NBFC REGISTRATION
About NBFC Registration
Registration of NBFC
At A2Z FINEDGE, we excel in providing taxation compliance and filing services for businesses and individuals. With a dedicated team of Chartered Accountants (CAs), Company Secretaries (CSs), MBAs, lawyers, and advocates, we ensure seamless navigation through the complexities of NBFC registration and compliance. This comprehensive guide explains everything you need to know about NBFCs, licensing, mandatory requirements, and more.
What is an NBFC?
A Non-Banking Financial Company (NBFC) is a financial institution that provides various banking services without holding a banking license. NBFCs operate under the regulation of the Reserve Bank of India (RBI) and primarily deal in activities such as loans, investments, credit facilities, leasing, hire purchase, and more. However, they cannot accept demand deposits or issue cheques like banks.
NBFCs are crucial to the economy as they cater to the financial needs of sectors underserved by traditional banks, including micro, small, and medium enterprises (MSMEs), rural populations, and individuals seeking alternative financial solutions.
When is an NBFC License Required?
An NBFC license is mandatory for any company engaged in the following activities:
- Loan and Credit Services: Lending money to individuals or businesses.
- Asset Finance: Financing the purchase of assets such as vehicles or machinery.
- Investment Activities: Dealing in securities, shares, and bonds.
- Leasing and Hire Purchase: Offering financial leasing and hire purchase facilities.
- Chit Funds: Managing chit fund activities.
- Insurance: Providing insurance services as a primary activity.
If a company’s financial assets constitute more than 50% of its total assets and its income from these financial assets exceeds 50% of its gross income, an NBFC license is required under the RBI’s guidelines.
Which Companies Do Not Require an NBFC License?
Certain financial entities are exempted from obtaining an NBFC license, including:
- Insurance Companies: Regulated by IRDAI (Insurance Regulatory and Development Authority of India).
- Stockbrokers: Registered with SEBI (Securities and Exchange Board of India).
- Merchant Banks: Governed by SEBI regulations.
- Housing Finance Companies: Regulated by NHB (National Housing Bank).
- Microfinance Institutions: Depending on specific regulatory requirements.
- Government-Owned Entities: Certain government-owned financial entities may not require an NBFC license.
Mandatory Legal Requirements for NBFC Registration
To register an NBFC, the following legal prerequisites must be met:
- Minimum Net Owned Fund (NOF):
- ₹2 crore minimum NOF is required for a company to be eligible for NBFC registration.
- Company Incorporation:
- The applicant must be registered as a company under the Companies Act, 2013.
- Fit and Proper Management:
- Directors must have a clean financial record and relevant experience in finance or banking.
- Business Plan:
- A detailed business plan for at least five years, including projected financial statements.
- Capital Adequacy Ratio (CAR):
- Maintain a CAR of at least 15% to ensure financial stability.
- Compliance with RBI Guidelines:
- Adherence to RBI’s prudential norms, including asset classification, provisioning, and capital requirements.
- Filing of Application:
- Submit an online application on the RBI’s portal and send a physical copy to the regional RBI office.
Types of NBFC Licenses
- Investment and Credit Company (ICC): Engages in lending and investment activities.
- Asset Finance Company (AFC): Provides finance for physical assets such as automobiles and machinery.
- Infrastructure Finance Company (IFC): Focuses on infrastructure project financing.
- Microfinance Institution (MFI): Provides small loans to low-income groups.
- Housing Finance Company (HFC): Specializes in housing loans.
- Non-Operative Financial Holding Company (NOFHC): Holds financial services entities under its structure.
Advantages of NBFC Registration
- Access to Funding: Easier access to institutional funding and credit facilities.
- Financial Inclusion: Facilitates the inclusion of underserved populations in the financial system.
- Tax Benefits: Certain tax benefits and exemptions for NBFCs under specific conditions.
- Diverse Operations: Freedom to operate across lending, investments, and asset financing.
