As the term suggests, Non-Banking Financial Company (NBFC) is a type of company which provides banking services like Advances and Loans, Hire Purchase, Leasing, Insurance Business, Chit Business, acquisition of shares/ stocks/ bonds/ debentures/ securities without meeting the legal definition of a bank. In India, the NBFS are rather eminent and very supportive and they are categorized in different companies such as; the asset finance companies, loan companies, and investment companies. Developing countries such as India through the NBFC registration has helped regulate the financial services of Companies Act 2013 and RBI act 1934. The Reserve Bank of India is the prime regulator of NBFC in India. The credit growth of NBFC accounts for 24.3% per year against 21.4% of other banks.

In recent years, the NBFC is trying to fill the gaps in financial needs of financial needs for both organized and unorganized persons, different organizations and businesses. Traditional Banks are focused on providing mid-size loans to SME or MSME, immense cooperates, and finally to persons with exceptional credit scores for instance if the bank opposed to collateral or income. This gap created by Traditional banks has given NBFC a golden opportunity to expand on its presence in the financial market. NBFCs are more likely to focus on unorganized sector of the society having low or no credit rating score while banks focus more upon the organized sector.

• There are few exclusions 

The services of NBFCs do not extend to the institutions with principal business activity as agriculture, industrial, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. ‘Principal business activity’ term implies that the aggregate of financing /physical assets which supports economic activity and income arising therefrom is not less than 60% of its total assets and total income respectively.

• Difference from Banks

The following factors differ NBFC from a banking institution:

1. NBFC cannot accept demand Deposits.
2. NBFC cannot issue cheque drawn.
3. NBFC deposits cannot avail deposit insurance facility covered by Deposit Insurance and Credit Guarantee Corporation (subsidiary of RBI).

• There are two types of NBFC which are classified into Deposit accepting & Non-Deposit accepting NBFCs

COMPLYKART is the leading name in NBFC related services in India, our well-experienced professionals have been supporting comprehensively entrepreneurs, companies in obtaining hassle free NBFC registration. Our services for NBFC registration cover expert Advisory, filing up the NBFC Application, preparing necessary documents, getting requisite approvals from the concerned governmental authorities, and offering rigorous prosecution for the best possible and brisk NBFC registration, on behalf of people and entities located in all parts of India and abroad.

On the basis of business nature, NBFCs are categorized as follows:

Asset Finance Company (AFC)

AFCs mainly provides the finance for the real assets or the physical assets such as the automobile, tractor generators, cranes and all other physical assets. All these resources are provided for the growth and operations of businesses. As the principal objective of AFC is providing loans for physical assets that makes assure than income from these assets would be 60% percent of total assets.

Infrastructure Finance Company 

Basic aim of these companies is to provide services for the development and infrastructure purposes. They give loans to people and some others financial services.

Investment Company

These companies provide loan for the investment in the securities. These securities can be shares, debentures, Collaterals and all other derivatives. It also helps you in buying the government securities as well. 

Loan Company

This company provides you loan for all the matters regarding to business and it has helped a lot people who want to make investment. These companies provide you loan for every need but it doesn’t allow you to take loan for the AFC purposes.

Important provisions regarding NBFCs:

NBFCs which are accepting public deposits need to comply with the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. Some of the important regulations relating to acceptance of deposits by the NBFCs are:-

1. NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months.
2. NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time.
3. NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.
4. NBFCs should have minimum investment grade credit rating.
5. The repayment of deposits by NBFCs is not guaranteed by RBI.

Registration Pre-Requisites

Before registering as NBFC, the company need to fulfil the following conditions:

1. The company should have registered itself under Companies Act, 2013 with names including Capital/ Fintech/ Finserv/ Leasing/ investment/ finance among others.
2. Open an updated account with an organized commercial bank and deposit a minimum net owned funds of Rs. 2 (two)crores. (Net owned funds consist of paid up equity capital, free reserves, balance in share premium account and capital reserves).
3. Submission of COR with RBI online and physically, any single mistake about the authenticity of your documents may lead to the nullification of your application to the COR.
4. Notices can be sent by RBI through your registered email, it is pertinent for you to respond to every email sent to you timely.
5. The NBFC license will only be granted after a thorough scrutiny of the application, shareholders, founders, and documents attached to it

Advantages

• Low Cost & Time

Time & cost of establishing NBFC are usually low in comparison to establishment costs of a Bank therefore as there is a requirement of only Rs. 2 Cr as NOF.

