Register Non-banking financial company
> Rs. 6,00,000 + Govt. Fees
> NBFC License from RBI
> 100% NBFC license assurance
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
- 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
|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
Frequently Asked Questions
• Step 1: An online application is to be made in the prescribed format with information regarding the demanded documents and enclosures, which generates a Company Application Reference Number.
• Step 2: A hard copy of the above-mentioned application along with demanded documents and enclosures to the concerned Regional Office of the RBI.
• Step 3: 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.
• Step 4: If the terms and conditions under section 45-I A of the RBI Act, 1934 are fully satisfied the Certificate will be granted.
• 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 send 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-IA of the RBI Act, 1943 are fully satisfied the Certificate will be granted.
• 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 favor 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
• Non-Banking Financial (Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007
• Non-Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding)
• Companies Prudential Norms (Reserve Bank) Directions, 2015; and
• Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.