nbfc registration

What is Non-Banking Financial Company (NBFC) Registration?

NBFC (Non-Banking Financial Company) brought the revolution in the banking as well as the financing sector. It is a company that is registered under the Companies Act, 1956. Its activities are similar to that of the bank but also have some differences such as NBFC’s cannot accept demand deposits, Bank deposits are insured by Credit Guarantee Corporation and deposit insurance whereas, deposits in NBFC’s are not insured and NBFCs cannot issue cheque drawn on itself. NBFCs similar to banks are engaged in the business of making loans and advances, trading of shares/bonds/securities, insurance business and many more but it does not include any institution whose principal business is that of agriculture activity, purchase or sale of any goods, Industrial activity and sale/purchase of immovable property.

But we must note that after the immense growth over the decade the NBFC sector has shown the signs of slowing down because of the fiscal interest rate and the budgetary deficiency. Also because of the intense competition NBFCs are not able to perform in recent years. The rise of credit co-operative societies also affected the NBFCs as most of the people generally go to the credit co-operative society for loan and advances. Credit co-operative societies offer far more flexibility to their clients than the NBFCs.

We have noticed that there are many bottlenecks in their path but then also NBFCs are the best financing corporation that the Indian economy has ever seen. They have played a huge role in the financing of the Indian Economy.

According to section 45-IA of the RBI act, 1934 no company can start or carry on a Non-banking financial company without having a certificate of registration and without having a Net owned funds of Rs. 200 lakhs. Net owned funds are the balance of funds owned minus the amount of investment in shares of subsidiaries, book value of debentures, bonds, other NBFCs and company in the same group.

Financial activity of a company as principal business is when the company's financial assets constitute more than 50% of the total assets and also the income from financial assets constitute more than 50% of the gross income. A company that will fulfill both these criteria will be available for the NBFC registration by RBI. Application for becoming an NBFC must be made to the regional office of the reserve bank of India in a requisite form.

Types of NBFC Registration

All the NBFCs are either deposit-taking or Non-deposit taking. ND is suffixed to their name (NBFC-ND) if they are Non-deposit taking and also they are denoted as NBFC-NDSI. There are many different types of NBFCs in India.

  • Asset Finance Company (AFC)

  • Investment Company (IC)

  • Loan Companies (LC)

  • Infrastructure Finance Company (IFC)

  • Infrastructure Debt Fund (IDF-NBFC)

  • Non-banking financial company-Micro Finance Institution (NBFC-MFI)

  • Non-banking financial company-Factors (NBFC-Factors)

Advantages of NBFC Registration

  • Provides loans and credit facilities

  • Funding private education

  • Supporting investments in property

  • Provides retirement planning

  • Compose feasibility, market or industry studies for companies

  • Trading money market instruments

  • Advise companies in merger and acquisition

  • NBFCs are faster than banks

Documents required for NBFC Registration

Major documents required for non-banking financial company registration are as follows:

  • MOA and AOA of the applicant company

  • Certificate of company registration

  • Audited financial accounts of the company for the last three years

  • Proof of address of premises

  • Information about directors/partners of a company

  • Documents related to the management and administration of the company

  • A brief documentary about the company's work and activities during the last three years.

  • Bank account with the minimum share up capital of INR 2 crores.

Procedure for NBFC Registration in India

Step 1: Company Incorporation

The applicant’s company first needs to have a company incorporation certificate under the company act, 1956 or the company act, 2013. The company should also be registered either as a private limited company or public limited company.

Step 2: Apply for online registration

The applicant then needs to apply for online registration and also submit the hardcopy of the application form along with the documents to the regional office of RBI (Reserve bank of India).

Step 3: Filling the Details

In the next step, you need to click on the click option of the login page. An excel application form will appear which you need to upload after filling up all the required details.

Step 4: CARN number will be allocated

After the submission of the form, you will receive a CARN (Company Application Reference Number) for the COR (Certificate of Recognition) application that is filed online.

Step 5: Submission of the application

Once CARN is received, the applicant must need to submit the physical application form along with the documents required to the regional office. Registrar will verify the form as well as the documents and send it to the head office.

Step 6: Issuance of NBFC license

On successful verification, the head office of RBI will then issue the NBFC license to the applicant.

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