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What is NBFC ?

NBFC an acronym used for Non-Banking Financial Company is a financial institution registered under the Companies Act, 1956 or Companies Act, 2013 that offers various banking services like Loan facilities, Asset financing, P2P lending, Currency exchange etc., without possessing a banking license. The most significant difference between NBFCs and banks is that unlike banks, NBFCs cannot accept demand deposits plus these institutions cannot issue cheques drawn on their name. Before commencing the business, NBFCs must register with RBI and adhere to the regulations issued by RBI.

Types of NBFCs

NBFCs are further divided into two broad categories based on:

  • The nature of their activity
  • Deposits

Types of NBFCs on the nature of their activity:

  • Asset Finance Company
  • Loan Company
  • Mortgage Guarantee Company
  • Investment Company
  • Core Investment Company
  • Infrastructure Finance Company
  • Micro Finance Company
  • Housing Finance Company

Types of NBFCs based on deposits:

  • Deposit accepting NBFC
  • Non-Deposit accepting NBFC

NBFC Registration Checklist

To register an NBFC with RBI, a company must fulfil the following conditions:

  • Company Registration

    The Company should be registered under the Companies Act, 2013 or Companies Act, 1956.

  • Net Owned Fund

    To register a company as NBFC with RBI, the Company must have a minimum net owned fund of INR 2 crore, and this fund cannot be a borrowed capital.

  • Net Owned Fund

    To register a company as NBFC with RBI, the Company must have a minimum net owned fund of INR 2 crore, and this fund cannot be a borrowed capital.

  • Director’s profile

    One of the two directors of the Company must have experience in Finance.

  • Business Plan

    The Company applying for NBFC registration must have a detailed business plan for the next five years.

  • Clean Credit History

    To get an NBFC registered the Directors and Shareholders of the Company must have no write-offs, and the CIBIL records of the Company should be clean.

Necessary Documents for NBFC Registration

Following are the documents required for NBFC Registration in India:

Certificate of Company Incorporation

Certificate of Company Incorporation.

Brochure of the Company

Detailed information of the management

PAN & CIN

You will have to submit a copy of PAN card and Corporate Identity Number of the Company.

MOA & AOA

A certified copy of Memorandum of Association (MOA) and Article of Association (AOA).

CIBIL Reports

CIBIL Reports of the Director of the Company.

Board Resolution

A copy of Board resolution stating that the Company is not carrying on any NBFC activity or has stopped NBFC activity

Fair Practices Code

A copy of Board resolution stating that the Company has formulated ‘Fair Practices Code’ as per RBI guidelines.

Certificate Issued by Statutory Auditor

A copy of certificate issued by statutory auditor that the Company has not accepted public funds in the past and does not hold any public fund as on the date and will not accept the same in future.

Educational and Professional Qualification

A Copy of the certificate of the highest educational and professional qualification of all the Directors of the Company.

Audited Balance Sheet

The Audited balance sheet and Profit & Loss accounting along with directors & auditors report of past 3 years needs to be submitted by the companies already in existence.

Experience Certificate

Copy of the experience certificate of the Directors of the Company, if any, in the Financial Services Sector (including Banking Sector).

Steps to Incorporate an NBFC

Following are the steps to be followed to incorporate an NBFC:

  • The first step is to register the Company under the Companies Act 2013 or under Companies Act 1956.
  • Before the incorporation of the Company as NBFC, the net owned funds of the Company should be Rs 2 crore or more.
  • At least one of the directors of the Company should be from the background of Finance.
  • The Company should have a good CIBIL score.
  • When all the above pre-requisites are fulfilled, the next step is to visit RBI’s official website and fill in the application form.
  • Next, submit all the required documents along with the application form.
  • After submitting the application form, a CARN number will be generated.
  • Next step is to send the hard copy of the application to your regional branch of Reserve Bank of India (RBI).
  • Finally, RBI checks and verifies the application, and if everything is found satisfactory, Company gets the license of NBFC.

