Convenient & Quick NBFC Registration
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- Prepare Business Plan
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- Full Assistance in Getting NBFC License
- Legal Advisory before and after incorporation
NBFC is a Non-Banking Financial Company. NBFC get its registration under the Companies Act, 2013 and is, also, regulated by RBI. It is a company engaged in activities very similar to the bank with some major points of differences
The principal objectives of NBFCs are to provide loans, personal loans, working capital loans, shared investments, other stocks and debenture issued by the Government or the other local authorities, leasing, insurance business. They also offer Market Place Lending Platform (P2P) for businesses. They are known to provide financial support and services to businesses and individuals.
Basically, an NBFC, to get and maintain its License, s can get involved in NBFC Registration
- the business of loans and advances,
- acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature,
- insurance business,
- chit business.
but does not include entities whose principal business activity is that of
- agriculture activity,
- industrial activity,
- purchase or sale of any goods (except securities) or
- providing any services related to the sale/purchase/construction of an immovable property.
Classification of NBFCs
- In terms of the type of liabilities into – Deposit or Non-Deposit taking NBFCs. Non-Deposit accepting NBFCs by their size into
- Systemically Important and
- other Non-Deposit Holding Companies (NBFC-NDSI and NBFC-ND) and
- By the kind of activity they conduct:
- Asset Finance Company (NBFC-AFC),
- Investment Company (IC),
- Loan Company,
- Infrastructure Finance Company (NBFC-IFC),
- Systemically Important Core Investment Company (CIC-ND-SI),
- Infrastructure Debt Fund (NBFC-IDF),
- Mortgage Guarantee Companies (MGC),
- Non-Operative Financial Holding Company (NOFHC),
- Micro Finance Institution (MFI), and
- Factors (NBFC-Factors), etc.
Requirements Before NBFC Registration
According to Section 45(1A) of the Reserve bank of India, below conditions must be fulfilled for a company to get NBFC License:
A company should be registered as per the rules, regulations, and provisions mentioned under Section 3 of the Companies Act 2013 or the previous Companies Act 1956. NBFC Regidtration in India.
- Director’s Qualifications
At least 1/3rd of the Directors must have experience in Finance. And he/she must be a full-time Director. Then only NBFC Registration condition is fulfilled.
- Unique Business Plan
For NBFC registration the company must have a detailed business plan laid out for operations for the next 5 years.
- Net Owned Fund (NOF)
The company must have at least Rs. 2 Cr as a NOF. Only equity paid-up share capital is to be included in this. The preference share capital is not to be included. It also includes Premium on Shares, and Reserves, if any. And it should not be a borrowed fund. A gift from a spouse can be included in the NOF. This requirement for the minimum NOF is different for specialized NBFCs (NBFC-MFIs, NBFC Factors, CICs).
- Clean Credit History
The CIBIL records of the company, the Directors and the members must be clean. They must have no write-offs or have not intentionally defaulted the repayment of loans to NBFC/Bank.
- FDI Compliance
In case the foreign investment is expected, the company needs to be in compliance with the FEMA Act.
NBFC Registration Process
After you have formed a company and have the minimum NOF, you need to follow the below procedure to get NBFC Registration for your company :
- An application needs to be submitted online along with the required documents. And a Company Application Reference Number (CARN) is generated. This reference number is useful for all future enquiries and communications.
- The hard copy of the documents and the form as submitted above are sent to the Regional Office of the RBI.
- Once the submitted documents are verified and approved, the regional office sends an application to the central office of the RBI. There the application and the documents are examined thoroughly and a background check is conducted.
- If the company meets all the terms and conditions specified in Section 45-I A of the RBI Act, the License is granted to the applicant for the Non-Banking Financial Company.
- Just remember, the required minimum capital has to be kept in a deposit account, free from all liens. Generally, such amount is maintained in a Fixed Deposit (FD). On application to the RBI, this amount will be verified by it, as the deposit of the company with the concerned bankers.
Documents Required for NBFC License
- Certified Copy of Certificate of Registration (COR)
Obtain a Certified Copy of COR, MoA, and AoA from the Regional ROC (Registrar of Companies)
- Updated KYC & Net Worth Certificate
Need the latest KYC details, income proof, credit report and Net Worth Certificate of Directors and shareholders. Education & qualification proof of the Directors.
