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Minimum Capital Requirement for NBFC: Complete Guide to Start an NBFC in India

minimum capital requirement for nbfc
Shivi Gupta
| Updated: Jun 06, 2020 | Category: NBFC

The banking sector encompasses various financial operations such as deposits, loans, and so on. Most countries have a centralized bank that regulates all other banks in the country, in India that role is played by RBI (Reserve bank of India). In India the Non-Banking Financial sector has an enormous growth potential.

A Non-Banking Financial Company (NBFC) is defined by the Reserve Bank of India (RBI) as “A company registered under the Companies Act of 2013 or 1956 which is involved in the business of loans and advances, acquisition of shares/bonds/stocks/securities/debentures issued by the Government or local authority or other marketable securities of a like kind, leasing, hire-purchase, insurance business, chit business but does not include any institution whose major business is banking.”

What is the 50-50 test?

RBI has formulated a test to check whether an NBFC is capable of being registered or not in India. The test is known as the 50-50 test. All the companies that are incorporated under the Companies Act of 2013 and want to launch a venture as a non-banking financial institution (NBFC), as defined under Section 45 I(a) of the RBI Act of 1934, must meet these basic requirements that are listed below:

  • The company is required to be registered in India as per Section 3 of the Companies Act of 2013;
  • The company should owned the funds of at least INR Two Crores.

Types of Non-Banking Financial Company

NBFCs are divided into two types:

  • Deposit Accepting NBFC (Type -1);
  • Non-Deposit accepting NBFC (Type -2).

A non-deposit accepting NBFCs can be further categorised into ten types, and they are as follows:

  1. Asset Finance Company, also known as AFC;
  2. Loan Company, also known as LC;
  3. Infrastructure Finance Company, also known as IFC;
  4. Investment Company, also known as IC;
  5. Infrastructure Debt Fund: NBFC, also known as IDF-NBFC;
  6. Systemically Important Core Investment Company, also known as CIC-ND-SI;
  7. Non-Banking Financial Company-Micro Finance Institution, also known as NBFC-MFI;
  8. Non-Banking Financial Company – Factors, also known as NBFC-Factors;
  9. Mortgage Guarantee Companies, also called as MGC;
  10. Non-Operative Financial Holding Company, also known as NOFHC.

Minimum capital requirement for a Non-banking financial company

Before we just on the discussion regarding the minimum capital requirements by NBFCs, let’s look at some of the important sections of the RBI Act of 1934.

Chapter III B- Provisions related to Non-banking financial institutions receiving deposits and financial institutions

  • Section 45-I(a) of the act defines the term, a business of a non-banking financial institution
  • Section 45-I(aa) of the act defines the term company.
  • Section 45-I(b) of the act defines the term corporation
  • Section 45-I(bb) of the act defines the term deposit
  • Section 45-IA of the act talks about the requirement of registration and net-owned fund
  • Section 45-IB of the act talks about the maintenance of the percentage of assets.
  • Section 45-ID of the act discusses the bank’s power to remove directors from office.
  • Section 45-IE of the act talks about the supersession of the board of directors of non-banking financial companies (Other than Government Companies).
  • Section 45J of the act talks about the bank to regulate or prohibit the issue of prospectus or advertisement soliciting deposits of money.
  • Section 45JA of the act discusses the bank’s power to determine policy and issue directions.
  • Section 45K of the act talks about the power of bank to collect information from non – banking institutions as to deposits and to give directions.
  • Section 45M of the act talks about the duty of non-banking institutions to furnish statements, etc., required by bank.
  • Section 45MA of the act talks about the powers and duties of auditors.
  • Section 45MBA of the act talks about the resolution of non-banking financial company.
  • Section 45QB of the act talks about the nomination by depositors.

Now coming back to the minimum capital requirements, as per RBI (Reserve bank of India) guidelines, a company that wishes to incorporate as NBFC in India has to maintain a minimum net owned fund of INR Two Hundred (200) Lakhs. This requirement came through the RBI amendment Act of 1999. Prior to this amendment, the regiment was INR 25 Lakhs.

