regulations and Provisions given in the Companies act, 2013 or the earlier Companies Act 1956.
If a company engaged in the business of any of the above mentioned fields, produces finance flow from that particular business, which is more than 50% of the total capital asset of the company for any year, the NBFC certificate is mandatory.
The applicant company should have a paid-up capital fund of INR-2 Crore. In case of a Foreign Company desirous of of setting up an NBFC in India, should have a paid up equity share capital of 5 Crore.
Note: The Net Owned Fund mentioned above has to be present in Company’s bank account at the time of filing Application.

Process of Registration

An online application is to be made in the prescribed format with information regarding the demanded documents and enclosures, which generates a Company Appliacation Reference Number.
A hard copy of the above mentioned application along with demanded documents and enclosures to the concerned Regional Office of the RBI.
After the verification and approval of the submitted application and documents, the regional office sends the application to the Central office of RBI, which goes through crucial examination in order to grant the Certificate.
If the terms and conditions under section 45-I A of the RBI Act, 1934 are fully satisfied the Certificate will be granted.

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

NBFCs recently gained a lot of popularity in between institutional investors, because NBFCs provides semi rural and rural India the access to credit, as the traditional banks have been traditionally poor in reaching them. Some advantages are as follows:

Provides loans and credit facilities- There are firms opting to take business loan from NBFCs other than Banks due to quicker processing, competitive interest rates, and availability of loans for those with poor credit history.
A hard copy of the above mentioned application along with demanded documents and enclosures to the concerned Regional Office of the RBI.
Supporting investmenst in property- Investing in property with NBFCs is advantageous due to flexible rates, easy repayment, acceptable property collaterals with quick and easy processing
Trading money market instruments- Interest rates on money market instruments such as commercial paper id soft with NBFCs, though the base rate of banks stayed unchanged.
Funding private education- Flexible rates and easy return makes it convenient.
Provides retirement planning
Advise companies in merger and acquisition
Wealth management such as Managing portfolios of stocks and shares
Prepare feasibility, market or industry studies for companies

Frequently Asked Questions on NBFC Registration

1. What are the requirements for the registration of the NBFCs with RBI?

NBFCs shall apply to RBI for obtaining license to operate as NBFCs. But before applying for such license, following conditions must be satisfied.

2. What is Net Owned Funds (NOF) of NBFCs at the time of takeover?

All the management thing is handed over to the Acquirer and the remaining consideration, if any, shall be paid off within 31 days of the public notice in the newspaper or as mutually agreed by all the parties. As a result of the takeover, all assets of the target company as presented in the balance sheet is liquidated, and liabilities paid off. That’s why Acquirer receives a clean bank balance in the Company’s name calculated by net worth as on the date of the takeover.

3. What is the definition of Net Owned Funds (NOF) of NBFC?

The addition of paid up equity share capital and free reserves as per the latest balance sheet of the company and deducting the following items from it.

4. Does every NBFC required to be registered with RBI?

The Reserve Bank of India (RBI) controls the working of all NBFCs under the framework of RBI Act, 1934 and directions issued by it from time to time. Thus, NBFC carry out its operations, is required to obtain license from Reserve Bank of India to commence its business.

5. How NBFCs are different from Banks?

There is minor difference between NBFCs and banks as NBFCs provide financial services similar to banks but they are more concentrated on unorganized sector of the society having low or no credit rating score.

6. Can NBFCs accept deposits?

Only those NBFCs which have been granted a license depicting their eligibility to accept deposits from the public shall proceed for the same. However, such deposits are not demand deposits.

7. What are the sources of funds for a NBFC?

NBFCs raise their funds from different sources such as financial institutions like banks, insurance companies, public deposits (only for NBFCs holding license to accept deposits from RBI), through issue of debentures, commercial papers and other inter-corporate loans. There is a gradual increase in the percentage of investment of the insurance companies in the NBFCs.