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Guidelines to be Followed by NBFCs

Once the registration is successful, NBFCs have to adhere to following guidelines:

  • NBFCs cannot receive deposits that are payable on demand.
  • The interest charged by an NBFC cannot exceed the ceiling prescribed by the Reserve Bank of India (RBI).
  • All the significant changes in the composition of the Company have to be furnished to the Reserve Bank of India (RBI).
  • Audited balance sheet of the Company has to be submitted every year.
  • NBFCs holding public deposit of more than Rs. 20 crore or asset size more than Rs 100 crore has to give a half-yearly ALM return.
  • NBFCs have to furnish a statutory return in the form of NBS-1every year on the deposits taken by them.
  • NBFCs also have to furnish a quarterly return on the liquid assets of the Company.
  • An NBFC has to maintain a minimum level of 15% of the Public Deposits in Liquid Assets.

Benefits of FinTech based NBFCs

NBFC sector has been growing by leaps and bounds over the years. Inclusion of Fintechs in NBFCs is disrupting the traditional banking models and offering various benefits to NBFCs as well s their customers. Following are some of the benefits of FinTech based NBFC:

  • Technology powered NBFCs can address the problems of their customers more efficiently and speedily.
  • The collaboration of FinTechs with NBFCs has enabled NBFCs to connect with clients having low income who can use their mobile devices to avail loan services offered by NBFCs.
  • FinTechs allow NBFCs to widen the horizon of their services by targeting a diverse pool of customers beyond geographical limitations.
  • The extensive use of technology in the operations of NBFC allows NBFCs to reduce operational costs.
  • Present-day FinTechs make use of technologies like Artificial Intelligence (AI), Machine Learning tools which allows NBFCs to provide more services without taking any additional risks while offering more advanced customer experience.
  • Technology in Finance is disrupting the traditional models of financial institutions and has certainly opened a door of opportunities for NBFCs to fulfil the rapidly changing demands of its customers.

NBFCs have seen exponential growth over the years by outperforming banks through various user- friendly services offered by them. With this ongoing growth in the NBFC sector, it has become imperative for these institutions to embrace cutting-edge technology to manage and process a large amount of user data.

FintechAsia aims at collaborating NBFCs with technological advancements happening around the world and make financing a better experience. We help our clients in registering their NBFC with RBI and assist them in creating a workable plan their company. We instil leading technological advancements in the business and operational models of NBFCs which allows them to offer their customers seamless and tailor-made services.

Why Choose Us

  • Comprehensive NBFC Registration Process
  • Technology-driven Business Model
  • Experienced Team of Legal and Financial Advisors
  • 24 x 7 Customer Support Service

Frequently Asked Questions

The company desirous of commencing the business of non-banking financial institution should necessarily be a company registered under Section 3 of the Companies Act, 1956 and it should have a minimum net owned fund of Rs 200 lakh.
The main difference between NBFCs and Banks is that unlike Banks, NBFCs cannot accept demand deposits. Moreover, NBFCs cannot issue cheques drawn on itself.
NBFCs whose asset size is of Rs 500 crore or more as per last audited balance sheet are considered as systemically important NBFCs.
Yes, NBFCs must register with RBI. However, there are certain NBFCs like Merchant banking companies, Stock-broking companies, Insurance companies etc. which are controlled by other regulating bodies like SEBI and IRDA.
You need to contact FintechAsia, and our team will take care of the complete process of the registration of your company as NBFC.

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What Our Client Is Saying

Wuhan Ching

Wuhan Ching

China

Right from NBFC consultation to Auditing Services, Fintechasia is a one stop shop for all your professional needs. They were very courteous and professional in their approach. We would definitely recommend their service to anyone seeking professional help

Tobby Carioca

Tobby Carioca

Malaysia

Fintechasia has provided me exceptional service when I consulted them for my NBFC business. From initial consultation to registering my NBFC business they were proficient and expert in their advice. I would highly recommend them for NBFC services.

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