9821399320 Chat With Us

Free Call Back by an Expert

Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality

NBFC Registration - An Insight

An NBFC, also known as Non-Banking Finance Company is a private or public limited company registered under Companies Act, 2013 and also have obtained COR (Certificate from Registration) from the reserve bank of India. The NBFC is primarily engaged in the business of providing loans and advances, acquisition of shares and stocks and other investible securities. RBI grants license to the NBFCs to carry out the business of providing various kinds of loans such as Personal Loans, Asset Financing, SME Lending, Gold Loans, Loan against Property, Loan against Shares, Short term Personal Loans, etc.

Principal Business of the NBFC? 

  • Secured Loan (LAP)
  • Gold Loan
  • Unsecured Personal and Business Loan
  • Marketplace Lending (Digital Lending )
  • Investment in Shares or Mutual Fund or Debentures
  • NBFC must maintain 50% of its assets as Financial Assets and 50% of its income must be generated from Financial Activity

Different Categories of RBI NBFC Registration

NBFC registration Categories

  • Investment and Credit Company (ICC): ICC is one common license for all types of financing business in India. Prior to feb 2019 there were three different licenses namely Loan Company, Asset Finance Company and Investment Company. Now after merger into one single License defined as ICC, It allows the license holder to engage in various kinds of wholesale retail loans and Investment business. The ETA for NBFC ICC License estimated to 120 days.
  • NBFC-Microfinance Companies (MFIs): The NBFC-MFIs disburse loans to the households whose annual income in rural areas does not exceeds ₹ 1,00,000 or urban and semi-urban household income not exceeding ₹ 1,60,000. Around 85% of the financial assets of MFIs shall lie in the nature of qualifying assets as above. The minimum Net owned funds of MFIs shall not be less than INR 5 crores. The ETA for NBFC CIC License could be 200 days.
  • NBFC-Factors: Engaged in the principal business of factoring, constituting at least 50 percent of its total assets and the income derived from factoring business should not be less than 50 percent of its gross income.
  • NBFC-Peer to Peer Lending (P2P): P2P lending intermediaries provide an online platform consisting of highly secured credit and risk assessment fintech driven platforms that runs an automatic risk assessment checks of the applicant and determines credit risk of the borrowers and Artificial intelligence based Platforms, Automatically publish the loan requirement along with the borrowers profile and risk rating on the platform. With peer-to-peer lending market place, borrowers can take loans from individuals who are willing to lend their money for an agreed interest rate to the borrower. For P2P Lending License, it may take approximate 180 working days for the in-Principal Approval from RBI. And after In-Principal Approval the Applicant will require to undergo with the Mandatory CISA Audit.
  • NBFC-Account Aggregators: This is the newest category of NBFC. NBFC Account Aggregators enables sharing of data across multiple financial sector organizations and act as “consent brokers”, i.e., they intermediate data transfer among the financial organizations with the consent of the user. The activities of Account Aggregators involves accumulation of financial data that involves gathering of information on a single platform from varied accounts such as bank accounts, investment accounts, business accounts, consumer accounts and other related financial accounts. The Net-Owned Fund requirement for NBFC-AA is also INR 2 crores.
  • Infrastructure Finance Company (IFC): This kind of NBFCs deploys at least 75 per cent of its total assets in infrastructure loans. Also, it has to maintain a minimum Net Owned Funds of ₹ 300 crore and shall also seek a minimum credit rating of ‘A ‘or equivalent with a CRAR of 15%. The ETA for NBFC IFC License could be 240 days.
  • Core Investment Companies (CIC): These kind of NBFCs carry on the business of acquisition of shares and securities and also fulfill the following conditions:
  1. Holding of 90% of its Total Assets in the form of investment in equity shares, preference shares, debt or loans in group companies;
  2. Not to carry out any other financial activity except as listed in point (a) above;
  3. The ETA for NBFC CIC License could be 180 days. 

Can NBFCs Accept Deposits? 

