{"id":507,"date":"2020-12-21T07:29:38","date_gmt":"2020-12-21T07:29:38","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=507"},"modified":"2020-12-21T11:14:16","modified_gmt":"2020-12-21T11:14:16","slug":"nbfc-compliance-under-fema","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/","title":{"rendered":"A Complete Summary of NBFC Compliance under FEMA"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Non- Banking Financial Company (NBFC) is a company registered under the <strong><em>Companies Act, 2013<\/em><\/strong>. NBFC is involved in the business of loans and advances, acquisition of stocks, shares, debentures, securities and bonds issued by govt or local authority or other marketable securities, but it does not include any institution whose business includes the industrial, agricultural or sale or purchase of immovable property (other than securities). NBFC has to act in accruing to the RBI guidelines to engage in the activities relating to the financial sector. This article will provide you with a complete summary of NBFC compliance under the FEMA. <\/p>\n\n\n\n<p>While borrowing\ncredit from foreign countries, it is necessary for NBFC to comply with the\nregulations of the Foreign Exchange Management Act (FEMA). <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a8c46b4c56\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a8c46b4c56\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Two_Routes_of_Foreign_Investment\" title=\"Two Routes of Foreign\nInvestment \">Two Routes of Foreign\nInvestment <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#What_are_the_purposes_for_which_NBFC_compliance_is_mandatory_under_FEMA\" title=\"What are the purposes for which\nNBFC compliance is mandatory under FEMA? \">What are the purposes for which\nNBFC compliance is mandatory under FEMA? <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Do_FEMA_and_RBI_mandate_the_NBFC_compliance\" title=\"Do FEMA and RBI mandate the\nNBFC compliance? \">Do FEMA and RBI mandate the\nNBFC compliance? <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Requirements_for_Foreign_Investment_in_NBFC_before_2016_Amendment\" title=\"Requirements for Foreign Investment in NBFC before 2016 Amendment \">Requirements for Foreign Investment in NBFC before 2016 Amendment <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Who_regulates_the_NBFC_compliance\" title=\"Who regulates the NBFC\ncompliance? \">Who regulates the NBFC\ncompliance? <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#NBFC_compliance_eligibility_criteria\" title=\"NBFC compliance eligibility\ncriteria \">NBFC compliance eligibility\ncriteria <\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Foreign_investment_under_automatic_route\" title=\"Foreign investment under\nautomatic route\">Foreign investment under\nautomatic route<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Non-_Fund_based_Activities\" title=\"Non- Fund based Activities\">Non- Fund based Activities<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#What_are_the_documents_that_are_required_for_NBFC_compliance_under_FEMA\" title=\"What are the documents that are\nrequired for NBFC compliance under FEMA?\">What are the documents that are\nrequired for NBFC compliance under FEMA?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#What_happens_when_Reserve_Bank_of_India_approves_a_loan_to_the_borrower\" title=\"What happens when Reserve Bank\nof India approves a loan to the borrower?\">What happens when Reserve Bank\nof India approves a loan to the borrower?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#How_is_NBFC_different_from_banks\" title=\"How is NBFC different from\nbanks?\">How is NBFC different from\nbanks?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Types_of_NBFCs_registered_with_RBI\" title=\"Types of NBFCs registered with RBI\">Types of NBFCs registered with RBI<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Investment_and_Credit_Company_NBFC_%E2%80%93_ICC\" title=\"Investment and Credit Company (NBFC \u2013 ICC) \">Investment and Credit Company (NBFC \u2013 ICC) <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Infrastructure_Finance_Company_IFC\" title=\"Infrastructure Finance Company (IFC)\">Infrastructure Finance Company (IFC)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Infrastructure_Debt_Fund_%E2%80%93_NBFC_IDF-_NBFC\" title=\"Infrastructure Debt Fund \u2013 NBFC (IDF- NBFC)\">Infrastructure Debt Fund \u2013 NBFC (IDF- NBFC)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Systemically_Important_Core_Investment_Company_CIC-_ND-_SI\" title=\"Systemically Important Core Investment Company (CIC- ND- SI) \">Systemically Important Core Investment Company (CIC- ND- SI) <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Non-_Banking_Financial_Company_%E2%80%93_Micro_Finance_Institution_NBFC_%E2%80%93_MFI\" title=\"Non- Banking