NBFC Registration

Registered NBFC in India A Complete Guide to NBFC Registration

Non-Banking Financial Companies (NBFCs) play a crucial role in the Indian financial ecosystem. They offer a wide range of financial services, excluding core banking services, and are regulated by the Reserve Bank of India (RBI). NBFC registration in India has become a popular option for entrepreneurs looking to start their financial service businesses. In this guide, we will walk you through the process, fees, and requirements for NBFC registration to help you understand how to establish your own NBFC company.

1. Overview of NBFC Registration

Non-Banking Financial Companies (NBFCs) are financial institutions that provide services similar to banks but without holding a banking license. NBFCs are allowed to provide loans, credit facilities, retirement planning, and investment services. However, they cannot accept demand deposits like banks.

The NBFC registration process is governed by the Reserve Bank of India (RBI) under the RBI Act of 1934. The need for NBFC registration online arises from the requirement to offer financial services while adhering to strict regulatory guidelines that ensure transparency and protection for clients.

    Key Types of NBFCs
  • 1. Asset Finance Company (AFC)
  • 2. Investment and Credit Company (ICC)
  • 3. Microfinance Institutions (MFI)
  • 4. Infrastructure Finance Company (IFC)
NBFC-Registration

Benefits of Registering an NBFC

  • - Access to Capital Registered NBFCs can easily access funding through a range of financial instruments such as loans, equity, and bonds.
  • - Scalability NBFCs are allowed to offer a wide range of financial services, which enables business scalability.
  • - Higher ROI Compared to traditional banks, NBFCs have less stringent regulations, allowing them to operate with greater flexibility, potentially yielding higher returns.
  • - Financial Inclusion NBFCs play a significant role in extending financial services to underbanked populations, contributing to economic growth.
NBFC-Registration

Eligibility Criteria for NBFC Registration

To be eligible for NBFC registration, your company must meet the following requirements

  • 1. Company Registration Your company must first be registered under the Companies Act of 2013 as a Private Limited or Public Limited Company.
  • 2. Net-Owned Fund Requirement A minimum net-owned fund (NOF) of INR 2 crores is mandatory for registration.
  • 3. Director’s Experience The directors of the company must have financial experience and a clean financial record.
  • 4. Financial Plan You need to provide a business plan with projections for at least three years.
  • 5. Compliance with RBI Regulations The company must comply with the RBI Act, 1934, and other related financial regulations.
NBFC-Registration

Documents and Process for NBFC Registration

The NBFC registration process consists of several steps, including submitting various documents and approvals from the RBI. Here's a detailed look

- Documents Required for NBFC Registration
  • 1. Incorporation Certificate Proof of company registration under the Companies Act.
  • 2. Memorandum of Association (MoA) & Articles of Association (AoA) These documents must clearly outline the financial activities the company intends to carry out.
  • 3. Board Resolution A board resolution that certifies the intent to apply for NBFC registration.
  • 4. Audited Balance Sheet A minimum of two years' worth of audited financial statements.
  • 5. Income Tax PAN PAN card of the company and directors.
  • 6. Directors' Qualifications Proof of the financial expertise and experience of directors.

NBFC Registration Process

  • 1. Online Application Submission The process begins with submitting an online application on the RBI's official website.
  • 2. Document Submission Upload all the necessary documents, including financial statements and company incorporation details.
  • 3. Scrutiny by RBI The RBI will verify the submitted documents and assess the financial viability of the proposed NBFC.
  • 4. Grant of License After successful verification, the RBI will grant an NBFC license, allowing the company to start its operations.

NBFC Registration Fees

  • - The NBFC registration fees vary based on the type and scale of operations you intend to carry out. On average, the fees range between INR 1.5 lakh to INR 2 lakh, excluding any consultation or legal fees.

Advantages of NBFC Registration

  • - Flexibility NBFCs can offer a diverse range of financial services, such as leasing, hire purchase, and investment plans.
  • - No Demand Deposit Restrictions Unlike banks, NBFCs don’t have to maintain a cash reserve ratio (CRR) or statutory liquidity ratio (SLR).
  • - Wider Reach NBFCs serve individuals and businesses that traditional banks often overlook, helping promote financial inclusion.

Disadvantages of NBFC Registration

  • - Strict Regulations Though NBFCs have more flexibility than banks, they must still comply with several regulations that may be challenging for smaller companies.
  • - Credit Risk NBFCs often cater to high-risk customers, which increases the chances of defaults and bad debts.
  • - Funding Limitations NBFCs cannot accept demand deposits, which limits their ability to raise funds from the public.

Conclusion

Registering an NBFC company in India provides a profitable opportunity for entrepreneurs in the financial sector. The process, although regulated, ensures that only compliant and financially sound entities are granted licenses. By carefully following the NBFC registration process and adhering to the regulations, you can successfully establish an NBFC and start offering financial services. Whether you are applying for NBFC registration online or offline, ensure that your business model aligns with the RBI's guidelines to avoid complications later on.

Let's Clear All The Doubts !

The minimum capital requirement is INR 2 crores, which must be in the form of net-owned funds.

No, NBFCs cannot accept demand deposits from the public unless explicitly approved by the RBI.

The entire process typically takes 90 to 120 days, depending on how promptly the necessary documents are submitted and verified.

NBFCs cannot accept demand deposits and do not offer payment or settlement services, unlike banks.

Yes, the RBI provides an online portal for submitting NBFC registration applications, making the process more streamlined and accessible.

No, NBFCs are restricted from engaging in agricultural, industrial activities, or trading in real estate and securities. However, NBFCs can offer financial services such as loans, hire purchases, and investment but cannot function as insurance providers unless they have obtained separate approvals from the relevant authorities

Yes, any company planning to conduct financial business as an NBFC must register with the Reserve Bank of India. Operating an NBFC without proper registration is illegal and can result in penalties and legal action.

Yes, a foreign company can set up an NBFC in India, but it must be registered as a company under the Companies Act and meet the minimum capital requirements. Foreign Direct Investment (FDI) up to 100% is allowed in NBFCs under the automatic route for certain types of NBFCs.