How to apply for NBFC License?

Swarit Advisors

| Updated: Oct 29, 2018 | Category: NBFC

Obtain the NBFC license, if you intend to enter into Indian Financial Market. NBFCs has nowadays people’s prefered  choice over traditional banks as NBFCs has quick loan sanctioning process. NBFCs are preferred because it ascertains the loan eligibility of an applicant faster when compared to the banks. The entire process is online. You must have Net Owned Fund of Rs. 2 Crore to  apply for NBFC registration.

NBFC is a Non-Banking Finance Company engaged in the business of loans and advances, hire-purchase insurance, acquisition of shares, bonds, stocks or chit fund business but doesn’t include institutions with principal business including agriculture, purchase or construction of immovable property, industrial activity of the sale.

Mainly, the operations of NBFCs are regulated by the Reserve Bank of India (RBI) within the framework of the Reserve Bank of India Act, 1934 (Chapter III-B) and the directors issued by it.

This blog will comprise four major topics linked with NBFC license as follows:

  1. How to apply for NBFC License?
  2. Comparison between NBFC and Banks
  3. Types of NBFCs registered with RBI
  4. Documents required for NBFC License

How to apply for NBFC License?

There are certain conditions that the applicant company must fulfilled to get the NBFC License. An application is required to be made before RBI along with the requisite documents on the website of the RBI (COSMOS). RBI may issue notice in case it has any query with regard to the NBFC application submitted, respond to the notice promptly to avoid the rejection of application. Let’s first understand the pre-conditions required to obtain NBFC license:

NBFC Registration in India

Conditions pertaining to obtain NBFC License in India

The applicant of the NBFC License must satisfy the following conditions:

  • At the time of applying for the NBFC license, the applicant company must hold the minimum capital fund of INR 2 crores. Even for the Foreign Company or Investor, the minimum required fund must be INR 2 crores.
  • The applicant company must be registered as per the Companies Act, 1956 or Companies Act, 2013.
  • One must engage in the financial activities mentioned in the Act. The Financial activities of the business must exceeds 50% of the total capital asset, to become eligible to apply for NBFC Registration certificate.

Procedures for applying for NBFC license

  • The applicant must file an online application in RBI’s secured website through COSMOS for the login page.
  • In the window, click on one excel sheet and download the application form.
  • The applicant shall indicate the correct name of the Regional Office in the field “C-8” of the “Annex-I identification Particulars” in the Excel application form.
  • After submission, the company will get a Company Application Reference Number for the Company registration application filed online.
  • At last, the applicant must get the print out of the application and submit the application form indicating the Company Application Reference Number, along with the required documents, to the concerned regional office of the Reserve Bank of India.

Comparison between NBFCs and Banks

Since NBFCs provide loans and make investments, their activities are akin to that of banks. But there are a few differences between NBFCs and Banks. The three major dissimilarities are described below:

  • NBFCs can’t accept demand deposits
  • NBFCs can’t issue cheques drawn on itself
  • Unlike in banks, there’s no deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation available to depositors of NBFCs.
NBFC Registration in India

Types of NBFCs registered with RBI

Mainly, NBFCs are classified in three different categories as follows:

  1. In terms of the type of liabilities, NBFC is divided into Deposit and Non-Deposit accepting NBFC.
  2. NBFCs taking non-deposit is further categorized by their size into systematically important and other non-deposit holding companies
  3. And by the kind of activity, they are indulged in.

Within this categorization, the different types of NBFCs are as follows:

  • Asset Finance Company (AFC)
  • Investment Company (IC)
  • Loan Company (LC)
  • Infrastructure Finance Company (IFC)
  • Systematically Important Core Investment Company (CIC-ND-SI)
  • Infrastructure Debt Fund: Non-banking Financial Company (IDF-NBFC)
  • Non-Banking Finance Company: Micro Finance Institution (NBFC-MFI)
  • Non-Banking Finance Company-Factors (NBFC-Factors)
  • Mortgage Guarantee Company (MGC)
  • NBFC-Non-Operative Financial Holding Company (NBFC-NOFHC)

Documents required for NBFC License :

  • Copy of the Certificate of Incorporation, MOA & AOA (Certified ).
  • KYC of directors & shareholders of the applicant company.
  • Detailed action plan of the proposed NBFC along with the organizational structure
  • Net worth certificate of the directors & shareholders of the company
  • Bankers Report regarding the no lien remark on fixed report of Rs. 2 Crore
  • Credit Report of directors & shareholders.
  • Financial statements of the applicant company along with the directors report & auditor’s report.
  • Highest qualification certificate of the directors of an applicant company.

Though there are certain conditions to be fulfilled for getting an NBFC license, the process isn’t much daunting. You can contact one of the leading consultants in the market, Swarit Advisors and get your NBFC license in the least possible time and at an effective price.

Swarit Advisors

Swaritadvisors.com is technology motivated platform establishing the specialized legal & Financial advisory services in India. We are dedicated to helping startups and MNC in solving legal, Taxation and compliance related to starting and running their business around the world.

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