RBI has liberalized the NBFC license norms in early 2016 and since 50% of licensing process can be handled online.
What is RBI Regulation for NBFC License in India?
NBFC (Non-Banking Financial Company) is a company registered under Companies Act, 2013 or earlier Companies Act, 1956. The Main business activity of NBFC includes Loans & advances, acquisition of shares/ stocks/bonds/ debentures/ securities that are issued by government or local authority or other marketable securities of similar nature, like hire-purchase, leasing, chit business, insurance business, etc. but does not include Agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services, sale/ purchase/ construction of immovable property. A non-banking institution having its principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner also comes under the ambit of the non-banking financial company.
How to get NBFC License from RBI?
In terms of Section 45-IA of the RBI Act, 1934, Any company, which wants to commence or carry on the business of Non-banking Financial company shall obtain a certificate of registration from the Reserve Bank of India and it must have a Net Owned Funds of ₹ 200 lakhs. However, there are certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz.Housing Finance Companies regulated by National Housing Bank, Venture Capital Fund/Merchant Banking companies/Stockbroking companies registered with SEBI, Stock Exchange or a Mutual Benefit company Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies, Chit companies,
Requirement for NBFC License with RBI
A company incorporated under the Companies Act, 2013, or previous Companies Act, 1956 and desirous of commencing the business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 needs to comply with the following requirements:
- The applicant company shall be registered under Companies Act, 2013 or 1956
- The applicant company should have a minimum net owned fund of ₹ 2 crores.
Procedure for Application to the RBI for NBFC License
The applicant company needs to be a company registered under the Companies Act, 2013 with a minimum paid up capital of Rs. 2 crores.
If the applicant is a foreign company, its minimum capital shall be Rs. 5 crores.
After registration of the company as Private Limited or Public Limited under Companies Act, 2013, the company needs to open a Fixed Deposit of Rs. 2 Crores. Now, you can move ahead to file the application in prescribed format with all necessary documents to Reserve Bank Of India.
If the Reserve Bank of India after due diligence of the application, is satisfied that the documents are complete and are as per the requirement of Section 45-IA of the RBI Act of 1934, it may grant the license to the company to work as a Non-Banking Financial Company and grant Certificate of NBFC registration.
The NBFC becomes eligible to accept deposits from the public, once the Certificate of NBFC Registration is granted to the company. Non-Banking Financial Companies need to comply with all the rules, regulation and terms and conditions prescribed by Reserve bank of India.
Documents required to be submitted to the Regional Office of the Reserve Bank along with the application form:
- Copies of Certificate of incorporation of businesses and Certificate of commencement of business of the concerned company.
- Certified copy of the main object clause in the MOA relating to the financial business.
- Certified true copy of Board Resolution in support of the registration of the company as a microfinance company, along with a declaration that the company will comply with prescribed rules, regulation and compliances directed by Reserve Bank of India for a microfinance company.
- Bankers’ report related to deals made by the company, its subsidiary, holding, associate, etc.
- An auditor’s report stating that the applicant company owns the minimum capital required.
- Certified copies of educational and professional qualification of all directors and experience certificate in the sector of Financial Services if any.