NBFC Registration: Non Banking Financial Companies— Reserve Bank of India

NBFC Registration Guidelines

NBFC is a non-banking financial company registered under companies Act 2013, engaged in a business of granting loan, advances, Marketplace lending or financial service provider, or other business objectives. The NBFC Registration done by those companies who involved in the financial business by providing financial & Non-financial services to Business. Do you know NBFCs can’t provide interest rates greater than the ceiling rate prescribed by RBI from time to time. The current ceiling is 12.5 percent per annum. The interest can be paid or compounded at naps not shorter than yearly naps.

REQUIREMENTS FOR REGISTRATION WITH RBI-

1. It should be a company registered under Companies Act, 2013

2. Minimum Net owned fund is 2Cr. (except for NBFC-MFIs, NBFC-Factors and CIC)

COMPLIANCES TO BE DONE BY NBFC-

1. NBS-1- need to file Return Quarterly on deposits

2. NBS-2 — need to file Return Quarterly on Prudential Norms if accepting public deposits

3. NBS-3 -need to file Return Quarterly on Liquid Assets

4. NBS-6 -need to file Monthly return on exposure to capital market if deposit taking NBFC with total assets of ₹ 100 crore and above.

5. Half-yearly ALM return by NBFC holding public deposits of more than ₹ 20 crore or asset size of more than ₹ 100 crore

If NBFC is accepting deposit then Audited Balance sheet and Auditor’s Report is required.

NBFC Registration Process

1. Register the company under the Companies Act 2013

2. The company’s net owned funds should be at least Rs. 2 crore.

3. There should be at least 1 director in the company from the core banking background.

4. Good CIBIL score is required

5. Fill the application form on RBI website ie on COSMOS website. Apply for online registration and meanwhile deposit a physical copy of the application to Reserve Bank of India.

6. Download the excel form detailing what all documents need to filed and upload on the website. Correct name of the Regional Office in the column or row ie, “C-8” of the “Annex-I identification Particulars” in the Excel application form need to be quoted correctly.

7. Submit all documents or you can connect with corpseed team for NBFC Registration.

8. After submission, a CARN number will be generated. When application filed online. Send the physical copy to regional branch of RBI.

9. If after viewing of application all documents are correct then License will be issued to the company. Acknowledgment number will be issued…

Documents Required for NBFC Registration

1. Certificate of Incorporation

2. Detailed information about the management along with a brochure of the company.

3. Corporate Identity Number (CIN)

4. Documents related to the office location/address

5. True copy of the Memorandum of Association (MoA) and Articles of Association (AoA).

6. Details about Directors’ profile need to be signed by each director to be attached.

7. CIBIL/credit reports of the Directors of the Company are required.

8. A copy of the board resolution which certifies that the company has not carried out or stopped NBFC activity and will not carry any until the registration from RBI is granted.

9. Board resolution need to be passed on ‘Fair Practices Code’ and file the same.

10. A certificate is initiated by the statutory auditor stating that the company is not holding not accepting any public deposit.

11. A Certificate from Auditor specifying about owned funds as on the date of the application.

12. Information in respect of bank account, balances, loans, credits, etc. is to be stated.

13. If applicable, audited balance sheet and profit and loss statement along with the directors and auditors report of the preceding three years has to be submitted.

14. Bank statement and Income Tax Returns must be self-certified.

15. Information detailing the company’s future plan, generally for the next 3 years, along with the projection of balance sheets, cash flow statement and income statement.

How are NBFCs Different from Banks?

Regulated Authority

1. In case of NBFCs — Companies Act 2013 & RBI Act, 1934
2. In case of Banks — Banking Regulation Act 1949

Demand Deposit

1. Banks can accept demand deposits.
2. NBFCs cannot accept demand deposits.

Foreign Investment

1. Foreign investment is allowed up to 74% for private sector banks.
2. In the case of NBFCs, foreign investment is 100% allowed.