- Regulatory Recognition: Enhanced credibility due to RBI regulation.
- Growth Opportunities: Significant potential for growth in underserved markets.
Documents Required for NBFC Registration
- Company Documents:
- Certificate of Incorporation
- Memorandum of Association (MoA) and Articles of Association (AoA)
- Financial Documents:
- Audited balance sheet and profit and loss account for the last three years.
- Net Owned Fund (NOF) certificate from a CA.
- KYC of Directors and Shareholders:
- PAN Card
- Aadhaar Card
- Passport (if applicable)
- Address proof
- Other Documents:
- Business plan
- Banker’s report
- Declaration regarding compliance with RBI norms.
Eligibility Criteria for NBFC Registration
- Company Type: Must be a registered company under the Companies Act, 2013.
- Net Owned Fund: Minimum NOF of ₹2 crore.
- Fit and Proper Directors: Directors must have a clean track record.
- Business Objective: The primary objective must align with financial activities.
- Compliance Capability: Ability to adhere to RBI guidelines and maintain financial discipline.
Step-by-Step Process for NBFC Registration
- Incorporate the Company:
- Register as a company under the Companies Act, 2013.
- Meet Net Owned Fund Requirements:
- Ensure a minimum NOF of ₹2 crore, certified by a Chartered Accountant.
- Prepare Documentation:
- Compile all required documents, including MoA, AoA, business plan, and KYC details of directors.
- Submit Online Application:
- Apply on the RBI’s COSMOS portal with digital copies of all documents.
- Send Physical Application:
- Submit a physical copy of the application to the RBI’s regional office.
- Scrutiny and Verification:
- The RBI scrutinizes the application and may request additional information or clarification.
- Grant of License:
- Upon satisfactory verification, the RBI grants the NBFC license.
Frequently Asked Questions (FAQs)
- Can NBFCs accept deposits?
Deposit-accepting NBFCs require special approval from the RBI.
- What is the validity of an NBFC license?
An NBFC license is valid indefinitely, subject to compliance with RBI norms.
- Is there any restriction on foreign investment in NBFCs?
Yes, foreign investment in NBFCs is permitted under specific conditions and guidelines.
- Can an NBFC provide savings account services?
No, NBFCs cannot offer demand deposit services such as savings accounts.
- What is the penalty for non-compliance?
Non-compliance can result in fines, cancellation of the license, or legal action by the RBI.
- What are the types of NBFCs based on liability?
NBFCs are categorized into deposit-accepting NBFCs and non-deposit-accepting NBFCs based on their liability.
- Are NBFCs subject to CRR and SLR requirements?
No, NBFCs are not required to maintain Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR).
- Can NBFCs issue credit cards?
No, NBFCs are not allowed to issue credit cards but can offer other forms of financing.
- How long does the NBFC registration process take?
The registration process may take 3-6 months, depending on document verification and RBI scrutiny.
- What is the minimum age requirement for directors of an NBFC?
Directors must be at least 18 years old and meet the “fit and proper” criteria set by the RBI.
- Can NBFCs be converted into banks?
Yes, NBFCs can apply for conversion to small finance banks or payment banks, subject to RBI approval.
- Do NBFCs have to follow KYC norms?
Yes, NBFCs must comply with RBI’s KYC (Know Your Customer) norms for customer onboarding and transactions.
Why Choose A2Z FINEDGE?
- Expert Team: Our seasoned professionals ensure a seamless registration process.
- Comprehensive Solutions: From documentation to compliance, we handle everything.
- Transparent Process: Clear communication and no hidden charges.
- Post-Registration Support: Ongoing assistance with compliance and regulatory requirements.
Get Started with A2Z FINEDGE Today!
Take the first step toward securing your business’s future with A2Z FINEDGE’s NBFC Registration Services. Let us handle the complexities while you focus on growing your dream business.
A2Z FINEDGE – Simplifying Compliance, Empowering Businesses.