Financial Company \u2013 Micro Finance Institution (NBFC \u2013 MFI)\">Non- Banking Financial Company \u2013 Micro Finance Institution (NBFC \u2013 MFI)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Mortgage_Guarantee_Companies_MGC\" title=\"Mortgage Guarantee Companies (MGC) \">Mortgage Guarantee Companies (MGC) <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Non-_Banking_Financial_Company_%E2%80%93_Factors_NBFC-_Factors\" title=\"Non- Banking Financial Company \u2013 Factors (NBFC- Factors)\">Non- Banking Financial Company \u2013 Factors (NBFC- Factors)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#NBFC-_Non-_Operative_Financial_Holding_Company_NOFHS\" title=\"NBFC- Non- Operative Financial Holding Company (NOFHS) \">NBFC- Non- Operative Financial Holding Company (NOFHS) <\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/swaritadvisors.com\/blog\/nbfc-compliance-under-fema\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Two_Routes_of_Foreign_Investment\"><\/span>Two Routes of Foreign\nInvestment <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The foreign investment has two routes for NBFC compliance under FEMA. These are:-<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/INFOGRAPHICS-1.png\" alt=\"Routes of Foreign Investment \" class=\"wp-image-540\" width=\"569\" height=\"224\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/INFOGRAPHICS-1.png 1000w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/INFOGRAPHICS-1-300x118.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/INFOGRAPHICS-1-768x303.png 768w\" sizes=\"(max-width: 569px) 100vw, 569px\" \/><\/figure><\/div>\n\n\n\n<ol><li>Government Route <\/li><li>Automatic Route<\/li><\/ol>\n\n\n\n<p>The foreign\ncountries entities are allowed to invest their funds in NBFC sector under the\nautomatic route. All the activities related to foreign investment is regulated\nunder the automatic route. Therefore, it is not required to take permission\nfrom the Reserve Bank of India. There is no limitation levied on the foreign\ninvestors in relation to the investment of funds under the automatic route. The\nparties engaged in it are not required to face any legal formalities for such\ntype of investment. The funds can be put in the NBFC sector regardless of the\nscale of investment and without any form of approval from the government. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_purposes_for_which_NBFC_compliance_is_mandatory_under_FEMA\"><\/span>What are the purposes for which\nNBFC compliance is mandatory under FEMA? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The main reasons\nfor which NBFC compliance under FEMA is mandatory are: &#8211; <\/p>\n\n\n\n<ul><li>To receive investment from foreign investors <\/li><li>To help increase the growth and development of\nNBFC<\/li><li>Since the NBFC activities carried out is based\non rural development, the foreign investors invest more money in NBFC. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Do_FEMA_and_RBI_mandate_the_NBFC_compliance\"><\/span>Do FEMA and RBI mandate the\nNBFC compliance? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It is necessary for Non \u2013 Banking Financial Companies (NBFC) to take permission from RBI for its establishment. In order to form an NBFC, it is necessary to start a private company which has minimum capital requirements. And the formation of the company must be in accordance with the rules of company law. And in similar ways, it is also necessary for NBFC to be compliant with the laws under FEMA in relation to all the activities related to foreign investment. Therefore, <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-compliance\" class=\"text-primary\">NBFC compliance<\/a><\/strong> under FEMA and RBI is mandatory. <\/p>\n\n\n\n<p>The amendment in\n2016 of Foreign Exchange Management (Borrowing and Lending in Foreign Exchange)\nRegulation, 2000 by RBI, it allowed foreign investors to invest in NBFC. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Requirements_for_Foreign_Investment_in_NBFC_before_2016_Amendment\"><\/span>Requirements for Foreign Investment in NBFC before 2016 Amendment <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Prior to the\namendment in 2016, the following requirements regarding capitalization were\nimposed on foreign investment in an NBFC. The previous norms under the regulatory\nauthority are mentioned in the following list: &#8211; <\/p>\n\n\n\n<ul><li>USD 0.5 million for foreign capital up to 51% to be brought upfront.<\/li><li>USD $ 5 million for foreign capital more than 51% and up to 75% to be brought upfront. <\/li><li>50 million for foreign capital more than 75% out of which $7.5 million to be brought upfront and the balance in 24 months.