  • NBFC Can accept deposits: but in recent few years, RBI has followed strict approach while granting the NBFC-D (Deposit) License.
  • After 2016 RBI has been encouraging: The Application for non-deposit taking NBFC and large number of new license has been approved in year 2017 to 2019.
  • Easy to raise fund from Bank: Even Non deposit taking NBFC is allowed to raise fund from bank at very cheaper rate.
  • Principal business as Finance: Non Depositing taking NBFC will primary engage in the lending activities and shall not accept the public deposits in the form of Savings Deposits, Recurring Deposits and Fixed Deposits
  • Be careful during Deposit taking NBFC Application: Even if you are planning to takeover the deposit taking NBFC License, in such circumstances at the Time of granting the approval for change in management and change in ownership of NFBC, RBI may downgrade to Non deposit taking NBFC.

We encourage our clients to submit fresh Application for NBFC Registration rather taking over the old NBFC. Advantages and disadvantages of both option can be evaluated.

How are the NBFC different from Banks?

1

Non-acceptance of Demand Deposits by the NBFCs

2

Inability to issue cheques drawn upon themselves

3

Non-availability of Deposit Insurance Facility provided by Deposit Insurance and Credit Guarantee Corporation to the depositors

Minimum Capital Requirement for NBFC License Registration

  • The minimum paid-up Capital: The Net owned fund of NBFC-ICC (Investment credit company) must be more than Rs. 2 Crores over the life of the NBFC unless otherwise prescribed the RBI.
  • Gift From Family Members: Shareholders should introduce own 2 crores as share capital, However shareholders can give or take gifts from Close relatives or Spouse
  • No Blockage of Fund: it shall mandatorily hold a Net owned funds of INR 2 crores at the time of registration and at all times thereafter. However, you can use the minimum capital for the lending or investment purpose.
  • Capital Must be tax Paid: The Applicant will require to produce the Proof of tax payment against the capital invested in the NBFC.
  • Need to Qualify the Quality of Capital Test: RBI Conducts quality of capital test and ensure that Capital invested by the shareholders are free from any possible defects or non-compliance with Indian or international laws.
  • FATF Member Investment: RBI Only recognize and Approves NBFC Registration or takeover from FATF Member Country Investment in India
  • 100% FDI is Allowed: In NBFC Sector 100% FDI is allowed from FATF member countries and under auto route.

Pre-Requisites for NBFC Registration

condition for NBFC Registration

  • Capital Test: The Quality of Capital is equally important and as right composition of board. The seed capital should be obtained from the legitimate sources and shall be commensurate with the Net Worth declaration and certification of all the shareholders.
  • Profile of the Promotors: Directors, being the face of the Company, shall be the individuals of higher integrity and knowledge. It is not necessary for each of the Directors should be from the Banking or Finance background. However, it is expected that 25 % of the Board shall should have financial background.
  • High level Business Plan: A detailed business plan is the life line of the NBFC license. It shall be in the form of a road-map for next 5 years. With the advent of a large number of lending institutions across the country, it becomes very important to grant license to genuine and capable promoters.
  • Area of Operation: Despite of the fact that many regions of the country are devoid of the adequate Banking facilities, there are certain high-priority regions which shall be looked into on an urgent basis. Coming up with an NBFC in Tier-2, Tier-3 and Tier-4 cities will make the way towards license little easier.
  • Targeting the untouched segment: The section of the population which is devoid of loan facilities due to their credit rating or lack of documentation shall be the targeted segment for the upcoming NBFCs. A well-planned risk management strategy shall be adopted to mitigate the risks at all the levels. 

Procedure of Applying for NBFC Registration

Unique Name of the company

Well Defined Object

Bank Account

Fixed Deposit

Promotor Vision

Online Application

Physical Submission of Application

Certificate of Registration from RBI

 

Documentation Requirement for NBFC Registration

Documentation-for-NBFC-Registration
  • 1  KYC of All Shareholders and Directors
  • 2  Business Profile of shareholders and Directors
  • 3  FD Certificate Receipt
  • 4  Bankers Report
  • 5  Net Worth Certificates
  • 6  Credit Rating Reports
  • 7  Educational Qualification Certificates
  • 8  Experience Certificates
  • 9  Related party disclosure
  • 10  Income Tax Returns
  • 11  Business Plan for 3-5 years .

