NBFC Registration in India: Eligibility, Process and requirements

NBFC Registration in India: Eligibility, Process and requirements

NBFC Registration in India: Eligibility, Process and requirements

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:

  1. NBFCs can’t accept demand deposits. However, certain NBFCs are allowed to accept term deposits.
  2. NBFC depositors cannot avail of the deposit insurance facility by the Deposit Insurance and Credit Guarantee Corporation.
  3. NBFCs do not form part of the payment and settlement system and cannot issue cheques that are drawn on themselves.
  4. NBFCs are not required to ensure minimum exposure to priority sectors.

So, who regulates NBFCs in India and how can a company obtain NBFC registration in India? Let’s find out!

Eligibility Criteria for NBFC Registration in India

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:

  1. The company’s financial assets comprise more than 50% of the company’s total assets (netted off by the intangible assets) and
  2. The income from financial assets comprises more than 50% of the gross income of the company.

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 – 

  1. It does not obtain a certificate of registration issued by the RBI
  2. It does not have net-owned funds of Rs. 2 crores. However, it may vary depending on the type of NBFC.

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.

Types of NBFCs that Can Get Registered with RBI

The RBI has categorized the NBFCs into the following categories:

  • Deposit-taking NBFCs or non-deposit-taking NBFCs
  • Non-deposit NBFCs are further categorized into systemically important and non-systemically important NBFCs based on their size
  • Based on the kind of activities they undertake

Based on the criteria (c) above, NBFCs can be classified into the following categories:

  • Investment and Credit Company (ICC)
  • Infrastructure Finance Company (IFC)
  • Systematically Important Core Investment Company (CIC-ND-SI)
  • Infrastructure Debt Fund Non-Banking Financial Company (IDF-NBFC)
  • Non-Banking Financial Company Micro Finance Institution (NBFC-MFI)
  • Non-Banking Financial Company Factors (NBFC-Factors)
  • NBFC Non-Operative Financial Holding Company (NOFHC)

NBFCs Exempted from RBI Registration

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 fulfillment of prescribed conditions:

NBFC

Regulator

Housing Finance Institutions

National Housing Bank

Merchant Banking Companies

SEBI

Stock Exchanges

SEBI

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 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.

 

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