• Easier Compliances

Lesser compliance norms are needed to be met in case of NBFC as against the establishment of formal banking institutions which entails huge compliance requirements.

• Quicker Registration

NBFC Registration can be completed in 3 to 4 months whereas even a small bank registration takes 12 to 24 Months.

• Easier for Prospective Borrowing Clients

Processing of loans from NBFCs is faster in comparison to the Banks as it requires lesser paperwork along with lesser compliances to meet.

• Credit Facilities

These Companies provide loans, financing and other credit facilities. They provide loans on the less interest rate to people who don’t have good credit history.

Procedure

The application for registration as NBFC can be applied online at RBI portal - COSMOS. To avoid the tedious process of form filling and document submission, you can choose ComplyKart and leave it to us.

• Expert Consulting

Our NBFC experts offers you the most effective NBFC consultancy so that you can get it registered and get it operative very easily.

• Furnish the Documents

Submit to us the documents listed in the next section along with the necessary information.

• Arrangement of Net Owned Fund

Open a separate Bank account & deposit 2 Crore Indian Rupees. If the Company already has reserves than it should be as equity Capital and there shouldn’t be any preference stock.

• Application Filing

File the application based on the given information on COSMOS. After submitting the required details, an Application Reference Number is given against the registration application filed. Subsequently, a hard copy of the application along with the required documents must be submitted to the Regional Office of RBI.

• Credibility checking by RBI

Upon filing of Form on the COSMOS portal, Department of Non-banking Regulation of NBFC checks the documents and provides credit scores to the applicant.

• Registration of NBFC

With the help of Application Reference Number, a company can check the status of the application. After the completion of registration process, a ‘Certificate of registration’ is issued to the registering company. NBFC can accept public deposits after this certificate is issued.

Documents Required for NBFC registration:

1. Incorporation Certificate of the company and commencement of business
2. MOA and AOA of Company
3. Board resolution for obtaining NBFC Registration
4. Documents management of the company 
5. Details of Registered Office of Company 
6. Audited financial accounts of the company

Additional Information required for NBFC-MFI applicant only:

1. Details of the Self-Regulatory Organisation (SRO) having association with applicant
2. Details reg. commencement of business of MFI applicant 
3. Details of other NBFC-MFIs/pending NBFC-MFIs in the group
4. Projected business plan for 3 years with following year wise details:
   1. Amount of loan assets to be originated 
   2. Amount of loan assets to be extended for income generation 
   3. Break up of amount of assets to be originated in rural areas and semi-urban and urban areas 
   4. Activities the company intends to support in rural and semi-urban areas and urban areas 
   5. Projected profits 
   6. Average cost of borrowings 
   7. Average Return on Assets (ROA) 
   8. Expected capital expenditure in land and buildings and IT resources 
   9. Locations where the company intends to operate. 
   10. Allocation of resources to training and skill development

Additional Information required for NBFC-IDF applicant only:

1. Details of the sponsor NBFC-Infrastructure Finance Company (IFC)
2. Details of the sponsor Bank
3. Details of the concessionaire
4. Details of the Project Authority

HOW CAN COMPLYKART HELP YOU IN NBFC REGISTRATION

CONSULTATION AND GUIDANCE

We always think about growth of our clients. We’ll provide you every detail regarding to the registration process of NBFC and we’ll sort out every problem till the commencement of your NBFC.

Managers and Agents

Our managers and agents will always be available to help you. They will be helping you in the application process and once it’s done they’ll further provide you services for license.

Licensing Procedure

Our experts remain in touch of RBI while registering your NBFC. We are here to deal with every matter of NBFC. We’ll keep informing you about required documents and serve you until you start your services. 

Outstanding Services, Great Experience

Consulting through our platform will definitely prove beneficial for you. Our experts are highly experienced and will never let you miserable. Just once, knock at our door we’ll render you best output.