NBFC Business Commencement Process

Pre Loan Disbursal Requirements: Before a newly licensed NBFC starts its operations, it shall mandatorily seek registrations from all of the below:

  • Credit Rating agencies such as CIBIL, ICRA, Equifax and Experian;
  • Central-KYC
  • FIU-ND
  • CERSAI Registration
  • Registration under Anti-Money Laundering Act;
  • Adoption of fair practice code.

Apart from this, there should be in place all the agreements and policies concerning all types of loans and lending procedures, organisational structure, Recovery measures, etc.

NBFC Compliances Post Approval from RBI

Apart from the one-time registrations , every non-deposit taking NBFCs shall be responsible for maintaining certain annual compliances as below:

  • Filing of NBS-9 on online RBI portal i.e. COSMOS; 
  • ROC Filings such as Annual Returns, Balance Sheets, Profit and Loss Accounts, etc;
  • Maintenance of proper accounts;
  • Appointment of Statutory Auditor;
  • Income Tax Returns and GST Returns;
  • All such compliances as may occur from time to time.
  • Adopt Fair Practice code as prescribed the RBI and Also Adopt NBFC Prudential norms as prescribed the RBI.
  • Always meet and Maintain 50:50 PBC Criteria

What are the Focus areas of NBFC? 

NBFCs have grown rapidly as indicated by their asset growth pattern over the years:

  • Customised Loan Products: The need of one customer is different from other and so is the funds requirement;
  • Flexible rate of interest: To stand in par with the Banking channels, NBFCs shall strive to serve competitive interest rates to the customers;
  • Quick Disbursal of Funds;
  • Minimal documentation requirement;
  • Serving the underserved section; and
  • Efficient Recovery Mechanism.

Circumstances under which the NFBC application is being rejected:

  • Inadequate Financial Experience:
  • Inappropriate Profiles of Directors and Shareholders:
  • Uncertain sources of Capital:
  • Incompetent Business Plan:
  • Inadequate Net Worth of the Promoters:
  • Inexperienced NBFC Consultants
  • Unfavourable of State or area of operation 

Role and Functions of an NBFC

The role and functions of an NBFC in India can be summarised as:

  • To develop sectors like Infrastructure, Education and MSMEs;
  • To assist in wealth creation;
  • To generate substantial employment;
  • To provide financial assistance to the economically weaker section of the society;
  • To assist in the economic development of the country;
  • To contribute to the state exchequer;
  • To provide specialised credit;
  • To help in the growth of the financial market.

Entities not Considered as NBFC

In India, an NBFC does not include the entities with the principle business as follows:

  • Agriculture Activity;
  • Industrial Activity;
  • Purchase and Sale of any goods;
  • Purchase/ Sale/ Construction of an Immovable Property.

Types of NBFC Audits

In India, according to the ISO 19011: 2018, there are three different types of NBFC audits which are as follows:

  • Process Audit: A Process Audit is conducted to verify and check whether the processes of an NBFC are being carried out as per the instructions laid down by government bodies. Moreover, the main objective of performing this audit is to ensure that an NBFC does not execute any activity which does not abide by the instructions and guidelines applicable over it.
  • Product Audit: A review conducted for any specific product or service is known as Product Audit. The auditing of a product or service may include hardware, software, or processed material, to make sure that they conform to the standards, specifications, performance criteria and customer requirements.
  • System Audit: A system audit is conducted at the management level. The main objective of this audit is to ensure that a proper system has been developed and everything is valuable and in conjunction with the prescribed requirements.

Advantages of NBFC Registration

In India, the advantages of an NBFC Registration are:

  • Save Time and Cost: In contrast to small banks, the process of incorporating an NBFC is much simpler. Opening of a bank involves a large amount of capital, time and cost, whereas, the same is not in the case of an NBFC. One just needs the assistance of a good NBFC consultant with prior experience to obtain NBFC Registration in India.
  • Easy Recovery of Loan: NBFCs work systematically and offer customised loan products, with achievable repayments. It becomes a convenient process for the borrowers as they can repay the loan amount quickly within the prescribed time period.
  • Economic Growth: Businesses and individuals look for an easy and reliable source of credit for their financial requirements. NBFCs provide affordable and secure credit facilities to an unserved market for their personal and business-related credit requirements. Therefore, NBFCs have contributed to the country’s economic growth by providing financial freedom to MSMEs, self-employed professionals and individuals.