- Company’s Details
Company’s PAN and GST number. Documents in support of the address of the company.
- Net Worth Certificate
Collect updated net worth certificate of Directors, Shareholders, and Company
- Bank Account
Company bank account details. This must have the minimum paid-up equity share capital of Rs. 2 crores. And well audited for the last three years.
Also, a Banker report is to be obtained about the No Lien remark on the Initial Fixed deposit of Rs 2 Cr.
- Board Resolution
The resolution from the board in favor of getting NBFC registration.
- Underwriting model
A detailed action plan about the loan products, fair practice code, credit, and risk assessment policy. As planned for the next 5-years.
- Organization Structure
Plan of the organization arrangement and decision-making process. Basis of approval/rejection of a loan application as proposed.
- IT Policy
Submit planned system and Information technology policy.
Compliance Requirements for NBFCs after COR
There are certain compliances to be met after the completion of the NBFC Registration. Moreover, guidelines, circulars, and notifications, from the RBI, published in the public domain from time to time, are to be complied with.
- Appointment of Statutory Auditor (CA with 5+ years of experience),
- Statutory Audit,
- Tax Audit,
- GST Return Filing,
- Income Tax Return Filing,
- ROC Returns,
- All other Compliances/Returns required by a competent authority.
Compliances for NBFCs by RBI
- Adoption of Fair Practice Code,
- COSMOS Registration,
- FIU-IND Registration,
- CIC Registration,
- C-KYC Registration,
- CERSAI Registration,
- Filling of NBS-9 by using the Online Platform of RBI (COSMOS),
- Secretarial compliances,
- Compliance of KYC Anti-money Laundering.
Penalty of Non-Compliance to RBI Regulations
RBI takes strict regulatory action if a company has its principal business of lending, accepting deposits or making investments but has not obtained the CoR of NBFC License. A heavy penalty or fine can be imposed on it. Or it can even be prosecuted in a court of law. RBI invites reporting of any entity which does non-banking financial activity but does not figure in the list of authorized NBFC on the RBI website. And accordingly, appropriate action will be taken for contravention of the provisions of the RBI Act, 1934. Moreover, RBI goes through market intelligence reports, complaints, and exception reports from statutory auditors of the companies, information received through SLCC meetings, etc. to find out companies violating its instructions/norms. RBI also shares this information with all the financial sector regulators and enforcement agencies in the State Level Coordination Committee Meetings.
Why Choose NBFCLicenseIndia
At NBFC License India, we understand that the actual work starts after receiving the license. We know that the critical issues of drafting company policies, business strategies, marketing, compliances prop up after the COR is accepted. And NBFC License India can help you during all these complex challenges. We support in all the below matters:
- New Registrations
- Business Re-structuring
- Setting up Business Plans & Policies
- Contract Drafting
- Approval for Management Change from RBI
- Designing Financial Services
- Marketing Digital Loan Products
- Meeting RBI Compliance
- Internal Audit Services
NBFC Registration or NBFC Takeover: Which is Better
Applying for a new NBFC License is considered a better option than taking over an existing one. The experts always advise to go for a new NBFC registration instead of buying one. Part of the reason is that the government has made the process of NBFC registration simpler than before. Especially for Foreign Companies, intending to enter into the Indian financial industry. Let’s weigh the advantages of getting a fresh registration over buying so that we can decide better.
- Low Legal Risk: For NBFC buying or takeover, the past transactions must be clean. Any non-compliance, on record, will have more chances of leading to the cancellation of the NBFC License.
- Timeline: Time required for a fresh NBFC Registration is typically anywhere between 3-5 months (depending on correct document filing) whereas the process of buying an NBFC usually takes 2-3 months.
- Capital: For a new application, you are required to block Rs. 2 Crore in a bank account. However, in the case of buying, the proposed shareholders need to submit the Banker’s report. This report is a certification by the bank that their bank balance is equivalent to the book value of the shares.
- Ownership: There is no title risk of who owns the company in case of a new registration. You are invariably the first shareholder of the new company. Whereas, you will not be able to establish the precise title of shares, in an existing NBFC.
- Tax Liability: The organization which is buying the existing NBFC is responsible to ensure that it has no tax liability pending.