NBFC Registration

What is NBFC and NBFC Registration

The non-banking financial company is a company which is involved in the principal business of lending, investment in shares, stocks, bonds, and debentures, leasing, hire purchase, insurance business, chit business or involved in receiving of deposits under any scheme or arrangement. NBFC registration carries on its operations under the guidelines of the RBI which governs its operations

As per Companies Act 1956, an NBFC is a company which carries on the activities similar to that of a bank except for the following differences:

  • NBFC’s cannot accept demand deposits
  • NBFC’s cannot issue cheque drawn by
  • Bank deposits are insured by Deposit Insurance and Credit Guarantee Corporation. However, deposits in NBFC are not insured.

Categories of NBFC

NBFC’s are mainly categorized into deposit and non-deposit taking NBFC. Deposit-taking and non- deposit taking NBFC are further classified based on their size as such there are many types of NBFC like Asset Finance Company, Investment Company, Loan Company, Infrastructure Finance Company, Infrastructure Debt Fund, and Micro Finance Institution.

How to do NBFC Registration

  • As per section 45IA of the RBI Act,1934 no company shall commence or carry on the business of a non-banking financial institution without obtaining a certificate of NBFC registration and without having a Net Owned Funds of Rs. 200 lakhs.
  • The basic requirement for NBFC registration as an NBFC is the minimum net owned funds of Rs. 200 Lakhs.
  • Net Owned Funds means the balance of owned funds minus the amount of investment in shares of subsidiaries, companies in the same group and all other NBFC’s, outstanding loans and advances, deposits with subsidiaries and companies in the same group.
  • Owned funds is the aggregate of paid-up equity capital, preference shares which are compulsorily convertible into equity, free reserves

and balance in share premium account, and capital reserves representing surplus arising out of sale proceeds of the asset.

Financial Companies not regulated by RBI

  • The Reserve Bank of India regulates and supervises the operations carried on by the NBFC’s and their principal businesses for NBFC Registration
  • However, there are financial businesses having specific regulators are given exemption from RBI from its regulatory requirement.
  • For example Insurance Regulatory and Development Authority regulates the Insurance companies, Securities Exchange Board of India regulates Merchant banking companies, Venture capital companies, Stock Broking Companies etc

NBFC Registration Procedure and Services

The NBFC registration procedure in India encompasses the following broad steps:

  • Formation and incorporation of the company: The desirous company must be NBFC registration under the New Indian Companies Act, 2013 or earlier Companies Act, 1956.
  • Minimum Net Owned Capital: The minimum amount of net owned capital or fund which must be possessed by the aspirant company for NBFC registration in India is Rs. 2 crores i.e. paid up equity share capital.
  • Open a fresh bank account: NBFC Registration required minimum capital has to be kept in the deposit account opened which must be free from all liens. Generally, such amount is maintained in the form of Fixed Deposit. While making the application to the RBI this amount has to be maintained in the bank account as the RBI verifies the deposit of the company with the concerned bankers
  • Application for NBFC Registration: The aspirant company is required to submit the application for online NBFC registration to the RBI. After which the applicant company will get an application reference number for NBFC Registration. After that, the company is required to submit the hard copy of the online application along with the required documents to the concerned regional office of the RBI.

The following prescribed documents are required to be submitted for NBFC Registration:

  1. Annexure I
  2. Annexure II
  3. Annexure III
  4. Information regarding incorporation of the company.
  5. Companies MOA and AOA
  6. Documents related to administration and management of the company
  7. Location of the Company
  8. Well audited financial accounts of the company
  9. Income Tax PAN etc

7) Granting of NBFC Registration Certificate:

After the application is filed with the concerned region of the RBI, the application is thoroughly examined and the documents submitted are critically verified and the application is further forwarded to the Central office of RBI and if everything is found complete and satisfying the Central; office shall grant NBFC Registration Certificate