NBFC: A Good Choice for Fintech Start-ups

At present, traditional banks in India still operate a Classic Business Model, which is not only costly, but also manual. In contrast, a Non-Banking Financial Company with the FinTech, hybrid Business Model emphasises on functioning from a physical office as well as digital channels. This reduces their operational cost to a great extent and allows them to process loan applications digitally.

In India, NBFCs are addressing the financial requirements of the underserved section of the society. This section has been unable to avail affordable loans by the traditional banks due to the strict eligibility criteria of the banks. Moreover, the entire process of borrowing money from a conventional bank is much slower in comparison to an NBFC. NBFCs offer digital loan processing, which reduces the turnaround time to a large extent.

Core functions of the Fintech Based Business Model

The core functions of the Fintech based business model can be summarised as:

  • It helps in addressing individual-specific credit problems and simplifying customer acquisition process;
  • It facilitates an application-based loan system for faster loan processing;
  • It establishes an alternate digital banking system which more and more companies can opt for;
  • It uses technologies like Machine Learning Tools, Data Science and Artificial Intelligence to minimise frauds to a greater extent.

Difference Between Nidhi Company and NBFC Registration

 

Points of Difference

NIDHI Company

Non-Banking Financial Company

Activities carried out

A Nidhi Company cannot carry out any other transaction or activity other than as specified in the Nidhi Scheme.

An NBFC intends to provide specialised credit facilities to its customers. However, an NBFC cannot undertake the activities related to Industrial or Agricultural Sector.

Right to Acquire Securities

A Nidhi company does not have the right to acquire securities in the form of shares or stocks that has been issued by the company.

A Non-Banking Financial Company has the right to acquire securities in the form of shares or stocks.

Chit Fund, Hire Purchase and Leasing business.

Nidhi Company cannot carry out the business of Chit Fund, Hire Purchase and Leasing Business.

An NBFC can carry out a business of Chit Fund, Hire Purchase and Leasing Business.

RBI Approval

A Nidhi Company does not need prior RBI approval before starting its business activities.

A Non-Banking Financial Company requires prior RBI approval before commencing the business activities.

Issue of Preference Share Capital and Debenture

A Nidhi Company cannot issue Debentures or Preference Share Capital for raising funds. Further, a Nidhi Company can only accept money in the form of deposits from its members.

An NBFC can issue Debenture as well as Preference Share Capital for raising funds.

Opening of a Current Bank Account

Nidhi Companies are not permitted by the government to open a Current Bank Account in its name.

NBFCs must open a Current Bank Account in its name.

Mutual Benefit Organization/ Commercial Company

A Nidhi Company is considered as a Mutual Benefit Organization.

An NBFC is treated as a Commercial Company.

Mandatory Conditions

In India, a Nidhi company is not allowed to open a branch office till the time it earns profits continuously for three years. It is one of the binding conditions and cannot be changed even if the company has taken permission from the ROC (Registrar of Companies).

There is no such requirement in the case of an NBFC.

Brokerage and Incentive

A Nidhi Company can pay any brokerage or incentive for granting loans or mobilising deposits from its members. However, it can employ people only on a fixed salary basis.

There is no such requirement in the case of an NBFC.

Process of Incorporation

The process of incorporation of a Nidhi Company involves less compliance requirements.

The process of incorporation of an NBFC is a lengthy procedure.

Boundary

A Nidhi company is a brand within a state. Therefore, it cannot operate outside the registered state until it earns profits continuously for three years.

An NBFC can operate PAN-India.

Restriction on entering into a Partnership

For the lending and borrowing purpose, a Nidhi Company is not allowed to enter into a Partnership.

There is no such restriction in the case of an NBFC.

Restriction on Membership

A Nidhi Company is not allowed to include a body corporate as its member. Thus, it cannot accept deposits from any of such institutions.

