What is NBFC Registration in India?
Non-Banking Financial Company (NBFC) is a financial institution that does not have banking license but is allowed to offer financial products and services to customers. NBFC is primarily concerned with the business of loans and advances, acquisition of shares, finance leasing, hire-purchase, chit fund, etc. It is important to note that an NBFC is different from bank in ways like an NBFC cannot accept savings and current account deposits, cannot issue cheques drawn on itself and its depositors do not get a deposit insurance and credit guarantee coverage.
Eligibility Criteria of NBFC Registration
- Company should already be registered under Company Act 2013 or Company Act 1956, as private or public limited company
- Company should have a business financial planning for at least 5 years
- Good CIBIL score or credit rating
- Minimum net owned funds shall be Rs. 2 crore or above
- Minimum assets should be worth Rs. 200 crore or above
- Must comply with the capital compliance and FEMA
- One third of directors should have financial experience
NBFC in India can be basically categorized into:
- Deposit accepting NBFCs
- Non-deposit accepting NBFCs
NBFCs in India are categorized in 10 Forms as mentioned below:
- Asset Finance Company (AFC)
- Loan Company (LC)
- Infrastructure Finance Company (IFC)
- Investment Company (IC)
- Infrastructure Debt Fund: Non- Banking Financial Company (IDF-NBFC)
- Systemically Important Core Investment Company (CIC-ND-SI)
- Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI)
- Non-Banking Financial Company – Factors (NBFC-Factors)
- Mortgage Guarantee Companies (MGC)
- Non-Operative Financial Holding Company (NOFHC)
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How to Register as NBFC?
Step 1: Register the company under the Companies Act 2013 or under Companies Act 1956.
Step 2: Minimum Net Owned Funds of the Company should be Rs. 2 crore or more.
Step 3: There should be atleast 1 director in the company from the same background.
Step 4: Good CIBIL score is required to present in order to register as NBFC.
Step 5: Next, visit RBI’s official website and fill in the application form.
Step 6: Submit all the required documents along with the application form.
Step 7: Once you have submitted the application form, a CARN number will be generated.
Step 8: Send the hard copy of the application to the regional branch of RBI.
Step 9: After the application is checked and verified, the License will be given to the company.
Also Know: What is the criteria for MSME registration?
Registration Requirements for NBFC
NBFC’s in India are regulated by the Reserve Bank of India (RBI). As per RBI guidelines, an NBFC cannot carry on non-banking financial business if, a) it does not have a certificate of registration from the bank (except for the NBFC’s who are not regulated by the RBI), and b) it does not have Net Owned Funds of Rs. 2 crore.
An NBFC incorporated under the Companies Act, 1956 or Companies Act, 2013 willing to commence a business of non-banking finance should comply with the following RBI guidelines:
- It must be registered under Section 3 of the Companies Act, 2013 or the Companies Act, 1956
- It should meet the requirement of minimum of Rs. 2 crore of Net Owned Funds (except for NBFC-MFIs, NBFC-Factors and CIC)
Net Owned Funds can be calculated from the last audited balance sheet of the firm. Paid-up Equity Capital, Free Reserves, Share Premium Account Balance, and Capital Reserve will constitute Total Owned Funds. To calculate, Net Owned Funds, deduct Revaluation Reserves, Balance of Accumulated Loss, and the book value of Intangible Assets from Total Owned Funds. If any investment in shares of other NBFC’s or in debentures and shares of subsidiaries and group companies is in excess of 10% of the owned funds will be subtracted from the Net Owned Funds.
Documents Required for NBFC Registration
- Certificate of Company Incorporation.
- Detailed information about the management along with a brochure of the company.
- A copy of PAN/Corporate Identity Number (CIN) of the company.
- Documents related to the office location/address
- Certified copy of the Memorandum of Association (MoA) and Articles of Association (AoA).
- List of Directors’ profile duly signed by each director must be attached.
- CIBIL/credit reports of the Directors of the Company are required.
- A copy of the board resolution which certifies that the company has not carried out or stopped NBFC activity and will not carry any until the registration from RBI is granted.
- A board resolution on ‘Fair Practices Code’ is to be passed and a certified copy of the same is to be submitted.
- Certificate issued by the statutory auditor stating that the company is not holding the public deposit and does not accept it as well.
