A Non-Banking Financial Company (NBFC) is akin to a banking company and engaged in the business of providing loans, accepting deposits (only certain NBFCs), leasing, hire purchase, acquisition of stocks, insurance, etc. What separates the NBFCs from normal banking companies are the following factors:
So, who regulates NBFCs in India and how can a company obtain NBFC registration in India? Let’s find out!
The Reserve Bank of India is the regulator of NBFCs in India. A particular company can be identified as NBFC if it satisfies the principal business criteria, that is to say, the company will be treated as an NBFC if:
A company that satisfies both the above criteria shall be qualified as a Non-Banking Financial Company and thus it would be required to obtain NBFC registration with RBI.
However, the NBFC registration requirements of RBI do not end here. As per Section 45-IA of the Reserve Bank of India (Amendment) Act, 1997, no NBFC shall be allowed to commence or carry on the business of a non-banking financial institution if –
Thus, the company is also required to satisfy the NBFC registration limit. Further, as per RBI notification, the net owned fund requirements for certain categories of NBFCs shall be increased to Rs. 10 crores for which a glide path has been provided. Following is the glide path for net owned funds requirements:
Type of NBFC |
Current Net Owned Funds Required |
Net Owned Funds to be Achieved Till 31st March 2025 |
Net Owned Funds to be Achieved Till 31st March 2027 |
NBFC – Investment and Credit Company |
Rs. 2 crores |
Rs. 5 crores |
Rs. 10 crores |
NBFC – Micro Finance Institution |
Rs. 5 crores (Rs. 2 crores in North Eastern Region) |
Rs. 7 crores (Rs. 5 crores in North Eastern Region) |
Rs. 10 crores |
NBFC – Factors |
Rs. 5 crores |
Rs. 7 crores |
Rs. 10 crores |
The company desirous of obtaining NBFC registration with the RBI shall make an application to the RBI in the prescribed form along with all the necessary documents. The RBI will issue the Certificate of Registration if it is satisfied that the entity satisfies all the conditions as prescribed under Section 45-IA of the RBI Act, 1934.
The RBI has categorized the NBFCs into the following categories:
Based on the criteria (c) above, NBFCs can be classified into the following categories:
Companies that are engaged in the financial business but are regulated by other regulators are given an exemption from RBI registration for avoiding dual regulation. Following are the NBFCs that have been exempted from getting registered under the RBI subject to the fulfilment of prescribed conditions:
NBFC |
Regulator |
Housing Finance Institutions |
National Housing Bank |
Merchant Banking Companies |
SEBI |
Stock Exchanges |
|
Companies engaged in the business of stock broking or sub broking |
SEBI |
Venture Capital Fund Companies |
SEBI |
Nidhi Companies |
MCA |
Insurance Companies |
IRDAI |
Chit Companies |
- |
Micro Finance Companies |
- |
Securitization and Reconstruction Companies |
- |
Mutual Benefit Companies |
- |
Mortgage Guarantee Companies |
- |
Core Investment Companies i.e., an NBFC that is a Core Investment Company but not a Systematically Important Core Investment Company |
- |
Alternative Investment Fund Companies |
- |
Following were the explicit requirements for Online NBFC registration in India. In case your principal business is related to financial activities, then you need to determine whether you satisfy the above criteria and whether the NBFC registration is applicable to you. For more details about the NBFC registration process, feel free to contact the ASC Group.
Leave a Reply
Your email address will not be published. Required fields are marked *