Payment And Settlement System

1. NBFCs — not a part of system
2. Banks — Integral part of the system

Maintenance Of Reserve Ratios

1. Not required in case of NBFCs.
2. Banks have to maintain reserve ratios.

Deposit Insurance Facility

1. NBFCs — Not available
2. Banks — Available

Credit Creation

1. NBFCs do not create credit.
2. Banks create credit.

Transaction Services

1. NBFCs cannot provide transaction services.
2. Banks provide transaction services.

Types of NBFC’s

1. Asset Finance Company

Financial institution that provides the service of financing of assets for individuals and the businesses which include machinery

2. Investment Company

It is a financial institution whose principal business is the acquisition of securities.

3. Loan Company

Loan Company is a financial institution which provides loan for various purposes other than AMC. Example Housing Finance Firms.

4. Infrastructure Finance Company

It is a Non- Banking Finance Company –

A. That three- fourth of its total assets should be in infrastructure loans

B. Minimum Net Owned Fund of 300crores

C. minimum ‘A’ credit rating or equivalent

D. CRAR of 15%

5. Systematically Important Core Investment Company

It is a Non- Banking Finance Company –

a. That deploys 90% of its total assets in the form of investment in shares, stocks, debt or loan Group Company.

b. Out of 90%, 60% should be invested in equity shares or those which compulsorily converted later in equity shares.

c. Does not carry any activity referred in section 45(c) or 45(f) of RBI act 1934.

d. That accepts public funds

6. Infrastructure Debt Fund

IDFs raise resources through bonds for long-term infrastructure projects. The bonds are issued in multiple currencies to ensure that have they had a five –year maturity for investors.

7. Microfinance Company

People in the urban, semi-urban or rural area of India need financial help to start their business and fulfil other requirements but they are hesitant to seek the help from banks because of the formalities which need to fulfil to get the required money.

Now, here the microfinance company come out, they provide financial help to these underprivileged people. Bandhan Financial Service Ltd, Ujjivan Financial service are few examples.

8. NBFC (Factor)

These types of NBFCs in India are low. These companies usually buy loans at a much discounted rate from lenders and after that, they adjust repayment table of the debtor to ensure facile settlement adding small profit.

9. Mortgage Company

It is a financial institution where -

* At least 90% of the business turnover is of mortgage guarantee or

* At least 90% of the gross income is from mortgage guarantee business or

* Net owned Fund is 100 crores

10. Non- operative Financial Holding Company

It is a separate category of NBFCs which is wholly owned Non-operative financial holding company permitted to set up or hold the bank.

Functions of NBFCs in India

• Providing customized loan solutions
• Employment generation
• Wealth creation
• Infrastructure development
• Financial assistance to financially weaker section of the society thus economic development
• Digital platform to provide loans using advanced technology
• Faster processing of loan

Points have to be kept in mind, while submitting an application for NBFC Registration.

In case you’re seeking to register an NBFC, these points need to be considered, while submitting an application for registration.

• Net Owned Fund
• Checklist: RBI has specified a checklist of documents and all the information and document should provided under Checklist
• Categories
• Background of promoters & directors
• Group details
• Business plan

NBFC Registration is not mandatory for all NBFCs. The following companies are exempted:

1. Core Investment Companies — ( with assets less than INR 100 crore or privately funded)
2. Merchant Banking Companies
3. Stock-brokers
4. Housing Finance Companies
5. Venture Capital firms
6. Insurance companies
7. Chit Fund Companies
8. Nidhi Companies

The Reserve Bank has been given the powers under the RBI Act 1934 to register, lay down policy, issue instructions, inspect, regulate, manage and exercise surveillance over NBFCs that fulfill the 50–50 standards of principal business. The Reserve Bank can penalize NBFCs for violating the provisions of the RBI Act or the directions or orders issued by RBI under RBI Act.

Covered Point:

• NBFC Registration consultant
• Procedure for Registration of nbfc with rbi
• NBFC Registration checklist
• Documents required for nbfc registration
• NBFC Registration Guidelines
• NBFC Registration number search
• Types of NBFC
• business plan for NBFC Registration