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NBFC Registration

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What is an NBFC?

Non-Banking Financial Company (NBFC) engaged in financial activities, they are registered under the Companies Act, 1956. NBFCs deal with the business of lending, investments in share market, debentures or bonds, leasing, hire purchase, insurance and chit business.

Irrespective of their financial activities they do not possess a banking license. NBFC cannot accept demand deposits or issue cheques. Unlike banks, the deposits in NBFC are not insured. As per RBI Act, 1934, a company cannot function as an NBFC without a certificate of registration and without having net owned funds worth Rs. 2 crores. Section 3 of the Companies Act also states about the same requirement.

Net owned funds is the balance of “owned funds” minus the amount of investment in shares of subsidiaries, companies in the same group and all other NBFCs, book value of debentures, bonds, outstanding loans and advances including hire purchase and lease finance made to and deposits with subsidiaries and companies in the same group.

Registration of NBFCs is done according to the Companies Act 2013 and RBI Act, 1934. They play a vital role in executing financial functions in the economy. They help to face demand that the banking system fails to fulfil in a short processing time.

An NBFC helps us by providing both secured and unsecured loans to the takers based on the alternative lending models. The government has also started promoting NBFCs so that the unorganized money lenders can run financial services.

What is not included under NBFCs?

NBFCs don’t include the following entities whose principal business is of:

  • Industrial activity
  • Activities related to agriculture
  • Giving services related to the sale or purchase or construction of an immovable property.
  • Sale or purchase of goods other than securities.

Classification of NBFCs

NBFCs are classified into three broad categories in India:

  • Investment Companies
  • Loan Companies
  • Finance Companies

Different types of NBFC in India

NBFCs are categorized into deposit and non-deposit taking NBFC. They are further divided based on their size as there are various NBFCs like asset finance company, loan company, infrastructure finance company etc. Categorization of NBFC is based on deposits and activities.

Following are the NBFC according to their authorization to take deposits

  • The Deposit Taking NBFC (Type -1)
  • Non-Deposit accepting NBFC (Type -2)

NBFC according to the Activities

  • Investment and Credit Company (Recently, RBI has merged Asset Finance Companies, Investment Companies and Loan Companies into a single category)
  • Infrastructure Debt Fund (IDF-NBFC)
  • Non-Banking Financial Company – Factors (NBFC-Factors)
  • Peer to Peer Lending Marketplace.
  • Company dealing with Infrastructure Finance.
  • Core Investment Company.
  • NBFC-MFI(Mircro finance institution)
  • Mortgage Guarantee Company.
  • Housing Finance Company
  • Chit Fund Company
  • Mutual Benefit Finance Company
  • And lastly, Core Investment Company

Advantages of NBFCs

NBFCs are slowing becoming popular between the institutional investors because they provide semi-rural and rural India with access to credit. Following are the advantages of NBFCs in India-

  • Provides loans and credit facilities based on the alternative credit scoring model to assess the loan application.
  • Support investment in property
  • Help in trading money market instruments
  • Fund private education
  • Provides retirement planning
  • They give advice companies in merger and acquisition
  • Wealth management
  • Prepare a feasibility, market or industry studies for companies.
  • They create a balance by addressing the financial needs of the country.

What are the pre-registration requirements of NBFC registration?

Before filing for NBFC registration there are certain requirements which need to be fulfilled for NBFC registration-

  • Register as a Company under The Companies Act, 2013.
  • Have a capital of Rs. 2 Crore which is the minimum capital requirement for establishing an NBFC.
  • It is compulsory to have a Fixed Deposit of Rs 2 crore.
  • In case there is a foreign investment FDI Compliance needs to be done as per FEMA Act.
  • Complete documentation required for an NBFC license.
  • Submission of documents with FD receipt before RBI.

Department dealing with NBFC Registration

For getting an NBFC registration one needs to follow both online and offline procedure. The Reserve Bank of India acts as an autonomous body and has two departments to help regulate and supervise the functioning of NBFC.

DNBR (Department of Non-banking Regulation)

The DNBR has an innovative and transparent assessment process for NBFC application, and The DNBR has the responsibility to conduct a fresh registration as well as regulate the NBFC.

They will email or send you a notice if any additional documents are required for the registration of NBFC. The RBI expects the submission or response to notice within a period of 30 days.

DNBS (Department of Non-Banking Supervision)

DNBS has the responsibility for post-registration compliance and other administrative issues concerning NBFC.

