What Are NBFC Registration Checklist?

Understanding NBFCs!

Non-Banking Financial Companies (NBFC) do not fall in the legal definition of Banks but they proffer banking facilities and financial services. It is a well-known fact that Banks are not able to cater to the financial needs of all Indians, however hard they try; therefore, more and more companies are applying for NBFC Registration.

The functioning of NBFCs is regulated and monitored by the RBI in compliance with the provisions mentioned in Chapter III B of the RBI Act of 1934.

The segments which are largely served by the NBFCs are instruments of the capital and money markets such as stocks, bonds, along with hire-purchasing, deposits, leasing, insurance business, investment funds, and chit business and many more similar activities.

Soaring Popularity of NBFCs!

The ever-growing popularity of NBFCs lies in these characteristic features:

  • RBI has eased the norms a great deal thus making NBFC incorporation simpler.
  • The biggest advantage awarded to NBFCs is the flexibility to structure products as per the needs of the customer.
  • NBFCs enjoy complete liberty to operate from anywhere and everywhere; in remotest of places to the most developed metros, thus attracting and capturing new customers.
  • Low operative costs make sure that high profits come their way since inception.
  • Taking full advantage of modern technological progress helps them not only target new customers but also help them ascertain their creditworthiness.

Know The Different Categories of NBFCs!

For the purpose of registration, the RBI has categorized the NBFCs into two types, the first one is Type-I, NBFC (NBFC-ND) and the second one is Type-II, NBFC (NBFC-ND).

Type-I NBFC (NBFC-ND) are those which are not accepting public funds/ not intending to accept public funds in the future and not having customer interface/not intending to have customer interface in the future.

Type-II NBFC (NBFC-ND) are those which are accepting public funds/ intending to accept public funds in the future and/or having customer interface/intending to have customer interface in the future.

The RBI endorses that Type-I NBFCs shall be subjected to less intensive scrutiny or due diligence and the processing of such applications shall be put on the fast track for processing. However, they shall be barred from accessing the public funds or having customer interface.

Checklist of Documents Needed For NBFC Registration

If you want your company to be registered under Type-I NBFC, then take note that the following documents will have to be submitted along with the prescribed application form:

1. Copies of Certificate of Incorporation (COI) and Certificate of Commencement of Business (in the case of public limited companies).

2. Copies of extracts of the main object clause in the MOA relating to the financial business.

3. Board resolution declaring that:

  • The company is not carrying on any NBFC activity or has stopped NBFC activity and will not carry on neither commence the same before getting registration from RBI.
  • The UIBs in the group where the director holds substantial interest or otherwise has not accepted any public deposit in the past nor does not hold any public deposit as on the date and will not accept the same in future.
  • The company has formulated “Fair Practices Code” as per RBI Guidelines.
  • The company has not accepted public funds in the past nor does not hold any public fund as on date and will not accept the same in the future without the approval of the Reserve Bank of India.
  • The company does not have any customer interface as on date and will not have any customer interface in the future without the approval of the Reserve Bank of India.

4. Copy of Fixed Deposit receipt & bankers’ certificate of no lien indicating balances in support of Net Owned Fund.

5. For companies already in existence, the Audited balance sheet and Profit & Loss account along with directors & auditors report or for the entire period the company is in existence, or for the last three years, whichever is less, should be submitted.

6. Banker’s report in respect of applicant company, its group/subsidiary/associate/holding company/related parties, directors of the applicant company having a substantial interest in other companies The Banker’s report should be about the dealings of these entities with these bankers as a depositing entity or a borrowing entity.

Also Read:-

In case you want to register under Type-II, NBFC (NBFC-ND), then the following documents are required to be furnished with the prescribed application form:

1. Certified copies of Certificate of Incorporation and Certificate of Commencement of Business in case of public limited companies.

2. Certified copies of extract of only the main object clause in the MOA relating to the financial business.

3. Board resolution stating that:

  • The company is not carrying on any NBFC activity or has stopped NBFC activity and shall not carry on nor commence the same before getting registration from RBI.
  • The company has not accepted any public deposit, in the past (specify period) nor does hold any public deposit as on date and shall not accept the same in the future without seeking prior approval of Reserve Bank of India.
  • The UIBs in the group where the director holds substantial interest or otherwise has not accepted any public deposit in the past nor does not hold any public deposit as on the date and will not accept the same in future.
  • The company has formulated “Fair Practices Code” as per RBI Guidelines.

4. Copy of Fixed Deposit receipt & bankers’ certificate of no lien indicating balances in support of Net Owned Fund.

5. Companies that are already in existence, the Audited balance sheet and Profit & Loss account along with directors & auditors report or for the entire period the company is in existence, or for the last three years, whichever is less, should be submitted.

6. Copy of the certificate of the highest educational and professional qualification in respect of all the directors.

7. Copy of experience certificate, if any, in the Financial Services Sector (including Banking Sector) of all the directors.

8. Banker’s report in respect of the applicant company, its group/subsidiary/associate/holding company/related parties, directors of the applicant company having a substantial interest in other companies.

“With the RBI easing the norms for registration of NBFCs, this is the most opportune time to go for it!”
-Shweta Gupta, Founder and CEO, MUDS

By | 2019-07-10T10:27:00+00:00 July 5th, 2019|NBFC Weekly Digest|0 Comments

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