A Non-Banking Financial Company (NBFC) is a financial institution that provides banking services without meeting the legal definition of a bank. NBFCs are incorporated under the Companies Act, 2013, and their operations are governed by the Reserve Bank of India (RBI) as per Section 45-IA of the RBI Act, 1934.
• NBFCs cannot accept demand deposits (savings and current accounts).
• NBFCs cannot issue cheques drawn on themselves.
• Bank deposits are insured, whereas NBFC deposits are not covered under the Deposit Insurance and Credit Guarantee Corporation.
NBFCs are categorized based on their activities:
• Deposit-Taking NBFCs (NBFC-D): Can accept term deposits under RBI authorization.
• Non-Deposit Taking NBFCs (NBFC-ND): Cannot accept public deposits.
a. Infrastructure Finance Company (IFC-NBFC): Provides finance for infrastructure projects.
b. Asset Finance Company (AFC-NBFC): Deals in hire purchase and leasing of physical assets.
c. Infrastructure Debt Fund (IDF-NBFC): Invests in Public-Private Partnership (PPP) infrastructure projects.
d. NBFC-Factors: Engages in factoring business of bill receivables.
e. Mortgage Guarantee Company (MGC-NBFC): Provides guarantees on housing finance mortgages.
f. Micro Finance Institution (MFI-NBFC): Lends to small borrowers with limited collateral.
g. Investment Company (IC-NBFC): Primarily invests in shares, securities, and bonds.
h. Systemically Important Core Investment Company (CIC-ND-SI-NBFC): Invests 90% of its total assets in shares and securities with net owned funds of at least INR 100 crores.
To register as an NBFC, a company must fulfill the following requirements:
• Registered as a company under the Companies Act, 2013.
• Minimum net owned funds (NOF) of INR 2 crores (varies for different types of NBFCs).
• At least 1/3rd of directors must have 10+ years of finance experience.
• Business plan for at least five years must be submitted.
• Directors must have a good credit history (CIBIL score).
Step 1: Incorporation of Company
Register a Private Limited Company or Public Limited Company under the Companies Act, 2013.
Step 2: Arrange Capital Funds
Ensure the minimum net owned fund (NOF) requirement is met.
Step 3: Open a Bank Account
Deposit the entire NOF in a fixed deposit account with a lien in favor of RBI.
Step 4: Prepare Necessary Documents
Key documents include:
• Memorandum and Articles of Association.
• Business plan for the next five years.
• Board resolution for NBFC registration.
• Banker’s certificate of no lien for NOF deposit.
• Director’s profile and credit report.
• Statutory auditor’s certificate verifying NOF.
Step 5: File Online Application with RBI
Submit an application through the RBI’s COSMOS portal.
Step 6: Submit Physical Application
Send a hard copy of the application along with supporting documents to the RBI’s regional office.
Step 7: RBI Verification and Approval
RBI reviews the application and, if satisfied, grants the Certificate of Registration (CoR).
Certain financial institutions are regulated by other authorities and do not require NBFC registration:
• Insurance Companies – Regulated by IRDA.
• Stockbroking Firms & Mutual Funds – Regulated by SEBI.
• Housing Finance Companies – Regulated by NHB.
• Chit Fund Companies – Regulated by State Governments.
Once registered, an NBFC must comply with RBI guidelines:
• File annual returns and financial statements.
• Maintain a minimum Capital to Risk-Weighted Assets Ratio (CRAR).
• Follow fair lending practices and anti-money laundering norms.
• Submit quarterly reports on deposits and financial health.
If an NBFC accepts deposits without authorization or fails to comply with RBI guidelines, it may face:
• Monetary fines.
• Cancellation of its license.
• Criminal prosecution in severe cases.
NBFC registration in India is a stringent but rewarding process for financial institutions looking to provide credit services. By adhering to RBI guidelines, NBFCs can play a crucial role in financial inclusion and economic growth.
With expert assistance from Return Filings, you can ensure a smooth registration and compliance process for your Non-Bank Finance Company (NBFC) registration. For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.
