NBFC Registration in India: Check Process, Cost, Eligibility, and Requirements

What is NBFC in Simple Terms?

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 is the Meaning of NBFC Registration RBI?

In accordance with the RBI Act of 1934, supervises the process by which companies are registered under the Companies Act. The NBFCs play a vital role in the Indian economy. They facilitate financial operations, and they fill in for traditional banks when they are unable to extend loans or advances.

Moreover, the majority of deposits are accepted by non-banking finance corporations (NBFCs) according to prescribed schemes and agreements. Depositors can choose to pay in one lump sum or in instalments.

The RBI regulates and supervises the NBFCs in accordance to the RBI Act of 1934. According to Section 45-IA of the RBI Act, an NBFC cannot start or continue business in India without a NBFC registration certificate.

In India, the RBI is the only authority that can issue NBFC certificates. In recent years, RBI has simplified policies and regulations for the NBFCs. This makes the process easier to obtain a registration certificate.

Synopsis of the NBFC in India

NBFCs, or Non-Banking Financial Companies, are corporate entities registered under the Companies Act 2013 regulations. The Reserve Bank of India is responsible for regulating NBFCs.

NBFCs are still involved in providing services such as loans and advances, and acquiring shares, equities and debts issued either by the local or national government. Further, NBFCs differ from commercial banks and cooperative banks.

What are the Advantages of NBFC Registration in India?

• Save time and money: - Unlike traditional banks NBFCs can register instantly and quickly. A traditional bank license requires less time and cost.
• Easy Recovery of Loans: - NBFC banks are now able to recover their loans quickly through legal actions such as asset attachment, foreclosure or repossession.
• Industry growth ratio: - Despite recent significant changes, it is expected that the NBFC Banking Sector in India will maintain a Compound annual Growth Rate (CAGR), of 18.5% from 2021 to 2026.
• Easy Registration: - NBFCs are primarily focused on small borrowers, so obtaining a NBFC registration will be easier than registering as a bank.

What are the Requirements for NBFC License in India?

According to Section 45-IA in the RBI Act, 1934, a company wishing to register as an NBFC must meet the following requirements:

• Registration: - A company must be registered in order to apply for NBFC registration. This is per Section 3 of Companies Act 2013.
• Director Qualifications: - A third of the directors must have experience in finance.
• Unique business plan: - A comprehensive business plan describing the company's strategy for the next five years is required.
• Net Owned Fund (NOF): - If you are searching for "What is the minimum net owned Funds required by NBFCs for registration with RBIA" then let us tell you it will be minimum of Rs. 10 crores.
• Clear Credit History: – A company's CIBIL history must be clean.
• FEMA Compliant: - NBFCs that engage in foreign investment are required to comply with FEMA.

What are the Different Types of NBFCs in India?

Activities Not Classified as NBFC

The following activities are not considered NBFCs in India.

• Agriculture is a growing industry.
• Purchase and sale of any goods
• Industrial Activity
• Purchase/sale/Construction of a movable property

What is the Difference Between NBFCs and Banks?
 

NBFCs are Driving India's Financial Landscape

Below are some specific roles and functions that NBFCs in India perform:

• Transforming Transport & Infrastructure
• Employment Generation
• Increase your wealth.
• Support for improving the financial situation of those in need
• Broad Base Economic Development
• Develop the financial market with flexibility
• Contribution to the State Exchequer of a large amount
• NBFC facilitates long-term audit and Specialized Credit

What are the Documents Required for NBFC Registration?

• Both the company brochure and its management system provide detailed information.
• The CIN (Corporate Identification Number) or PAN (Personal Identification Number) of the applicant
• Documents proving the address and location of the applicant company.
• Certified copy of the MOA (Memorandum of Association), and AOA (Article of Association).
• Each Director must sign the list of directors.
• The Director's CIBIL score or credit report must be submitted.
• The board resolution stating the company does not provide financial services, and will not do so until it is registered as an NBFC.
• Certificate stating that the company does not hold any public deposit issued by the authority concerned and is also not accepting it.
• The company's board resolution demonstrates that the company has complied with the Fair Practices Code in its business activities.
• Document proving the company's Net Owned Fund (NOF) or net owned fund.
• Other details about the company must be provided, including bank account, loans, credits balances
• If the company is not eligible for NBFC registration, they must provide the five-year list of financial statements. A balance sheet, a profit and loss statement, and a directors and auditors report.
• Self-certified Bank Statement for Income Tax Return
• A company must submit information about its plans for at least five years.

The RBI Regulations Penalize Non-Compliance

• If an NBFC is operating without a certificate of registration.
• Operating in the Public Interest
• Refusal to pay the deposit
• Continued default by a defaulting NBFC.
• Non-compliance of the RBI's statutory orders.
• Non-compliance of the Company Law Board's statutory orders.
• The RBI has issued directions to auditors.

Complainces for an NBFC After Obtaining Registration

What is the NBFC Registration Procedure in India?

• The Companies Act 2013 requires that a company applicant be registered.
• To obtain an NBFC licence, you must have a minimum of 10 crores in net owned funds.
• The applicant must have deposited a fixed deposit of at least Rs. 10 crores in any nationalised bank.
• Foreign Exchange Management is required for all foreign investment applications.
• Applicants must arrange the necessary documents after meeting these requirements.
• The documents must be submitted along with the FD receipt at the Reserve Bank of India or RBI.
• The applicant must also submit an online application through the RBI's official website.
• The applicant company will then need to download the electronic form from the website and submit it electronically.
• In order to track the progress of a request, the applicant must also collect an Application Reference Number (ARN) issued by RBI.
• The applicant should keep a hard copy of the e-form for the reference number.
• The applicant must also submit all necessary documents to the RBI Central Office.

List of RBI Compliance for NBFC

• Fair Practice Code Implementation
• Secretarial compliances
• CIC Registration
• KYC Registration
• COSMOS Registration
• CERSAI Registration
• FIU-IND Registration
• The COSMOS platform is the online platform of RBI.
• Compliance with KYC and Anti-Money Laundering.

NBFC Model Based on FINTECH has many Advantages

The financial industry has evolved with the advent of technology. It is now able to upgrade its business and provide various benefits for the Indian economy. Below are some advantages of Fintech-based NBFC models.

• The advancements in technology have made it easier for customers to solve their problems.
• Online Loan Facility
• Streamlining business operations can increase efficiency.
• Better Risk Management facilities.
• Work on the Financial Inclusion App

Cancellation Request for NBFC Registration

RBI can cancel a NBFC registration application for any of the following reasons.

• Non-maintenance: - When the NBFC fails to meet the minimum requirement of Net Owned Fund (NOF).
• If the NBFC does not operate in the public's interest.
• Failure to Repay Deposits: - NBFC will not repay deposit in accordance with the terms and conditions set forth by the depositor.
• Not operating NBFC activity: - When NBFC does not operate its primary financial business.
• Failure to submit books of accounts: - When the NBFC does not manage its books of account in accordance with RBI guidelines.
• Incorrect profile of Directors: - If the Directors of the applicant fail to meet the criteria according to RBI policies.
• Unsuitable Business Plan: - A business plan of at least five years is required.
• Incorrect profiles of shareholders: – Failure to provide the correct details and identify the shareholders.