Required Documents
- PAN Card
- Aadhar Card
N
NBFC REGISTRATION
About NBFC Registration
Registration of NBFC
At A2Z FINEDGE, we excel in providing taxation compliance and filing services for businesses and individuals. With a dedicated team of Chartered Accountants (CAs), Company Secretaries (CSs), MBAs, lawyers, and advocates, we ensure seamless navigation through the complexities of NBFC registration and compliance. This comprehensive guide explains everything you need to know about NBFCs, licensing, mandatory requirements, and more.
What is an NBFC?
A Non-Banking Financial Company (NBFC) is a financial institution that provides various banking services without holding a banking license. NBFCs operate under the regulation of the Reserve Bank of India (RBI) and primarily deal in activities such as loans, investments, credit facilities, leasing, hire purchase, and more. However, they cannot accept demand deposits or issue cheques like banks.
NBFCs are crucial to the economy as they cater to the financial needs of sectors underserved by traditional banks, including micro, small, and medium enterprises (MSMEs), rural populations, and individuals seeking alternative financial solutions.
When is an NBFC License Required?
An NBFC license is mandatory for any company engaged in the following activities:
- Loan and Credit Services: Lending money to individuals or businesses.
- Asset Finance: Financing the purchase of assets such as vehicles or machinery.
- Investment Activities: Dealing in securities, shares, and bonds.
- Leasing and Hire Purchase: Offering financial leasing and hire purchase facilities.
- Chit Funds: Managing chit fund activities.
- Insurance: Providing insurance services as a primary activity.
If a company’s financial assets constitute more than 50% of its total assets and its income from these financial assets exceeds 50% of its gross income, an NBFC license is required under the RBI’s guidelines.
Which Companies Do Not Require an NBFC License?
Certain financial entities are exempted from obtaining an NBFC license, including:
- Insurance Companies: Regulated by IRDAI (Insurance Regulatory and Development Authority of India).
- Stockbrokers: Registered with SEBI (Securities and Exchange Board of India).
- Merchant Banks: Governed by SEBI regulations.
- Housing Finance Companies: Regulated by NHB (National Housing Bank).
- Microfinance Institutions: Depending on specific regulatory requirements.
- Government-Owned Entities: Certain government-owned financial entities may not require an NBFC license.
Mandatory Legal Requirements for NBFC Registration
To register an NBFC, the following legal prerequisites must be met:
- Minimum Net Owned Fund (NOF):
- ₹2 crore minimum NOF is required for a company to be eligible for NBFC registration.
- Company Incorporation:
- The applicant must be registered as a company under the Companies Act, 2013.
- Fit and Proper Management:
- Directors must have a clean financial record and relevant experience in finance or banking.
- Business Plan:
- A detailed business plan for at least five years, including projected financial statements.
- Capital Adequacy Ratio (CAR):
- Maintain a CAR of at least 15% to ensure financial stability.
- Compliance with RBI Guidelines:
- Adherence to RBI’s prudential norms, including asset classification, provisioning, and capital requirements.
- Filing of Application:
- Submit an online application on the RBI’s portal and send a physical copy to the regional RBI office.
Types of NBFC Licenses
- Investment and Credit Company (ICC): Engages in lending and investment activities.
- Asset Finance Company (AFC): Provides finance for physical assets such as automobiles and machinery.
- Infrastructure Finance Company (IFC): Focuses on infrastructure project financing.
- Microfinance Institution (MFI): Provides small loans to low-income groups.
- Housing Finance Company (HFC): Specializes in housing loans.
- Non-Operative Financial Holding Company (NOFHC): Holds financial services entities under its structure.
Advantages of NBFC Registration
- Access to Funding: Easier access to institutional funding and credit facilities.
- Financial Inclusion: Facilitates the inclusion of underserved populations in the financial system.
- Tax Benefits: Certain tax benefits and exemptions for NBFCs under specific conditions.
- Diverse Operations: Freedom to operate across lending, investments, and asset financing.
