NBFC Requirements

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Non Banking Financial Companies (NBFCs) has managed to attract a large stake of the business market in context with market encompassing the entities engaged in banking and banking-related services. It is nowadays recognized as an important segment of Indian economy. NBFCs are engaged in the business similar to a bank, but to a limited extent, it does not cover all the activities which a bank does. An NBFC offers loans, accepting deposits, giving cash advances, leasing, hiring purchase, performing financial inter-mediation etc.

India is a densely populated country hence need for money is always for survival or such other requirement is always there. Although banks are established all over India still it lacks banking institutions in many areas which has resulted in increasing demand for availing loans from NBFC and more NBFC Registration. More and more people willing to indulge in the business of NBFC in order to have a profitable business in India than ever before.

NBFC can raise funds from the public, directly or indirectly, and can freely lend them to ultimate spenders.

What is the Tenure to Accept Deposits from the Public?

  1. Minimum: 12 months (1 year), and
  2. The maximum period consists of 60 months (5 years).

NBFC advance loans to the various small, wholesale, and retail traders as well as self-employed persons. NBFC advances loan at an interest which is decided by the NBFC itself, at the same time it is also known for attractive interest rates on the investors’ deposits.

NBFC has advantages in terms of short-term lending, High ROI, and No Cap on Interests.

What are the areas wherein NBFC Financial Activity cannot Enter?

The NBFC financial activity will not include:

  1. Agriculture activity,
  2. Purchase or sale of any goods (other than securities)
  3. Providing any services and sale/purchase/construction of immovable property or
  4. Industrial activity.

NBFC Requirements List

Once the type of NBFC to be registered is decided then follow the given below steps, also note that the basic requirement for NBFC registration is that you should have minimum Net Owned Funds should be of ₹ Two crores to be registered as NBFC:

  1. To file an application go to the site https://cosmos.rbi.org.in.
  2. Download the NBFC form from the site fill in the application,
  3. Thereafter submit the application and
  4. Take a print of the same and note down the CRN. This SRN can be used to track the status of the application.
  5. Submit the hard copy of the application form (indicating the online Company Application Reference Number, along with the supporting documents, to the Regional Office of the state where you are applying for registration usually at the place where ROC /head office has been established.

Note: The documents to be attached are enlisted along with the form, which can be accessed at the time of downloading the form.

Board resolution to be attached along with the application for NBFC Registration shall be passed keeping in mind the following details:

  1. In case of NBFC-MFI Applicant:

  • The certified copy of the board resolution to be attached shall state that:
  • The company shall obtain the membership of all the Credit Information Companies and will be a member of at least one Self-Regulatory Organization.
  • The company shall not violate any of the rules and regulations of Fair Practices in lending, pricing of credit, and non-coercive method of recovery as per the guidelines of RBI.
  • It shall also detail about the steps taken to avoid any undesirable concentration in any geographical locations
  • The company does not fall under Section 25 of the Companies Act, 1956 or Section 8 of the Companies Act, 2013.
  1. In case of NBFC-Factor applicant:

It shall enclose a roadmap that the company has proper planning for having financial assets in the factoring business constituting at least 50% of its total assets and their incomes derived from factoring business will not less than 50% of its gross income for a specific time frame as mentioned.

  1. In case of NBFC-IDF applicant:

  • No Objection Certificatefrom RBI regarding the sponsoring the NBFC-IDF issued to the NBFC-IFC.
  • In the last financial year, if any change in the management of the sponsor company has happened, such change should be detailed
  • Copy of the Tripartite Agreement i.e. between the NBFC-IDF, the concessionaire, and the Project Authority.
  • Details of the source of money used in startup capital along with the evidentiary documents in support.

Here’s a video about NBFC Registration Process:

Documents Required

From All Directors And Shareholder.

  • Certified copy of up-to-date Memorandum and Articles of Association of the Company.
  • Banker’s Report in a sealed envelope.
  • Auditors report about receipt of the minimum net owned fund.
  • A certificate of Chartered Accountant regarding details of group/associate/subsidiary/holding companies along with details of investments in other NBFCs as shown in the Proforma Balance Sheet