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NBFC Compliances in India

NBFC refers to a Non-Banking Financial Company which carries on the business of Loans & Advances, Equities, Debt, Acquisition of stocks, etc. issued by the government.

As per RBI (Reserve Bank of India), every entity willing to commence the business of NBFC should mandatorily obtain NBFC registration.

Furthermore, the Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016 directs every NBFC to follow the concerned compliances within the stipulated time.

After the Sahara Case, RBI has made stringent rules and introduced new compliances for NBFCs, which will be under the continuous screening of RBI.

RBI compliances for NBFC and various mandatory returns

As per the RBI’s Master Directions, every NBFC-NDs-SI and NBFC-SI deposit-taking companies must file the returns as described below:

Returns for Deposit-taking NBFCs

  • NBS-1 return

    NBS-1 is a quarterly return that every NBFC, who holds or accepts public deposits, has to file.

    The primary objective of filing NBS-1 return is to present the financial information of the company such as Components of Assets and Liabilities, Profit and Loss Account, Exposure to sensitive sectors and more.

  • NBS-2

    Again, NBS-2 is a quarterly return which needs to be submitted by every NBFC accepting public deposits.

    The major intent to submit this return is to present compliances pertaining to various prudential norms like Capital Adequacy, Asset Classification, Net-Owned Funds, Provisioning, etc.

  • NBS-3

    Like the above two, NBS-3 is a return needs to be filed on a quarterly basis. The chief reason to file this form is to capture details on Statutory Investments in the Liquid States.

    Mainly, the statutory investments consist of Central or State Government Securities, Fixed Deposits in Schedules Commercial Bank, etc.

  • NBS-4

    Typically, rejected company holding public deposits needs to file this annual return of critical parameters. NBS-4 is filed to obtain the repayment status of the rejected NBFCs who accept public deposits.

    Earlier, NBS-5 was filed but it stands withdrawn now since NBS-1 is filed quarterly.

  • NBS-6

    Deposit-taking NBFC holding the total assets of Rs. 100 crores or more has to file this monthly return.

    NBS-6 displays the company’s exposure to capital market.

  • Half-yearly ALM returns

    These need to be filed by the NBFCs with asset size more than Rs. 100 crores and NBFCs who accept public deposits of above Rs. 20 crores.

  • Branch Information Return

    Every NBFC holding and accepting public deposits needs to submit this quarterly return.

  • Audited balance sheet and Auditor’s report

    This needs to be filed by those NBFCs who accept public deposits.

Returns to be filed by NBFCs-ND-SI (Non-Deposit-taking Systematically-Important)

  • NBS-7

    It’s a quarterly return and needs to be filed on a quarterly basis. Every NBFC-ND-SI needs to file this quarterly statement of risk-weighted assets, risk asset ratio, and statement of capital funds, etc.

  • Monthly returns on necessary Financial Parameters

    The monthly returns regarding the financial parameters of NBFCs-ND-SI must be filed on a monthly basis.

  • ALM returns

    ALM stands for Asset Liability Management. NBFCs-ND-SI need to file such returns at certain intervals as described below:

    1. NBS-ALM 1: It’s a quarterly statement of short term dynamic liquidity.

    2. NBS-ALM 2:It’s a half-yearly statement of short-term structural liquidity.

    3. NBS-ALM 3:ALM-3 is a half-yearly statement of Interest Rate Sensitivity.

    4. ALM-YRLY:Asset Liability Mismatch statement. It’s an annual return.

  • Branch Information Return

    Just as NBFCs-SI, NBFC-ND-SI also needs to submit the branch information return quarterly.

Quarterly return for NBFCs with assets of above Rs. 50 crores but below Rs. 100 crores

Non-deposit taking NBFCs which holds asset size between Rs. 50 crores and Rs. 100 crores need to submit the basic info such as the company’s name, address, profit or loss statement, and NOF (Net-Owned Profit) during the last three years quarterly.

NBFC Compliances Checklist for Non-Deposit and Deposit-taking NBFCs along with the due dates

Once you have obtained the NBFC license, your responsibility doesn’t end here. Your next duty is to follow the NBFC compliances strictly if you wish to operate the business without any hindrance.

For the same, you need to remember the due date for filing each return in the expected time. Therefore, we have constructed a checklist for following NBFC compliances in the prescribed time:

S. No.

NBFC Compliance Checklist

Due Dates

Annual Compliances

1.

NBS-7/Unaudited March Monthly return

On or before 30th June

2.

Statutory Auditors certificate on Assets & Income

On or before 30th June

3.

Details of Companies having FDI/Foreign Funds

On or before 30th June

4.

NBS-7/Audited March Monthly return

Upon completion

5.

File audited annual balance sheet and P&L Account

One month from the date of signoff

6.

Resolution of Non-Acceptance of Public Deposit

Before the commencement of the new Financial year

7.

Declaration of Auditors

Annual basis

Monthly Compliance

8.

Monthly return

By 7th of every month

Periodical Compliances

9.

Appointment of Director

Within 30 days of appointment

10.

Resignation of Director (DIR-12 + Challan report)

Within 30 days of appointment

11.

Adoption of any notification in the ensuing Board Meeting and filing the certified copy with RBI

 

Additional compliances

Apart from the aforesaid compliances as directed by RBI, all the NBFCs are also required to follow the compliances of the Companies Act 2013 as they are registered under this act.

Additional compliances that NBFCs need to follow as per the provisions of Companies Act, 2013 are as follows:

  • ADT-1, Appointment of Auditor
  • Maintenance of Books of Accounts
  • Maintenance of Statutory Registers
  • Preparation of Financial Statements
  • Convene Statutory Meetings
  • Income Tax Returns Filings
  • AOC-4, Filing of Financial Statement
  • MGT-7, Filing ROC Annual Returns

Penalties for Non-Compliance

If you are an NBFC and don’t follow the compliances timely, then you would be subject to severe penalty by the RBI. The penalties for non-compliance vary for different kinds of NBFC. One of the biggest consequences could be the confiscation of the NBFC license or even it could lead the company’s closure.

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