What are the eligibility criteria for the NBFC registration?

All those who wish to incorporate a non-banking financial company must register with the Reserve Bank of India (RBI) (except those mentioned by the RBI guidelines). So before you proceed with the process of registration, please go through the following list of eligibility criteria:

  • You must register your company whether as a as a private or public limited company, under the Company Act of 2013. Also, the companies which are registered under the provisions of the Company Act of 1956 are also eligible.
  • The company must have the business financial strategies ready for at least five years
  • It is required to have a good credit or Credit Information Bureau (India) Limited also called as CIBIL score.
  • A company should own minimum funds of INR Two Crores or above.
  • A company should own minimum assets of INR Two Crores or above.
  • The company should comply with all the provisions of the FEMA (Foreign Exchange Management Act of 1999).

What is the process to register a Non-Banking Financial Company in India?

Following are the steps involved in registering a Non-Banking Financial Company in India:

  • In step 1 of the process, the applicant has to register the company under the Companies Act of 2013.
  • In step 2 of the process, the company is required to maintain a net-owned fund of at least INR Two Crores.
  • In step 3 of the process, the company must appoint at least one director from the same background.
  • Step 4 of the process, says the company is required to have a good credit or Credit Information Bureau (India) Limited[1], also called CIBIL score.
  • In step 5, the applicant can fill out the application form with all the required documents and submit it.
  • In Step 6, a CARN number will be generated and given to the applicant for the future reference.
  •  Finally, in Step 7, authorities will verify the application forms and all the documents filed. If everything is satisfied, the authority will provide the license to the company.

Documents required for NBFC registration

The following documents must be provided to obtain an NBFC license:

  • Management-related information;
  • In the case of public limited corporations, certified copies of the Certificate of Incorporation and the Certificate of Commencement of Business;
  • Certified copies of the company’s most recent Memorandum and Articles of Association. Details of financial business clauses in the MoU;
  • A copy of the company’s PAN/CIN;
  • Each director must fill up and sign their director profile;
  • A certificate from the NBFC/s where the Directors received NBFC experience;
  • CIBIL information about the company’s directors;
  • Board Resolution stating that the company has not accepted any public deposits in the past (specify period)/does not hold any public deposits as of the date and will not accept any public deposits in the future without the prior written consent of the Reserve Bank of India;
  • An authenticated copy of the board resolution establishing the “Fair Practices Code.”;
  • Statutory Auditors Certificate attesting to the fact that the company accepts/does not accept/does not hold Public Deposit;
  • Statutory Auditors Certificate attesting that the company is not engaged in NBFC activity;
  • Statutory Auditors Certificate attesting to the net owned fund as of the application date.
  • Details of the company’s authorised share capital and the most recent shareholding pattern, including percentages;
  • A copy of the Fixed Deposit receipt and a bankers certificate of no lien indicating the balances in support of the Net Owned Funds;
  • Details of bank balances/accounts/full postal address of the branch/bank, loan/credit facilities, and so on;
  • The three years prior Directors’ and auditors’ reports, an audited balance sheet and profit and loss account, or for the smallest time frame possible (for companies already in existence);
  • Business plan for the next three years detailing the company’s (a) business drive, (b) market sector, and (c) anticipated balance sheets, cash flow statement, asset/income pattern statement, without any element of public deposits;
  • Documentary documentation supporting the source of the company’s initial cash.
  • Self-attestation of bank statements/IT returns, etc.


Funds raised by the NBFCs are directly or indirectly from the general public. Then they lend the money (in the form of loans) to a wide range of small businesses, wholesale and retail enterprises, and self-employed individuals. In India, NBFCs are divided into two types, one is deposit accepting NBFC (Type -1), and another is a non-deposit accepting NBFC (Type -2). RBI governs the working of NBFCs, therefore as per the RBI guidelines a, NBFCs has to maintain a minimum capital requirement, which is INR Two Hundred Lakhs.


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