Everything You Should Know About NBFC Registration Process in India - LawyerINC

Non-banking financial companies (NBFCs) are financial institutions that offer various banking services but do not have a banking license. Generally, these institutions are not allowed to take traditional demand deposits—readily available funds, such as those in checking or savings accounts—from the public. This limitation keeps them outside the scope of conventional oversight from federal and state financial regulators.

NBFCs can offer banking services such as loans and credit facilities, currency exchange, retirement planning, money markets, underwriting, and merger activities.

Registration of NBFCs is done according to the Companies Act 2013 and RBI Act, 1934. They play a vital role in executing financial functions in the economy. They help to face demand that the banking system fails to fulfil in a short processing time.

An NBFC helps us by providing both secured and unsecured loans to the takers based on the alternative lending models. The government has also started promoting NBFCs so that the unorganised money lenders can run financial services.

When it comes to a question of whether the company is a financial institution or not, then the RBI (Reserve Bank of India) shall decide such questions in consultation with the Central Government and its decision shall be final and be binding on all the parties concerned.

• Deposit-taking Non- Banking Financial Company [NBFC- D]
• Non- Deposit taking Non- Banking Financial Company[ NBFC_ND]
• Systematically important Non- Banking Financial Company should have assets size of Rs. 100 Crores or more [NBFC-ND-S1]
• These are Core investment Non-Deposit companies and systematically important who has already redistributed its 90% assets as an investment in shares or debts instruments or loan in group companies and out of 90%,  60% should be invested in equity shares or those instruments which can be compulsorily converted into equity shares. It accepts public funds also [CIC-ND-SI]

1. Asset Finance Company
According to RBI, any non-banking company can act as an asset finance company, on condition; that the income arising from the aggregate physical assets supporting the economic activity should not be less than 60% of its total assets and total income. Asset finance company can either be deposit-taking or non-deposit taking. All deposit-taking NBFC’s have to register themselves with RBI as per given RBI regulation.

2. Investment Company
In layman term, Investment Company is a company whose main business is managing and holding securities for investment. These companies invest funds on behalf of their clients who, in return are expected to share the profits and losses. These companies exist only to invest.

3. Loan Company
Loan companies under NBFC provide loans and advances for working capital finance. A financial company would only be considered Loan Company if their 50%of total assets are in lending and 50%of total income arises from the assets which are lent. The known loan company registered as NBFC is LIC Finance Limited.

4. Infrastructure Finance Company
Infrastructure finance companies provide infrastructure loans for the development of transport, water &sanitation, energy, communication, social and commercial infrastructure. The companies need to follow the following stipulations to be considered as infrastructure finance company they need to deploy at least minimum of 75% of total assets in infrastructure loans, and the net worth of the company must be Rs. 300 crore. The minimum credit rating of the company should be at 'A' or equivalent of CRISIL, FITCH, ICRA, CARE, or an equivalent rating by any other crediting rating agencies. A certificate must support the request for registering a (non-banking companies) NBFC's as infrastructure finance company from their auditors confirming the asset pattern of the company of the latest financial year. The famous infrastructure finance company is IndiaBulls Housing Finance.

5. Core Investment Company
Core investment companies are the non-banking financial company doing the business of acquisition of securities and shares, and they hold 90% of its asset in the form of bonds, equity shares, preference shares. These companies need to invest not less than 60 per cent in the equity shares of group companies.

6. Micro Finance Company
There are many microfinance companies in India, which play some crucial role in the development of India. Microfinance companies are those financial institutions that offer small-scale financial services in the form of credit and savings, to the poor in rural, semi-urban areas. Micro financial services are meant to help them in economic activities, increasing savings and supporting self-empowerment. Microfinance company is a non-deposit taking firm regulated by reserve bank of India act, 1934. These companies are entitled to provide loans up to Rs.50, 000 to individual coming under low-income group living in rural or semi-urban areas. A company to be registered NBFC’s-MFC, they should have minimum net capital of Rs.5 crore after incorporation as a private limited company having equity share capital.

7. Housing Finance Company
Housing finance companies have mention housing finance as the main clause in its main memorandum of association.NBFC’s have complemented commercials bank in providing mid-term capital loans to individual or firms; their flexibility and less stringent regulation provide them competing for an edge over commercial banks.

• Register as a Company under The Companies Act, 2013.
• Have a capital of Rs. 2 Crore which is the minimum capital requirement for establishing an NBFC.
• It is compulsory to have a Fixed Deposit of Rs 2 crore.
• In case there is a foreign investment FDI Compliance needs to be done as per FEMA Act.
• Complete documentation required for an NBFC license.
• Submission of documents with FD receipt before RBI.

1. The formation and the incorporation of the company.

The company that you desire to build must be registered under the new Indian companies’ act 2013.

2. Minimum net owned capital.

The minimum amount should be Rs 2 crores which is paid up equity share capital.

3. Open a fresh new bank account.

The capital required has to be kept somewhere in deposit, and this capital should be free from all liens and generally, such an amount is managed and kept in the form of an FD or a fixed deposit. While you are making the application for NBFC Registration certificate to the reserve bank of India, this amount will need to be maintained as it’s verified by the Reserve Bank of India of the deposits of the concerned bankers.

4. Make an application for the NBFC Registration certificate.

The candidate is supposed to submit the application for NBFC Registration certificate online to the reserve bank of India, after which the applicant will get a reference number. Later on, the company is supposed to submit a hard copy of online application along with the required documents to the supposedly concerned regional office of the Reserve Bank of India.

• Annexure I, II, III.
• All the information that is regarding the incorporation of the supposed company.
• The memorandum of association and articles of association of the company.
• The documents that are related to the administration and management of the company.
• The location of the company.
• Audited financial accounts of the company.
• Income tax PAN Number etc.

Once you submit it all, everything will be verified and an NBFC Registration Certificate will be granted. For further queries, you may contact experts at LawyerINC anytime or Call @ 9681006624