In India, most of the population lives in the rural areas were our banking system does not reach. This makes growing businesses and satisfying their financial needs difficult for the people in these areas. This increases the demand for Non-Banking Financial Companies or NBFCs.
To start a business in the financing field, one can register an NBFC. The business of NBFC includes granting loans and advances, acquisition of shares or bonds issued by the government, leasing & hire-purchase, etc. it cannot provide finance to the business related to industrial activities, agricultural activities, sale or purchase of any goods other than securities, providing any services and sale, purchase or construction of immovable property.
For registration of NBFC in India, the basic requirements that need to be fulfilled are:
The company needs to be registered under the Companies Act, 2013.
For NBFC incorporation, it is essential to first register a private company or a public company that complies with the provisions of the Companies Act, 2013. The procedure for NBFC Registration is:
The documents required for registering the Company under the Companies Act, 2013 are:
The following documents will have to be submitted to RBI for NBFC registration:
Getting an NBFC License has the following advantages:
In the past, the banks have been the sole financial intermediaries and have accumulated heavy debts. Their lending capacity is declining with each passing day due to an increase in Non-Performing Assets. In these circumstances, NBFCs are marking their presence in the financial market and their demand has seen a rise.
Lower costs, wider reach and strong risk management capabilities are the main reasons for the success of NBFCs. It is believed that NBFCs have a better understanding of the market than the banks. Their incorporations have also simplified in recent times. NBFCs have thus a large contribution towards the growth of the economy over the past few years and have a huge scope.
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