NBFC Registration Procedure And License With RBI In India

Desirous of Exploring The NBFC Sace?

The rapidly-growing Indian economy has provided an excellent opportunity to Non-Banking Financial Companies (NBFCs) in creating a niche for themselves in recent years.

The NBFCs do not hold banking license but they offer almost every service that banks do including accepting deposits, offering loans, performing financial intermediation, offering cash advances, leasing, hire purchase, etc.

In a thickly populated country like India, mainstream banking services are not capable of fulfilling the financial needs of all the citizens. Owing to this fact, the NBFC has been able to carve a space for itself by making inroads into the country.

NBFCs have grown at a remarkable pace in the last decade as a consequence of their customer friendly approach, great flexibility and an attractive rate of returns. They cater to the urban and the rural, the needy and the deprived, as they have penetrated small towns and villages.

Who Is The Regulatory Authority of NBFCs?

The working and operating of NBFCs are regulated by the Reserve Bank of India (RBI) within the framework of the Reserve Bank of India Act, 1934. From time to time the RBI issues guidelines and directions to be followed by the NBFCs.

Section 45-IA mandates that no NBFC shall begin or carry on the business of a Non-Banking Financial Institution without obtaining a Certificate of Registration (COR) from the RBI.

Know The Areas of Business of NBFCs

These will throw light on the wide scope of business opportunities of NBFCs.

  1. Acquisition of shares/ stocks/ securities/ bonds/ debentures issued by the Government or other authorities,
  2. Loans and Advances,
  3. Insurance Business,
  4. Chit Business,
  5. Hire-purchase,
  6. Leasing.

Services that NBFCs Cannot Offer:

RBI clearly defines the domains which cannot be touched by the NBFCs:

  • agricultural activity,
  • industrial activity,
  • purchase or sale of any goods (other than securities), or
  • providing any services, sale or purchase or construction of the immovable property.

Different Categories of NBFCs Registered With RBI

The NBFCs are categorized here based on the kind of activity they primarily undertake, knowing about them shall provide you insight as to your own preferences.

  • Non-Banking Financial Company-Micro Finance Institution
  • Infrastructure Debt Fund Non- Banking Financial Company
  • Systemically Important Core Investment Company
  • Non-Banking Financial Company-Factors
  • NBFC- Non-Operative Financial Holding Company
  • Mortgage Guarantee Companies
  • Infrastructure Finance Company
  • Asset Finance Company
  • Investment Company
  • Loan Company

Eligibility Norms For Registration of NBFCs

You should be ready with this pre-work before you seek NBFC incorporation.

  • Company should be registered under the Companies Act, 2013 or Companies Act, 1956
  • Company should have Minimum Net Owned Fund of INR 2 crore

(Net Owned Funds to be calculated on the basis of the last audited balance sheet of the Company)

The Procedure of Registration of NBFCs

It shall be beneficial for you to know in brief about the procedure of Registration of NBFC:

  • First formality is an incorporation of the applicant company under the Companies Act, 1956 or 2013, with Minimum
  • Net Owned Fund of INR 2 crore (Equity Share Capital & not Preference Share Capital).
  • Thereafter the applicant company needs to open a Bank Account and keep the entire sum of INR 2 crores in the bank’s deposit account, which should be free from all liens.
  • The applicant is then required to apply for registration online on RBI’s official COSMOS website.
  • Post submission of the form, CARN (Company Application Reference Number) is generated that is helpful in future references.
  • Subsequently, the hard copies of all the documents are required to be submitted to the concerned Regional Office of RBI.
  • The Regional Office shall scrutinize the authenticity of the documents and on being satisfied, shall forward it to the Central Office.
  • The Central Office of RBI grants the NBFC registration only after the fulfillment of all prescribed requirements by the company under section 45-IA, of its act of 1934.

Also Read:-

Keep These Documents Ready Before Applying for NBFC Registration

Along with the application, there is a long list of documents to be submitted:

  • Certificate of Incorporation (Certified Copy Issued by ROC)
  • Extract of Main Object Clause in MOA (Clearly depicting Financial Business)
  • Board of Resolution stating the following before getting registration from RBI:
  • Adherence to the “Fair Practices Code (as per RBI guidelines)
  • Non-carrying out any NBFC activity
  • Non-carrying out of acceptance of any public deposit
  • Audited Balance Sheet & Profit & Loss account along with directors and auditor’s report (for the entire period of the company’s existence or last 3 years, whichever is less)
  • Director’s Highest Educational & Professional Qualification (Copy of certificate)
  • Director’s experience in the Financial Services Sector, including the Banking Sector (Copy of certificate)
  • Details of deposits & loans balances as on the date of application & conduct of account (Bankers report)

The Most Opportune Time For NBFCs

This can be called the most lucrative period to venture into NBFC business as the economy is thriving. The banks still have a lot of ground to cover and the vacuum left by them is being tapped by NBFCs in various segments. The earlier you enter this space, the more customers you will be able to capture, carving a bright future for your company.

Significant Factors Working In Favour of NBFCs

  • Simplification of norms means attracting more customers is easier for NBFCs.
  • The freedom to structure the products as per the needs of the customer gives it an edge over others.
  • NBFCs have a definite advantage over banks as they can capture customers from the remotest of places.
  • The operational costs are lower which result in higher earnings for such companies.

Contact MUDS At The Earliest For A Bright Future!

MUDS consultancy firm has an efficient team of professionals who are adept in extending swift services like NBFC registration.

Their impeccable track record speaks for their efficiency and capabilities.

They will ensure attainment of COR in the shortest time period and without any botheration to you.

“The future of NBFCs in India is secure for many years to come, therefore, the sooner you capture this space, the better it would be!”
-Shweta Gupta, Founder, and CEO, MUDS

By | 2019-07-09T11:57:26+00:00 July 9th, 2019|NBFC Weekly Digest|0 Comments

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