- Certificate specifying owned funds as on the date of the application from the Statutory Auditor is required.
- Information regarding the bank account, balances, loans, credits, etc. is to be furnished.
- If applicable, audited balance sheet and profit and loss statement along with the directors and auditors report of the preceding three years has to be submitted.
- Self-certified copy of the bank statement and Income Tax Returns is required.
- Information detailing the company’s future plan, generally for the next 3 years, along with the projection of balance sheets, cash flow statement and income statement.
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NBFC Registration Fees
Fees to be deposited for NBFC registration is classified under various types which are mentioned below:
- While registering the company, a fee based on the authorized capital of the company is to be paid to the Ministry of Corporate Affairs (MCA)
- A company would also need to pay fees on the basis of the authorized capital and other few factors for the MOA (Memorandum of Association) and AOA (Articles of Association) of the company
- Simplified Proforma for Incorporating Company electronically (SPICe) filling might also require the company to pay certain fees
- For a Reserve Unique Number (RUN) and Director Identification Numbers (DIN), a predetermined fee is to be paid to the MCA
- A Digital Signature Certificate (DSC) is required for every director and thus its generation would require a payment of periodic fees
- Additional fees are required to be paid while submitting the application to the registrar.
Advantages of NBFC Registration in India
- Provides loans and other credit options
- NBFCs are more profitable than private and public sector banks because of less investment
- Registration process is simpler than other banks or lending institutions
- Loan processing feature takes lesser time as compared to banks
- NBFCs helps in managing portfolios of stock and shares
- Helps to trade in money market instruments
- CIBIL or credit score does not become hindrance in getting loan
Frequently Asked Questions (FAQs)
Q. I want to know about the leading NBFCs in India?
There are numerous NBFCs in India but some of the leading NBFCs include Bajaj Finserv, Aditya Birla, Tata Capital, Muthoot Finance, HDB Finance, Capital First, Lendingkart Finance, IIFL, etc.
Q. What compliances are required to be fulfilled once the firm is registered?
Certain guidelines have been laid down by RBI that has to be complied with. Submission of Income Tax Returns, ROC Returns, Statutory Audit, Tax Audit, various NBS returns for Deposit accepting and non-deposit accepting companies are some of the most important statutory compliances.
Q. Are NBFC’s allowed to accept deposits?
Only NBFC’s which have special authorization from the Bank and have an investment-grade are allowed to accept and hold deposits up to 1.5 times of their Net Owned Funds. However, all NBFC’s are barred from accepting demand deposits that include savings and current account deposits.
Q. What is the significance of the 50-50 test for NBFC’s?
A 50/50 test means that a firm’s financial assets constitute more than 50% of the total assets and income from financial assets constitute more than 50% of the gross income. A firm which fulfills both these criteria will be registered with the RBI as an NBFC. If, after registration, a firm violates the 50/50 criteria then RBI has the authority to penalize the NBFC.
Q. From where can I get an NBFC license?
Ans. To get the NBFC license, applicants need to get registration done from Registrar of Companies and RBI license can be obtained under RBI u/s 45-IA of the RBI Act of 1934.
Q. What is the main difference between a bank and an NBFC?
Ans. The primary difference is that NBFC offers banking services to customers without having a bank license. NBFC is registered under Indian Companies Act, 1956, whereas banks are registered under Banking Regulation Act, 1949.
Q. Is it mandatory to get my business an NBFC registration?
Ans. Yes, obtaining a NBFC registration certificate is mandatory in order to commence any business.
Q. What are the total nets owned funds required by an NBFC for registration purposes?
Ans. The minimum net owned funds for NBFC registration with RBI should be Rs. 2 crore.
Q. What is the registration fee charged by Govt. of India for an NBFC registration?
Ans. Government fee of approximately Rs. 3.5 lakh is required to register as an NBFC with minimum owned net funds of Rs. 2 crore.
Q. How do I check my NBFC registration number?
Ans. Visit mca.gov.in to obtain the CIN number and after entering the first and last name you can get the registration number from the official website itself.
Q. Can I apply for an NBFC license for my existing businesses?
Ans. Yes, existing businesses with minimum business assets of Rs. 200 crore and net owned funds of Rs. 2 crore are eligible to apply for an NBFC.