There is no such restriction in the case of an NBFC.

Objective

A Nidhi Company is incorporated to encourage the habit of savings in its members and also to create a fund for its members.

A Non-Banking Financial Company is incorporated to provide financial services. An NBFC plays a vital role in the country’s economic growth.

Net Owned Fund

A Nidhi Company needs a minimum of Rs 10 Lakhs as Net Owned Fund.

An NBFC needs a minimum of Rs 2 Crore as Net Owned Fund.

Capital Investment

A Nidhi Company needs less capital investment in comparison to an NBFC.

An NBFC company requires a huge capital investment in comparison to a Nidhi Company.

Advertisement

A Nidhi Company is not allowed to advertise for accepting deposits.

An NBFC is allowed to advertise its services to accept or grant loans, deposits etc.

 

NBFC Annual Compliances

If a company has successfully acquired its NBFC Registration, it is compulsory to comply with all the NBFC (Non-Banking Financial Company) Annual Compliances. If an NBFC fails to comply with its annual compliances, it becomes liable to pay hefty penalties, which can even result in the cancellation of its NBFC License. An NBFC needs to follow all the compliances within six months from the date of obtaining NBFC license.

In India, there are two types of NBFCs:

  • Deposit-taking NBFC (NBFCs – D)
  • Non – Deposit NBFCs (NBFCs- ND)

Compliances for NBFC-ND with RBI

Annual Compliances

Sr. No.

Article

Term

1

Unaudited March Monthly Return or NBS7.

on or before 30th June.

2

Audited March Monthly Return or NBS7.

Upon completion.

3

Statutory Auditors Certificate on Income and Assets.

on or before 30th June.

4

Information about Cos having FDI (Foreign Direct Investment) or Foreign Funds.

on or before 30th June.

5

Board Resolution for Non-acceptance of Public Deposit.

Much before starting the new financial year.

6

Annual Balance Sheet along with the details of profit and loss account.

One month from the date of signoff.

7

Declaration by the Auditors, who are working in the company.

Annual Basis

 

Monthly Compliances

S No.

Article

Term

1

Monthly Return

by 7th of every month.

2

Upload Monthly Return

by 7th of every month.

Periodical Compliances

S No.

Article

Term

1

Appointment of Director (Annexure-III)

within 30 days of appointment.

2

Upload Monthly Return

within 30 days of the resignation.

 

Returns by Deposit Taking NBFC

The Returns to be filed by a Deposit Taking NBFC in India are as follows:

S.no

Return

Monthly/ Quarterly/ Half Yearly/ Annual Basis

Reason for Filing

1

NBS -1

It is a Quarterly Return

For the purpose of summarising financial details, like the Profit and Loss Account, Total assets and Liability with the company.

2

NBS -2

It is a Quarterly Return on prudential norms

For the purpose of getting details concerning several regulations, like the Asset Classification, Capital Adequacy, Net Owned Fund, Provisioning.

3

NBS -3

It is a Quarterly Return on liquid assets

It describes the information about the company’s statutory investment in liquid assets.

4

NBS -4

It is an Annual Return regarding critical limitations rejected by companies

To acquire the refund status of the rejected NBFCs accepting public deposits.

 

5

NBS -6

It is a Monthly Return

A deposit-taking NBFC needs to file this return when the asset size exceeds Rs 100 crore or more.

6

ALM Return

It is a Half Yearly Return

A deposit-taking NBFC needs to file this return when the total deposits exceed Rs 20 crore or the asset size is more than Rs 100 crore.

Further, an NBFC needs to attach the documents as follows:

a)      Audited Balance Sheet of the Company;

b)      Auditor’s Report;

c)      Return related to Branch information. 

 

Returns by Non-Deposit Taking NBFC

S.no

Return

Monthly/ Quarterly/ Half Yearly/ Annual Basis

Reason for Filing

1

NBS -7

It is a Quarterly Return

For the purpose of summarising financial details, Risk Assets Ratio, Capital Funds, and Risk-Weighted Asset.