<\/li><li>The Non- Banking Financial Companies (NBFC) having foreign direct investment (FDI) more than 75%&nbsp; and up to 100% and with a minimum capitalization of $50 million, can set up subsidiaries below them for specific NBFC private lender activities, without any constraint on the number of operating subsidiaries and without getting additional capital. There is no particular constraint for the number of subsidiaries that are formed under this. <\/li><li>Joint Venture operating Non- Banking Financial Companies (NBFC) that have less than 75% or 75% foreign investment can also create subsidiaries for carrying out activities of NBFC, subject to the subsidiaries also in accordance with the minimum capitalization norm mentioned above. <\/li><li>Non- Fund based activities: the US $0.5 million to be brought up front for all allowed non-fund based NBFC private lenders regardless of the level of overseas investment. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_regulates_the_NBFC_compliance\"><\/span>Who regulates the NBFC\ncompliance? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The NBFC compliance is regulated by the Reserve Bank of India (RBI). NBFC is required to be registered with RBI and has to obtain permission from RBI to execute its business activities. Besides this, the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulation, 2000 and Foreign Exchange Management Act, 1999, regulates the NBFC. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"NBFC_compliance_eligibility_criteria\"><\/span>NBFC compliance eligibility\ncriteria <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The eligibility\ncriteria for NBFC compliance is: &#8211;<\/p>\n\n\n\n<ul><li>Registering an NBFC compliance\/NBFC with the Foreign Exchange Management Act (FEMA).<\/li><li>The NBFC must be allowed for securing foreign investment.<\/li><\/ul>\n\n\n\n<p><strong><em>For an NBFC, foreign investment is allowed permitted the automatic route in the below mentioned 18 prescribed NBFC activities. The foreign investment is permitted through the automatic route in the following sectors: &#8211; <\/em><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Foreign_investment_under_automatic_route\"><\/span>Foreign investment under\nautomatic route<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul><li>Underwriting<\/li><li>Stock broking<\/li><li>Merchant banking<\/li><li>Portfolio management services<\/li><li>Venture capital<\/li><li>Factoring<\/li><li>Asset management<\/li><li>Custodian services<\/li><li>Housing finance<\/li><li>Leasing and finance<\/li><li>Rural credit<\/li><li>Micro credit<\/li><li>Credit card business<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Non-_Fund_based_Activities\"><\/span>Non- Fund based Activities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul><li>Financial consultancy<\/li><li>Investment Advisory Services<\/li><li>Credit rating agencies<\/li><li>Forex broking<\/li><li>Money changing business<\/li><\/ul>\n\n\n\n<p>What is the\nprocedure for NBFC compliance under Foreign Exchange Management Act (FEMA)?<\/p>\n\n\n\n<p>The following\nprocess has to be followed, once the Non- Banking Financial Company is\nregistered with the Reserve Bank of India (RBI): &#8211; <\/p>\n\n\n\n<ul><li>It is necessary that the NBFC has to be in compliance with the foreign exchange laws as directed under the Foreign Exchange Management Act (FEMA).<\/li><li><strong><em>Form 83 <\/em><\/strong>has to be downloaded from RBI\u2019s website for any form of foreign investment. <\/li><li>The form must be filled with all the requested details and any additional sheet must be added if required. <\/li><li>Further, the duplicate of form along with the necessary documents must be submitted by the borrower to the designated Authorised Dealer (AD) for all the specified categories and any amount of external commercial borrowing (ECB). <\/li><li>After the conformity with the guidelines of the ECB, the authorized dealer will provide the requisite details of the form in Part F and then forward the one copy for allotment of Loan Registration Number (LRN) within 7 days from the date of signing the loan agreement between the lender and the borrower, to be submitted in duplicate by the borrower to the authorized dealer (AD) designated for all specified categories and any amount of external commercial borrowing (ECB).<\/li><li>The form must be submitted to the mentioned address: the Director Balance of Payments Statistic Division Department of Statistics and Information Management (DSIM) Reserve bank of India C-8-9 Bandra- Kurla Complex Mumbai \u2013 400051<\/li><li>Once the form is verified by the Reserve Bank of India (RBI) the loan registration number shall be issued to the borrower. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_documents_that_are_required_for_NBFC_compliance_under_FEMA\"><\/span>What are the documents that are\nrequired for NBFC compliance under FEMA?