- Regulatory Recognition: Enhanced credibility due to RBI regulation.
- Growth Opportunities: Significant potential for growth in underserved markets.
Documents Required for NBFC Registration
- Company Documents:
- Certificate of Incorporation
- Memorandum of Association (MoA) and Articles of Association (AoA)
- Financial Documents:
- Audited balance sheet and profit and loss account for the last three years.
- Net Owned Fund (NOF) certificate from a CA.
- KYC of Directors and Shareholders:
- PAN Card
- Aadhaar Card
- Passport (if applicable)
- Address proof
- Other Documents:
- Business plan
- Banker’s report
- Declaration regarding compliance with RBI norms.
Eligibility Criteria for NBFC Registration
- Company Type: Must be a registered company under the Companies Act, 2013.
- Net Owned Fund: Minimum NOF of ₹2 crore.
- Fit and Proper Directors: Directors must have a clean track record.
- Business Objective: The primary objective must align with financial activities.
- Compliance Capability: Ability to adhere to RBI guidelines and maintain financial discipline.
Step-by-Step Process for NBFC Registration
- Incorporate the Company:
- Register as a company under the Companies Act, 2013.
- Meet Net Owned Fund Requirements:
- Ensure a minimum NOF of ₹2 crore, certified by a Chartered Accountant.
- Prepare Documentation:
- Compile all required documents, including MoA, AoA, business plan, and KYC details of directors.
- Submit Online Application:
- Apply on the RBI’s COSMOS portal with digital copies of all documents.
- Send Physical Application:
- Submit a physical copy of the application to the RBI’s regional office.
- Scrutiny and Verification:
- The RBI scrutinizes the application and may request additional information or clarification.
- Grant of License:
- Upon satisfactory verification, the RBI grants the NBFC license.
Frequently Asked Questions (FAQs)
- Can NBFCs accept deposits?
Deposit-accepting NBFCs require special approval from the RBI.
- What is the validity of an NBFC license?
An NBFC license is valid indefinitely, subject to compliance with RBI norms.
- Is there any restriction on foreign investment in NBFCs?
Yes, foreign investment in NBFCs is permitted under specific conditions and guidelines.
- Can an NBFC provide savings account services?
No, NBFCs cannot offer demand deposit services such as savings accounts.
- What is the penalty for non-compliance?
Non-compliance can result in fines, cancellation of the license, or legal action by the RBI.
- What are the types of NBFCs based on liability?
NBFCs are categorized into deposit-accepting NBFCs and non-deposit-accepting NBFCs based on their liability.
- Are NBFCs subject to CRR and SLR requirements?
No, NBFCs are not required to maintain Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR).
- Can NBFCs issue credit cards?
No, NBFCs are not allowed to issue credit cards but can offer other forms of financing.
- How long does the NBFC registration process take?
The registration process may take 3-6 months, depending on document verification and RBI scrutiny.
- What is the minimum age requirement for directors of an NBFC?
Directors must be at least 18 years old and meet the “fit and proper” criteria set by the RBI.
- Can NBFCs be converted into banks?
Yes, NBFCs can apply for conversion to small finance banks or payment banks, subject to RBI approval.
- Do NBFCs have to follow KYC norms?
Yes, NBFCs must comply with RBI’s KYC (Know Your Customer) norms for customer onboarding and transactions.
Why Choose A2Z FINEDGE?
- Expert Team: Our seasoned professionals ensure a seamless registration process.
- Comprehensive Solutions: From documentation to compliance, we handle everything.
- Transparent Process: Clear communication and no hidden charges.
- Post-Registration Support: Ongoing assistance with compliance and regulatory requirements.
Get Started with A2Z FINEDGE Today!
Take the first step toward securing your business’s future with A2Z FINEDGE’s NBFC Registration Services. Let us handle the complexities while you focus on growing your dream business.
A2Z FINEDGE – Simplifying Compliance, Empowering Businesses.
Required Documents
- PAN Card
- Aadhar Card