2

NBS -2

It is a Monthly Return

For the purpose of summarising critical financial parameters of NBFCs-ND-SI

3

NBS-ALM-1

It is a Monthly Return

For the purpose of summarising short-term dynamic liquidity.

4

NBS-ALM2

It is a Half Yearly Return

For the purpose of summarising structural liquidity.

5

NBS-ALM-3

It is a Half Yearly Return

For the purpose of summarising interest rate sensitivity

6

Branch Info Return

It is a Quarterly Return

For the purpose of summarising crucial financial parameters of non-deposit taking NBFC having total assets of more than Rs 50 crores and above, but less than Rs 100 crores.

Further, an NBFC needs to attach the additional information as follows:

a)      Name of the Company;

b)      Address of the Company;

c)      Net Owned Fund;

d)     Profit and Loss statement for the last three years.

 

 RBI Conditions for Issuing NBFC License

The following conditions must be fulfilled before undergoing the process of NBFC Registration:

  • The Non-Banking Financial Company must be able to pay claims to its present as well as future investors in full;
  • It cannot carry out any operation in a manner prejudicial to the interest of both its existing or future investors;
  • The general character of the Board and the management must not be detrimental to the interest of the public and depositors;
  • An NBFC must have an adequate capital structure and earning potential;
  • It must not be unfavourable to the functioning of the financial sector if the RBI decides to grant NBFC license to a company.
  • The company’s working must be consistent with the economic growth, monetary stability, and other related policies of RBI.

Fresh NBFC Registration v. NBFC Takeover

The best option for foreign companies that wish to enter into the Indian Financial Service is to apply for a fresh NBFC Registration instead of taking over an existing NBFC.  Moreover, the process of NBFC Registration has now been simplified by the RBI significantly.

Advantages of Fresh NBFC Registration over NBFC Takeover

The advantages of obtaining a Fresh NBFC Registration in India are:

  • Low Legal Risk: In case of an NBFC Takeover, any previous non-compliance of the target company with the RBI Act may result in the cancellation of the NBFC License. However, the same is not possible in fresh NBFC Registration.
  • Timeline: A Fresh NBFC Registration requires a period of 90 to 120 days for its execution, whereas, an NBFC Takeover usually needs around 150 to 300 days.
  • Title Risk: A case of fresh NBFC Registration does not involve the risk of ownership as the person incorporating it becomes the first shareholder of the company. However, in case of an NBFC Takeover, the precise title of shares cannot be established.
  • Tax Liability: In an NBFC Takeover, the bidder company is solely be responsible for paying the tax liability of the target company. However, the same is not the case with a company applying for fresh NBFC Registration.
  • Capital Requirement: While applying for a fresh NBFC Registration, the company needs to have a minimum amount of Rs 2 Crore or Rs 20 Million as FD in a bank. In an NBFC Takeover, the proposed shareholders of the target company need to submit the banker’s report. The report submitted must state that the book value of the shares is equal to the bank balance.

Punishment for Non-compliance of RBI Regulation

In India, the RBI has the power to impose a penalty on an NBFC for violating the provisions of RBI Act. These penalties include:

  • If a company carries out its operations without obtaining NBFC License, the RBI (Reserve Bank of India) can impose a fine of not less than Rs 1 Lakh, which can go up to Rs 5 Lakh or twice the amount involved in such violation, whichever is more;
  • If a company carries out its operation without obtaining NBFC License, the directors of the company are punishable with imprisonment up to one year;
  • If the company in default continues to work, the RBI may impose a fine up to Rs 25000 per day after the first day of such default;
  • In case of any other contravention, the RBI can impose a fine up to Rs 5000 on the company;
  • If an NBFC is not complying with the orders of the NCLT (National Company Law Tribunal), it is punishable with a maximum imprisonment of 3 years and a fine of up to Rs 50 per day till the time such non-compliance continues;
  • If an auditor fails to abide by any direction or guideline given by the Reserve Bank of India, it would be punishable with a fine up to Rs 5000.

Does RBI regulate all the Financial Institutions?

