A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, of 1956 involved in the main business of financing, investments in shares/stocks/bonds/debentures, leasing, hire-purchase, insurance organization, chit company or involved in the getting of deposits under any scheme or agreement. NBFC are under the purview of the Reserve Bank of India (RBI) and in this guide, we proceed to the process for NBFC Registration in India and a few of the regulations that govern NBFC operations.
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A non-Banking Financial Company is like a bank except for the following difference
- NBFCs can't accept demand deposits
- NBFCs can't trouble cheque drawn on itself
- Bank deposits are guaranteed by Deposit Insurance and Credit Guarantee Corporation. But, deposits in NBFCs aren't insured.
NBFC like banks except for the aforementioned differences are engaged in the company of earning advances and loans, trading and acquisition of shares/stocks/bonds/debentures/securities, leasing, hire-purchase, insurance organization, chit company but doesn't include any establishment whose chief business is that of agriculture activity, industrial action, sale or sale of any merchandise (other than securities) or supplying any solutions and sale/purchase/construction of immovable property. Additionally, a company that's at the main business of receiving deposits under any arrangement or scheme in 1 lump sum or in installments by means of donations or in any manner, is also a non-banking fiscal firm.
Different types of Non-Banking Financial Companies (NBFC)
NBFCs are largely categorized into deposit-carrying NBFCs and non-deposit-carrying NBFCs. Deposit-accepting NBFCs and non-deposit-accepting NBFCs are categorized according to their dimensions.
According to Section 45-IA of the RBI Act, 1934, no corporation may start or continue the business of a non-banking bank without obtaining a certification of enrollment and with Internet Owned Funds of Rs. 200 lakhs. The requirement for enrollment as a NBFC really are a business included under Section 3 of the Companies Act, 1956 and with a minimum net owned funds of Rs.200 lakhs. Internet-possessed funds is the equilibrium of "owned capital" minus the quantity of investment in stocks of subsidiaries, businesses in precisely the exact same category and the rest of the NBFCs, publication value of debentures, bonds, outstanding loans and advances including hire purchase and lease finance created to and deposits with subsidiaries and businesses in precisely the exact same group. Earning capital is the aggregate of paid-up equity funding, preference shares that are compulsorily convertible into equity, no cost reserves, equilibrium in share premium account and capital reservations representing excess stemming from sale proceeds of advantage, excluding reserves created by revaluation of an asset, after deducting therefrom gathered balance of reduction, deferred revenue expenditure and other intangible assets.
The program for getting an NBFC has to be made in the requisite form to the Regional Office of the Reserve Bank of India. A listing of documents needed to be filed together with the NBFC software could be obtained here: NBFC List of Documents Required.
The Reserve Bank of India regulates and supervises companies that are engaged in financial activities as their primary company. A firm that has monetary assets of over 50 percent of its total assets and derives over 50 per cent of its gross income from these assets is known as as an NBFC and is governed by the Reserve Bank of India. But some financial companies have particular regulators and therefore are granted exemption from the Reserve Bank od India from its own regulatory requirements. For Example, Insurance Regulatory and Development Authority (IRDA) governs insurance companies, Securities Exchange Board of India (SEBI) governs Merchant Banking Firms, Venture Capital Companies, Stock Broking businesses and Mutual funds, National Housing Bank (NHB) governs housing fund companies, Department of Companies Affairs (DCA) governs Nidhi businesses and State Governments govern Chit Fund Businesses.
Deposit Taking NBFCs
Deposits are monies accumulated in any fashion, aside from that accumulated by means of share funds, participation of funds by the partners of a venture firm, safety deposit, earnest money deposit, and progress account for the purchase of goods, construction or services, loans obtained from banks, financial institutions and cash lenders and subscription to chit funds. Monies accumulated in any way other than those could be termed as residue. All NBFCs can't accept public deposits. Just NBFCs that maintain a deposit-taking Certificate of Registration can take deposits. Additionally, RBI is of the purview that just nationalized banks can take deposits and hence hasn't approved any NBFC that began after 1997 to take deposits.
If any unincorporated entity (Proprietorship / Partnership) or an NBFC without consent to accept deposit is located accepting public deposits, then it's accountable for criminal actions. Furthermore, if NBFCs connect themselves using proprietorship/partnership companies accepting deposits in contravention of the RBI Act, then they're also liable to be prosecuted under criminal law or under the Security of Interest of Depositors (in Financial Establishments) Act if passed by the State Government.
This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.
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