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The documents that are required for the NBFC compliance under FEMA are:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/infographics-2.png\" alt=\"documents required for NBFC compliance\" class=\"wp-image-541\" width=\"491\" height=\"493\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/infographics-2.png 1000w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/infographics-2-150x150.png 150w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/infographics-2-300x300.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/infographics-2-768x771.png 768w\" sizes=\"(max-width: 491px) 100vw, 491px\" \/><\/figure><\/div>\n\n\n\n<ul><li>KYC documents <\/li><li>Application in Form \u2013 83<\/li><li>Company\u2019s bank statement<\/li><li>All the documents relating to <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\">NBFC registration<\/a><\/strong>. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_happens_when_Reserve_Bank_of_India_approves_a_loan_to_the_borrower\"><\/span>What happens when Reserve Bank\nof India approves a loan to the borrower?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When the Reserve\nBank of India approves a loan to the borrow it required the below mentioned\nrequirements to be followed: &#8211; <\/p>\n\n\n\n<ul><li>NBFC compliance under <strong>FEMA Act, 1999<sup><a href=\"https:\/\/www.incometaxindia.gov.in\/pages\/acts\/foreign-exchange-management-act.aspx\" class=\"text-primary\"><strong><em>[1]<\/em><\/strong><\/a><\/sup><\/strong> and meeting with rules and regulations of RBI is necessary. <\/li><li>Copy of the application in Form \u2013 83 should be provided to the Authorized Dealer (AD) for any amount of external commercial borrowings. <\/li><li>After the conformity with the regulations under the external commercial borrowing, the Authorized Dealer (AD) will submit required information in Part F of the form and forward a copy for the allotment of Loan Registration Number (LRN).<\/li><li>The borrower has to provide the duplicate of the same to the Authorized Dealer (AD) regardless of the amount of external commercial borrowing. And this must be submitted to the Reserve Bank of India\u2019s office located in Mumbai. <\/li><li>A credit can be obtained after the loan registration number (LNR) is availed. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_is_NBFC_different_from_banks\"><\/span>How is NBFC different from\nbanks?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NBFC\u2019s performs\nsimilar function as that to the banks. However, there are some differences\nbetween the banks and NBFCs such as: &#8211; <\/p>\n\n\n\n<ul><li>Demand deposits cannot be accepted by NBFCs.<\/li><li>NBFCs cannot issue cheques drawn on itself and\nalso do not involve payment and settlement system.<\/li><li>The depositors of NBFCs cannot avail the deposit\ninsurance facility of the Deposit Insurance and Credit Guarantee Corporation,\nunlike in banks. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_NBFCs_registered_with_RBI\"><\/span>Types of NBFCs registered with RBI<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/infographics-2-1.png\" alt=\"NBFCs registered with RBI Types \" class=\"wp-image-509\" width=\"681\" height=\"479\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/infographics-2-1.png 1000w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/infographics-2-1-300x211.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2020\/12\/infographics-2-1-768x541.png 768w\" sizes=\"(max-width: 681px) 100vw, 681px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investment_and_Credit_Company_NBFC_%E2%80%93_ICC\"><\/span>Investment and Credit Company (NBFC \u2013 ICC) <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is one of the\ncommon licenses for all the types of finance business in India. Earlier, before\n2019 there were three different types of licenses, that is, Asset Finance\nCompany, Investment Company and Loan Company. After 2019, these three licenses\nmerged into one single license that is Investment and Credit Company (ICC). It\npermits the holder of the license to engage or operate in different kinds of\nwholesale retail loans and investment business. The ETA for NBFC ICC License is\nestimated to 120 days. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Infrastructure_Finance_Company_IFC\"><\/span>Infrastructure Finance Company (IFC)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is a Non-\nBanking Financial Company which utilizes at least 75% of its total assets in\ninfrastructure loans, has a minimum credit rating, net owned funds of Rs. 300\ncrore and a CRAR of 15%<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Infrastructure_Debt_Fund_%E2%80%93_NBFC_IDF-_NBFC\"><\/span>Infrastructure Debt Fund \u2013 NBFC (IDF- NBFC)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is registered\nas NBFC to allow the flow of long term debt in infrastructure projects. Rupee\nor Dollar denominated bonds is issued to raise resources of minimum 5 years of\nmaturity under the IDF- NBFC. It can be sponsored by only infrastructure\nfinance companies (IFC).