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NBFC Non-Banking Financial Companies Registration in India

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Introduction

NBFC full form is Non-Banking Financial Companies. NBFCs are the companies incorporated under Companies Act 2013 or 1956. NBFCs provide banking services without meeting legal definition of bank. According to Section 451(c) of RBI Act a Non-Banking Company carrying on a business of Financial Institution will be a NBFC. It is governed by Ministry Of Corporate Affairs as well as The Reserve Bank of India.

What is NBFC?

Non banking financial companies also called as non banking financial institutions are the companies engaged in the business of  loans and advances, acquisition of shares, stock, bonds, debentures, and securities issued by Government or any local authority. The main objective/function of NBFC (Non banking financial company) is to accept deposit under any scheme or manner. Click for more details on NBFC Registration process.

Difference between NBFC and Bank

NBFC

BANK

-NBFC provide banking services to people without holding a bank license

-Bank is a government authorized financial intermediary that aims at providing banking services to general public

-NBFC can’t accept demand draft

-Bank do accept demand draft

-In NBFC foreign investment is allowed upto 100%

-In bank foreign investment are allowed upto 74% for private sector bank

-Payment and settlement system is not a part of NBFC

-Payment and settlement system is integral part bank.

-No need to maintenance of reserve ratio

-Banks are required to maintain reserve ratio.

Different types of NBFC:

1. On the basis of Liabilities

  • NBFCs having public deposits

  • NBFCs not having Public deposits

2. On the basis of Assets:- 

 

NBFC - Asset Finance company:

Asset Finance Company is a company which involves financing physical assets such as automobiles, material handling equipment and industrial machines supporting economic activity.

60% of Total Assets in Financing Real /Physical Assets &

60% of Total Income arises from the aforesaid Assets

NBFC - Investment Company:

It is a type of financial institution whose principal business is related to the acquisition of securities.

Not less than 90% of Net Assets should be in the form of Investment in Group Companies AND

Not less than 60% of Net Assets are held as equity stake in Group Companies

NBFC - Loan company:

It is a type of institution which provides finance in the form of loans or advances. They obtain funds by taking deposits from the public and give loans to small-scale traders.

NBFC - Infrastructure finance company:

It is a type of non banking financial institutions with Net Owned Fund of Rs.300 Crore, Credit rating ‘A’ or equivalent credit rating, CRAR of 15% and 75% in infrastructure loans.

NBFC - Factor:

Means a company which carries on factoring business as its principal business and satisfies the following criteria:

  • Min Net Owned Fund 5 Crores AND

  • At least 75% of its total assets should be financial assets AND

  • At least 75% of its gross income should be from factoring business

NBFC - Micro finance company:

Micro Finance Company is a type of NBFC which is in a business of micro (small) credit to a special type of borrowers. It is also known as Micro Finance Institution (MFI). No company other than registered with RBI can do the business of MFC. Even the NIDHI Companies are not allowed to do so.  Such microfinance should be in the form of loan given to those who have annual income of Rs. 60,000 in rural areas and Rs. 120,000 in urban areas. Such loans should not exceed Rs. 50000 and its tenure should not be less than 24 months. Further, the loan has to be given without collateral. Loan repayment is done on weekly, fortnightly or monthly instalments at the choice of the borrower.

NBFC - Infrastructure dept fund:

 IDF-NBFC is a company registered as NBFC to facilitate the flow of long term debt into infrastructure projects. IDF-NBFC raise resources through issue of Rupee or Dollar denominated bonds of minimum 5 year maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs.

NBFC registration process:

  • It should be a company incorporated under company act2013.

  • It should be a company having net owned funds of INR 2 crores.

  • The application can be submitted online by accessing RBI’s secured website.

  • The application and documents are scrutinized.

  • The procedure from filling up documents till NBFC license is obtained takes about 90 to 120 days.

 Documents required for NBFC license:

  • Certified copy of Company’s Certificate of incorporation.

  • Certified Copy of extract of MOA which state the main clause relating to financial business.

  • Copy of PAN/CIN allotted to company.

  • Copy of Fixed deposit receipt and banker certificate indicating the balances in support of the minimum net owned fund of 2crore.

  • Directors profile in detail, signed by each director.

  • CIBIL data of the directors of the company.

  • For company which are already in existence:

  • The audited balance sheet

  • Profit & loss account

  • Director & auditor’s report; for the entire period of the company is in existence or for the last 3 year, whichever is less.

  1. Board resolution stating that:

  • The company is not carrying on any NBFC activity and will not commence the same before getting registered 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 hold any public deposit as on the date and will not accept the same in the future

  • The company has formulated “Fair Practices Code” as per RBI Guidelines

  • The company has not accepted public funds in the past/does not hold any public fund as on the date and will not accept the same in the future without the approval of 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 Reserve Bank of India

Click to know more about NBFC Registration procedure, documentation, and registration fee.

Please connect Team Corpseed at +91-9999008018, +91 7558 640 644 or write us at info@corpseed.com for free consulting.

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Author
Vinay Singh
Vinay Thakur is Managing Partner in Corpseed. He focused on payments, digital transformation, and financial technology for over 15 years and holds strong expertise on fintech startups, banking innovation, and investors with a keen understanding of the trends and activities of startups, banks, and investors in the space.