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Non-Banking Financial Company Registration

Register a “Non-banking financial company”

  • Rs. 6,00,000 + Govt. Fees
  • NBFC License from RBI
  • 100% NBFC license assurance

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NBFC Registration

NBFCs or Non-Banking Financial Companies are registered under the Companies Act 1956/Companies Act 2013. Though these do not possess a banking license, yet they are involved in various financial services. Some of the 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
cor process
Regulations
Classify
Advantages
Document
Requirement
FAQ

Regulations 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.

Classification of NBFC

The classification based on authorization to take deposits:

  • Type-1: Deposit-taking (NBFC-D)
  • Type-2: Non-deposit taking (NBFC-ND)

The classification based on their activities:

Asset Finance Company (AFC):

If the primary business of the company is to finance the assets of a firm, such as machines, automobiles, generators, material equipment, industrial machines, etc., then it is called an “Asset Finance Company”.


Investment Company (IC):

These companies deal primarily in securities.


Loan Companies (LC):

The main business for these companies is to grant loans and advances. These loans are not for asset acquisition, but other purposes, such as working capital finance, etc.


Infrastructure Finance Company (IFC):

The companies falling under this category possess at least Rs.300 Crores and deploy 75% of their total assets in infrastructure loans. These companies must also have a credit rating A or above and CRAR of 15%


Systematically Important Core Investment Company (CIS-ND-SI):

In case a company owns assets worth Rs.100 crores or more and has deployed 90% of it’s assets in debt instruments or loans in group companies, then it is considered as CIS-ND-SI. Of the 100%, 90% should be invested in equity shares.


Infrastructure Debt Fund (IDF-NBFC):

The investment of these companies is primarily in the infrastructure sector. These funds are crucial, as it is difficult to obtain funds of such amounts.
You could either register this as a trust or a company. In case it’s a trust, then it would be a mutual fund which comes under SEBI regulations. It will then be called “IDF-MF”. And if it is a company, then it would be under RBI regulations. Then it will be called as IDF-NBFC.


Mutual benefit financial company:

This is a type of company, whose main aim is to enable it’s members to pool their money with a pre-calculated investment objective. The sources of these funds are share capital & deposits from it’s members and the general public.


Micro Finance Institution (NBFC-MFI):

This is a non-deposit taking NBFC that has at least 85% of it’s assets in the form of microfinance.


Housing Finance Company

In the Memorandum of Association of these companies, there is a clause of housing finance mentioned. These provide mid-term capital loans to individuals or firms. Due to their less stringent regulations and flexibility, these companies are a much better alternative to commercial banks.


Core Investment Company

These are the business companies which conducts the business of acquisition of securities and shares. These companies hold 90% of their assets in the form of bonds, equity shares, and preference shares. Also, these companies need to invest at least 60% in equity shares.


Fee of registration

The government charges are “Rs.3,50,000” approx. And adding this to the professional fee could bring the total amount to Rs.15 lakh. But, if you use our services, it would cost you Rs.6,00,000 + Government fee for the registration.

Advantages

  • NBFCs can provide loan and credit facilities to its clients
  • These companies can also trade in money market instruments.
  • The NBFCs can also take part in wealth management such as managing a portfolio of stocks and shares.
  • These companies become the last resort for many other businesses as these are pumping huge amounts of money in country-wide projects.
  • The functioning of these companies is much faster than banks.
  • Due to the use of technological advancements, you don’t have to depend on bank branches.
  • Due to it’s digitization, the reach of the NBFCs has broadened and it can reach a wider audience within seconds.
  • Investing in property, has become profitable with NBFCs due to their flexible rates, easy repayment options, acceptable property collaterals, with quick and easy processing.
  • Most of the NBFCs have formed partnerships with the government and used their database to identify a customer’s worthiness before the granting of a loan. This reduces the risks and maximizes profits.

Documents Required

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

  • Documents related to the administration and management of the company
  • Company Incorporation Certificate
  • The Memorandum of Association and the Articles of Association 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
  • Should have a bank Account with a minimum paid up equity share capital of INR-2 Crore
  • Income tax PAN, etc.

Pre-requirements of NBFC

For a company to be considered an NBFC, it should be registered as per the rules, regulations, and provisions mentioned in the Companies Act 2013. The minimum amount of fund owned by an NBFC should be at least Rs.2 crores and this shouldn’t be borrowed fund. (This limit is different in other cases like that of specialized NBFCs:- “NBFC-MFIs, NBFC Factors, CICs, as it is decided on the kind of NBFC”). Any gift from spouse comes under owned-funds.

At least 1/3rd of the directors must have some experience in finance.
Also, there must be a detailed plan for the next 5 years.

NBFCs as sponsors of IDF-MF

For a company to be considered as an “IDF-MF”, the minimum owned fund should be at least Rs.3 crores, CRAR of 15% and NPA not more than 3% of the net advances. Along with this, the company should be operational for the last 5 years and profitable in the last 3 years.

FAQ

NBFCs are institutions that offer financial assistance and various banking services but do not have a banking license. They are not the same as both “Cooperative and Commercial” banks, They don’t have to hold a financial permit however they should carefully follow the standards and guidelines given by RBI from time to time. NBFCs, most usually, work in the field of industrial and commercial loans, hire-purchasing, investment funds, deposits, debentures, chit fund business, leasing, insurance business, instruments of the capital & money markets like “bonds, stocks, and various other similar activities.”