After the application is accepted, the NBFC license is generated within a period of 90-120 days.

Process of NBFC Registration in India

  • Step No.1: Firstly, you need to form a company with a minimum of Rs. 2 crores net worth (in the form of equity share company and not preference share capital)
  • Step No.2:After forming the company, one needs to open a Bank Account.
  • Step No.3:One needs to apply online for generating the Certificate of Registration to RBI. The online application needs to be in a prescribed format accompanied with the information regarding the documents and enclosures. After this, a company application reference number is generated.
  • Step No.4:Submission of a hard copy of documents to the Regional Office of RBI along with the documents and enclosures.
  • Step No. 5:After proper verification and approval of the submitted application, the regional office forwards the application to the Central office of RBI,they go through crucial examination in order to grant the Certificate.
  • Step No.6:If all the terms under section 45-I A of RBI Act, 1934 are complied with then the certificate will be granted.

Documents Required for NBFC Registration

Following are the documents required for NBFC Registration in India:

  • Documents related to the administration, management of the company
  • Certificate of Company incorporation
  • The MoA and the AoA
  • 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.
  • Latest KYC
  • Net worth certificate
  • Clean banker report
  • Education proof
  • Other relevant documents on request

NBFC registration with LawyerINC

  • Connect with our team of experts
  • Get a callback
  • Expert Consultation
  • Submission of documents
  • Fill Application with the Concerned Authorities
  • Follow-up with the authorities.
  • Track Progress
  • End to end service

*Any fee, stamp duty, and miscellaneous charges shall be payable extra.

LawyerINC does not take any charges/tax on government fees. Do contact us in case of any query related to NBFC Registration in India and much more.

To avail any of our services, kindly establish contact by posting a query at our site, LawyerINC.

How will LawyerINC help to get you an NBFC registration?

  • Assistance in the SOP of the organization and assistance in designing the loan product
  • Expert advisory related to Fintech Based Credit Assessment model
  • Expert assistance on Digital Financial Services Marketing
  • Assistance for developing Company Policies
  • Development of High-Level Business Plan & Investor Deck
  • Helping founders in preparing to go to market strategy
  • Assistance in the fundraising process via FDI Automatic route
  • Assistance in meeting secretarial compliances
  • Assistance in meeting RBI Compliance
  • Advisory on Adoption of Ind-AS
  • Internal Audit Services

What are the NBFC Registration Fees?

For registration of NBFC a minimum capital of Rs. 2 crores is needed, the applicant needs to register a company along with the prescribed capital and requisite government fee.

Why should one opt for a fresh NBFC Registration instead of getting an NBFC takeover?

After 2016, RBI has simplified the whole procedure of NBFC registration. Therefore, it is advisable to apply for a fresh NBFC license as NBFC takeover is a little complicated process.

NBFC registration is beneficial for foreigner companies who want to enter into the Indian Financial Service market.

Frequently Asked Questions

  • 1. Is NBFC a financial institution?

    Yes, NBFC is a company registered under the new Companies Act, 2013. After the registration, one needs to obtain a certificate of registration from the RBI.

  • 2. What do you mean by principal business in matters related to NBFC?

    If the NBFC has more than 50% of total assets or revenue from the financial services and comprises more than 50 % of the gross income. Then, in this case, it is eligible to apply for an NBFC license.

  • 3. What is the main difference between banks from NBFCs?

    A very minor difference in there between NBFCs and banks, NBFCs give financial services which are similar to banks. But the NBFCs are more concentrated on unorganized sector of the society which are having low or no credit rating score.

  • 4. How is the funding done in NBFC?

    The funding in NBFC is provided from different sources like financial institutions through debentures, commercial papers and other inter-corporate loans.

  • 5. What are the requirements for NBFC takeover?

    We need approval from RBI to initiate NBFC takeover. The company needs to send an application on the company letterhead to the regional office of RBI for getting approval. After the approval is granted, a public notice shall be published in leading newspaper. After this, the parties sign the share-purchase agreement and takeover takes place.

  • 6. What are the benefits of taking services from LawyerINC?

    At LawyerINC, we have an excellent blend of experts to help you get a NBFC registration hassle free. We are committed to offer our services to various entities at a reasonable price. Our focus is to provide quality services to our clients.

  • 7. Where can one get the list of Registered NBFCs and instructions issued to NBFCs?

    The list of registered NBFCs is available on the official web site of RBI. The instructions issued to NBFCs are also hosted at the official RBI website. They are issued through Official Gazette notifications and press releases.

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