No, the Reserve Bank of India (RBI) does not regulate or govern all kinds of financial institutions prevalent in India. The financial institutions which are treated as NBFCs but are exempt from the registration under Section 45-IA of the RBI Act, 1935 are as follows:

  • Housing Finance Companies;
  • Merchant Banking Companies;
  • Stock Exchanges;
  • Companies engaged in the activities of Stock Broking or Sub Broking;
  • Venture Capital Fund Companies,
  • Insurance Companies;
  • Nidhi Companies;
  • Chit Fund.

Powers of RBI on NBFCs

In India, the powers of the RBI on NBFCs can be summarised as:

  • It regulates the process of NBFC Registration;
  • It lays down the polices and issues directions for NBFCs;
  • It inspects and exercises surveillance over NBFCs to verify whether they are complying with the provisions of the RBI Act, 1935 or not;
  • It penalises NBFCs for violating the rules of the RBI Act, which can also result in cancellation or suspension of NBFC License.

Rejection of Application for NBFC Registration

In India, the situations in which the RBI rejects an application for NBFC Registrations are as follows:

  • Inadequate Financial Experience;
  • Inappropriate Profile of the Directors and Shareholder;
  • Uncertain Sources of Raising Capital;
  • Incompetent Business Plan;
  • Inadequate Net Worth of the Promoters;
  • Inexperienced NBFC Consultants;
  • Unfavourable State or Area of Operation.

If you want to register an NBFC of your own or willing to take over NBFC, feel free to write us at [email protected]

Frequently Asked Questions

Yes. NBFC Can accept deposit with deposit taking license.

Gold Loan, SME Lending, Personal Loans, Loan Against Property, Loan Against Shares Asset Financing etc.

The minimum NOF for NBFC registration is INR 2 crores. It shall be kept in the current account of the newly formed company in the form of Fixed Deposit.

Minimum 1/3 or ¼ directors must have financial or banking experience

Right Team, Clean Capital, Business Plan and Area of Operation.

Lifetime unless otherwise cancelled due to non-compliance with the law.

Fintech based lending, P2P and NBFC-AA.

50% of total assets must be financial and 50% of total income must be generated from financing business.

Yes. Subject to the requirement and convincing business Plan

For carrying loan or investment business in India, you must apply for NBFC License otherwise unlicensed lending or financing business is deemed to be illegal.

NBFC with assets size more than Rs. 500 crores deemed to SI and higher compliance has been set for NBFC-SI.

RBI Does not regulate insurance, Chit fund, all such entities regulated by SEBI, Nidhi company, etc.

Public funds includes ICD, Loan from Banks but Public deposits mainly includes souring of funds from individuals.

Interest rate is subject to business plan submitted by the Applicant Company to the RBI.

A Non-Banking Financial Company (NBFC) is a financial institution registered under the provisions of Companies Act, 2013 that deals in financial services. These institutions offer various financial services without obtaining any banking license. Further, they are permitted to involve only in the financial activities mentioned under section 45-IA of the RBI Act.

NBFCs are registered under the Companies Act, 2013, whereas Banks are registered under the Banking Regulation Act, 1949. Further, an NBFC is not allowed to accept all kinds of deposits. However, Banks can easily accept the demand and time-based deposits from their customers.

There are two types of NBFCs in India. These are categorised on the basis of Liability and on the basis of Activities. Based on Liability, there are two types of NBFC, i.e. Deposit Accepting NBFC and Non-Deposit Accepting NBFC. Further, based on Activities, NBFCs are bifurcated into ten parts, i.e., NBFC-ICC (NBFC-Investment and Credit Company), NBFC-IFC (NBFC-Infrastructure Finance Companies), CIC-NBFC (Core Investment Company NBFC), IDF-NBFC (Infrastructure Debt Funds-NBFC), NBFC-MFI (NBFC-Micro Finance Institutions), NBFC Factor, NOFHC (Non-Operative Financial Holding Company), MGC (Mortgage Guarantee Company), NBFC-AA (NBFC Account Aggregator) and NBFC-P2P (NBFC- Peer to Peer Lending).

In India, some of the renowned examples of NBFCs are Muthoot Finance Ltd; HDB Financial Services; Aditya Birla Finance Ltd; L&T Finance Ltd; Tata Capital Financial Services Ltd.

