Online NBFC Registration Apply Now & Certificate

Q: What is an NBFC?

NBFC stands for Non-Banking Financial Company. It is a type of financial institution that operates without a banking license and provides financial services such as loans, investments, and other financial products and services. It is regulated by the Reserve Bank of India (RBI) and are required to comply with various regulations and guidelines issued by the RBI.

Online NBFC Registration Apply Now & Certificate - ASC Group

Nov, 18 2022
Other Regulatory Matters
By ASC Group

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:

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

NBFC Registration Eligibility Criteria 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:

The company’s financial assets comprise more than 50% of the company’s total assets (netted off by the intangible assets) and
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 –

It does not obtain a certificate of registration issued by the RBI
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 31^st March 2025	Net Owned Funds to be Achieved Till 31^st 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 fulfilment 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 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.

Frequently Asked Questions

What is an NBFC?

NBFC stands for Non-Banking Financial Company. It is a type of financial institution that operates without a banking license and provides financial services such as loans, investments, and other financial products and services. It is regulated by the Reserve Bank of India (RBI) and are required to comply with various regulations and guidelines issued by the RBI.

What are the benefits of registering an NBFC in India?

Registering an NBFC in India offers several benefits, including increased credibility and trustworthiness in the eyes of customers and investors, as well as the ability to engage in a wide range of financial activities such as lending, leasing, investment, and insurance. NBFCs can also raise funds and lending capacity through various sources such as fixed deposits, bonds, and commercial papers. Additionally, being an NBFC provides more flexibility, and interest rates can be higher than those offered by banks, leading to increased profit margins. Finally, NBFCs can play a crucial role in promoting financial inclusion by providing loans and other financial services to underserved segments of society, such as low-income households, small businesses, and rural areas.

Who can apply for NBFC registration in India?

In India, registration as a Non-Banking Financial Company (NBFC) is open to various entities, including companies registered under the Companies Act of 2013 or its predecessor, the Companies Act of 1956, co-operative societies whose principal business is finance-related activities and registered under any law in force in India, and partnership firms, limited liability partnerships (LLPs), or any other association of persons engaged in the business of providing finance-related activities.

These entities are eligible to apply for registration as NBFCs, subject to compliance with relevant regulations and guidelines laid down by the Reserve Bank of India (RBI).

What are the different types of NBFCs in India?

India has a diverse range of Non-Banking Financial Companies (NBFCs), each with their unique set of rules and regulations. The different types of NBFCs include Asset Finance Companies (AFC), Investment Companies (IC), Loan Companies (LC), Infrastructure Finance Companies (IFC), Systemically Important Core Investment Companies (CIC-ND-SI), Microfinance Institutions (MFI), Non-Banking Financial Companies-Factors (NBFC-Factors), and Non-Banking Financial Companies-Micro Finance Institutions (NBFC-MFIs).

These NBFCs cater to various segments of the economy and offer financial services to individuals and businesses. Each NBFC is regulated by the Reserve Bank of India (RBI) and must adhere to the guidelines and regulations set by the RBI.

How is an NBFC different from a bank?

An NBFC (Non-Banking Financial Company) is a financial institution that provides financial services like loans, credit facilities, investments, and other financial products, but it cannot accept deposits from the public. In contrast, a bank is a financial institution that accepts deposits from the public and provides a range of financial services. Banks also have additional privileges, such as issuing cheques, providing checking and savings accounts, and providing payment and settlement services. Additionally, banks are more heavily regulated than NBFCs, and are subject to specific regulations under the Banking Regulation Act, 1949.

What are the penalties for non-compliance with NBFC regulations in India?

Non-compliance with NBFC regulations in India can lead to severe consequences, including penalties and legal action by the regulatory authority, the Reserve Bank of India (RBI). The penalties for non-compliance can result in monetary fines, cancellation of registration, and even criminal prosecution. The severity of the violation determines the amount of the penalty, which can range from a few lakh rupees to several crores.

Apart from imposing penalties, the RBI can take additional measures like restricting the NBFC's business operations, removing its directors, or appointing a management team to run the company. Therefore, NBFCs operating in India must comply with the regulatory framework to avoid any adverse actions by the RBI.