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Systemically_Important_Core_Investment_Company_CIC-_ND-_SI\"><\/span>Systemically Important Core Investment Company (CIC- ND- SI) <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>CIC- ND- SI is\nan NBFC that is carrying on the business of acquisition of shares and\nsecurities on following conditions: &#8211; <\/p>\n\n\n\n<ol><li>Holds 90% of its total assets in preference\nshares, equity shares, loans or debts in group of companies<\/li><li>Investment in equity shares is not less than 60%\nof its total assets in group of companies<\/li><li>Does not carry out any other financial activity\nmentioned in Section 451(c) and (f) of the Reserve Bank of India Act, 1934. <\/li><li>Size of the assets are above 100 crore<\/li><li>Public funds are accepted<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Non-_Banking_Financial_Company_%E2%80%93_Micro_Finance_Institution_NBFC_%E2%80%93_MFI\"><\/span>Non- Banking Financial Company \u2013 Micro Finance Institution (NBFC \u2013 MFI)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>NBFC \u2013 MFI has\nat least 85% of its asset in the nature of qualifying assets. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Mortgage_Guarantee_Companies_MGC\"><\/span>Mortgage Guarantee Companies (MGC) <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>MGC is a type of\nNBFC that is carrying on the business of guaranteed mortgage and the gross\nincome is at least 90% from the mortgage guarantee business and Rs 100 crore is\nthe net owned fund.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Non-_Banking_Financial_Company_%E2%80%93_Factors_NBFC-_Factors\"><\/span>Non- Banking Financial Company \u2013 Factors (NBFC- Factors)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>NBFC- Factors\ncarry on its business in factoring and constitutes at least 50% of its total\nassets. The income is not less than 50% of its gross income.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"NBFC-_Non-_Operative_Financial_Holding_Company_NOFHS\"><\/span>NBFC- Non- Operative Financial Holding Company (NOFHS) <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The promoters or\nthe group of promoters are allowed to set up a new bank which is completely\nowned NOFHS regulated by Reserve Bank of India. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Financial\nactivity is a principle business for many businesses. And giving validity in\nengaging in financial activities, it is necessary for the financial\ninstitutions to register itself with the Reserve Bank of India and comply with\nits rules and regulations. When a Non- Banking financial institution engages\nitself in the lending and borrowing of money with the foreign investments, it\nis mandatory for them to comply with the rules and regulations under Foreign\nExchange Management Act (FEMA) and RBI. NBFC compliance under FEMA and meeting\nwith regulations and rules of RBI is necessary, for seeking funds from the\nforeign investors. <\/p>\n\n\n\n<p>The Non- Banking Financial Institutions functions and operates under strict rules and regulations.&nbsp; It is necessary for private lenders to ensure compliance with laws. The Reserve Bank of India has made it easier for the borrowers by simplifying the filing process for them.<\/p>\n\n\n\n<p><b>Also, Read:<\/b> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/how-to-avoid-rejections-of-trademark-registration\/\">How to Avoid Rejections of Trademark Registration?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Non- Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013. NBFC is involved in the business of loans and advances, acquisition of stocks, shares, debentures, securities and bonds issued by govt or local authority or other marketable securities, but it does not include any institution whose business includes the industrial, agricultural [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":508,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[58],"tags":[111],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/507"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=507"}],"version-history":[{"count":10,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/507\/revisions"}],"predecessor-version":[{"id":543,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/507\/revisions\/543"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/508"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=507"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=507"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=507"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}