No, an NBFC cannot borrow funds from the RBI (Reserve Bank of India), but they can borrow from banks. RBI is a regulatory body and monitors the operations of non-banking financial companies and exercises control over their activities.

Yes, an NBFC can provide loan in various forms such as Unsecured Personal Loan, Business Loan, Secured Loan against property, Loan to MSMEs, Loan against Securities, Gold loan, etc. However, the loan products offered by the NBFC must be specified in the business plan.

Yes, an NBFC can list its shares on a recognised stock exchange. For example, Power Finance Corporation Limited has listed its shares in National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Any company registered under the Companies Act, 2013 can incorporate an NBFC. Moreover, the company should have a minimum net owned fund of Rs 2 Crore and at least one full-time director.

Bank FDs (Fixed Deposit) are viewed as comparatively safer and more reliable than NBFC fixed deposits because the former is regulated by the strict regulations of the Reserve Bank of India. the returns offered on deposits by NBFCs are higher compared to bank FDs; however, the risk factor is higher. Therefore, one has to be vigilant when it comes to company FD because he/ she might end up losing all the money including the interest earned.

In India, NBFCs play a crucial role in promoting inclusive growth by catering to the various financial needs of bank-excluded customers. Moreover, NBFCs often take the lead role in offering innovative financial services to the MSME sector suitable to their diverse business needs. Further, it also helps in the development of the country’s economy by providing employment generation, credit to economically weaker sections and wealth creation. NBFCs also provide emergency services such as financial assistance and guidance to their customers in the matters relating to insurance, hire purchase, leasing and much more.

Until a year ago, investors preferred NBFCs over any other business structure due to the high margins and better growth rates. However, after the IL&FS scam, NBFCs in India faced a severe liquidity crisis. This made it tough for other NBFC lenders to refinance debt. Moreover, due to the liquidity crisis, NBFCs are now compelled to reduce lending to MSMEs and ensure that a robust liquidity risk management policy is enforced.

Type 1 NBFC refers to the Non- Deposit taking NBFCs (NBFC-ND). These NBFCs do not accept public deposits or have any customer interface. In contrast, Type 2 NBFC refers to the Deposit-taking NBFCs (NBFCs – D) that accept public deposits and have customer interface.

RNBC is the acronym form for the Residuary Non-Banking Company. It is a type of NBFC in which a company is engaged in the business of receiving deposits. However, such deposits must not be from an Investment, Loan or Asset Financing Company. Moreover, RNBCs are required to maintain investments and liquid assets according to the directions issued by the RBI (Reserve Bank of India).

A minimum of 12 months and a maximum of 60 months period is prescribed for an NBFC to accept deposits. However, an NBFC is not eligible to accept deposits on demand.

The working and compliance of a Non-Banking Financial Company is regulated by the RBI (Reserve Bank of India) within the framework of the RBI Act, 1934 (Chapter III-B) and the guidelines issued by it.

Working Process

Swarit Advisors Working Steps

1

Make Enquiry

Share your Contact Details and receive free consultation.

2

Make Payment

Make Online or Offline Payment for your Order.

3

Submit Documents

Submit Documents for your Order Using Online Dashboard.

4

Work Completed

Work will be completed by us and updates delivered Online.

Latest Post

NBFC vs Banks: How NBFCs Are Bridging Banking Loopholes in India

Loans have become an essential part of availing immediate financial assistance, be it for personal use or business purposes. Loans may be used to boost business, handle some personal emergency,...

Shivani Jain
Shivani Jain

Importance of NBFCs: A Priority Sector for the RBI

India is one of the largest economies in the world and has recently witnessed a quick escalation in the growth of numerous industries such as infrastructure, education, healthcare and technology....

Shivi Gupta
Shivi Gupta

Effects of COVID-19 on NBFC Sector in India

This article talks about the pre-coronavirus NBFC sector, the effects of COVID-19 on NBFC and the measures which can be taken by NBFCs in India to manage the coronavirus impact...

Shivi Gupta
Shivi Gupta

Our Valuable Clients

Subscribe for our Newsletter

Hi! My name is Akanksha! Let's talk.