Any business willing to commence activities of non-banking financial nature as defined under Section 45-IA of the RBI Act, 1934 should comply with: 1. It should be a company incorporated under section 3 of the Companies Act, 1956 or 2013, 2. It should have a minimum NOF of Rs.2 crores. (The minimum NOF requirement for specialized NBFCs like NBFC-MFIs, NBFC- Factors and CICs differs).

NBFCs provide loans and make investments. These characteristics are the same as that of banks. However, there are some differences: 1. NBFCs cannot accept deposits payable on demand, 2. They are not part of the payment and settlement system and cannot issue cheques drawn on itself, 3. The deposit insurance facility of “Deposit Insurance and Credit Guarantee Corporation” is not available to the investors of NBFCs.

Just call “LegalRaasta” at +91 875 000 8585. We'll complete the advantage of accumulating the documents as required by RBI according to how you wish to start your NBFC. Advise you on the procedures to be met and arrange for them to get completed. File them with the RBI regional office. Provide consultancy on the steps to be taken by you. Answer all the queries on time. And get you registered conveniently.

• Certificate of Incorporation of the Company. • MoA and AoA. • Administrative Documents of the Company. • Address proof of the Company. • Detailed information about Directors or Partners of the Company. • Well-audited accounts of the Company since its formations or for at least the past 3-consecutive years. • Board Resolution approving the creation of NBFC. • Bank Account that holds the paid-up equity share capital of minimum Rs. 2 Crore. • Latest KYC. • Net worth certificate. • Clean banker's report. • Other relevant documents on request.

No, “Merchant Banking Companies, Stock Exchanges, Housing Finance Companies, Venture Capital Fund Companies, Stock-broking/Sub-broking Companies, Nidhi Companies, Insurance Companies, and Chit Fund Companies” are NBFCs and they do not need to be registered with RBI but are subject to certain conditions. They are regulated by other regulators.

RBI has the authority to register, lay down policy & provisions, issue directions, regulate, supervise, inspect, and exercise surveillance over NBFCs meeting the “50-50” criteria of principle business. It can penalize NBFCs for infringing the provisions of the RBI Act or directions/orders issued under it. The penal action can also be cancelation of the CoR or prohibiting them from accepting deposits and alienating their assets or filing a winding-up petition.

Businesses whose principle activity is “lending, investing, or accepting deposits” must be registered with the RBI as NBFCs .If they are found without an NBFC license, then RBI can impose a penalty or fine on them. They can even be indicted in a court of law. Members from the general public are invited to report such firms to the nearest Regional Office of RBI. Appropriate action will be taken against such entities for violating the provisions of the RBI Act, 1934.

The provisions are as follows: a) They shall not be subjected to any statutes, whether prudential or conduct of business regulations if they have not accessed any public funds and do not have a customer interface. The norms are “Fair Practice Code, KYC, etc.” b) Those with a customer interface are subject to these codes if they are not accessing public funds. c) If public funds are accessed, NBFCs will be subjected to certain prudential regulations but no conduct of business regulations if no customer interface is there. d) When both public funds are accepted and the customer interface also exists, those companies are subject to both the limited prudential regulations and the conduct of business regulations

Public Fund means “public deposits, bank finance, inter-corporate deposits, and all funds received” whether directly or indirectly, from outside sources. It could be funds raised by issuing Commercial Papers etc.

A. Returns to be submitted by NBFC-Deposit Accepting are: 1. NBS-1 - Quarterly returns on deposits in the First Schedule. 2. NBS-2 - Quarterly returns on Prudential Norms. 3. NBS-3 - Quarterly returns on Liquid Assets. 4. NBS-4 - Annual returns of critical parameters by a rejected company holding public deposits. 5. NBS-6 - Monthly returns on exposure to capital market institutions with total assets of Rs. 100 crore and above. 6. Half-yearly ALM returns - with companies having public deposits of over Rs. 20 crore or asset size of over Rs. 100 crore 7. Audited Balance sheet and Auditor’s Report. 8. Branch Info Returns. B. Returns to be submitted by NBFCs-ND-SI: 1. NBS-7 - Quarterly statement of capital funds, risk-weighted assets, their ratio, etc. 2. Monthly Returns on Important Financial Parameters. 3. ALM returns: a. Monthly statement of short term dynamic liquidity in format ALM [NBS-ALM1], b. Half-yearly Statement of structural liquidity in format ALM [NBS-ALM2], c. Half-yearly Statement of Interest Rate Sensitivity in the form ALM -[NBS-ALM3]. 4. Branch Info returns. 5. Quarterly returns on important financial values & basic information like name of the company, its address, NOF, profit & loss statement during the last 3-years of NBFC-NDs with assets between Rs. 50 crore and Rs. 100 crore.

Residuary Non-Banking Company (RNBC) is a type of NBFC whose principle business is of receiving deposits under any “scheme/arrangement/some other manner”. It is not an “Investment Company, Asset Financing Company, or Loan Company.” They are required to maintain investments and liquid assets as required by RBI. Their functioning is quite different from those of NBFCs in terms of how they mobilize deposits and the requirement of deployment of depositors' funds as per RBI Directions. Besides, Prudential Norms Directions apply to them also.

All NBFCs are not permitted to accept public deposits. Only the NBFCs which have taken specific permission from the RBI to do so, are allowed to accept/hold public deposits. To get permitted by RBI, they must have an investment-grade rating to a limit of 1.5 times of it’s NOF.

RBI has capped the annual rate of interest an NBFC to a maximum of 12.5%. The interest may be paid or compounded at a frequency of one month or more.

The deposits with NBFCs can be accepted/renewed for a minimum period of 12 months and a maximum of 60 months. They cannot accept demand deposits.

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