NBFC Registration


A Non–Banking Financial Corporation is a company incorporated under the Companies Act 2013 or 1956. According to section 45-I (c) of the RBI Act, a Non–Banking Company carrying on the business of a financial institution will be an NBFC. It further states that the NBFC must be engaged in the business of Loans and Advances, Acquisition of stocks, equities, debt etc issued by the government or any local authority or other marketable securities.

Minimum Requirements
Minimum Fund of Rs. 2 Crore
ROC Registration
COR Assistance
RBI Approval

    What is an NBFC?

    A non-banking institution that is a company and has principal business of receiving deposits under any scheme or arrangement by any mode is also a non-banking financial company (Residuary non-banking company).

    Exclusions from the definition: The NBFC business does not include business whose principal business is the following:

    • Agricultural Activity
    • Industrial Activity
    • Purchase or sale of any goods excluding securities
    • Sale/purchase/construction of any immovable property – Providing of any services

    Meaning of Principal Business: The Reserve Bank of India has defined financial activity as principal business to bring clarity to the entities that will be monitored and regulated as NBFC under the RBI Act. The criteria s is called the 50-50 test and its as follows:

    • The company’s financial assets must constitute 50% of the total assets.
    • The income from financial assets must constitute 50% of the total income. It is governed by the Ministry of Corporate Affairs as well as the Reserve Bank of India. The License for operation is obtained from the RBI and it is incorporated as a company under applicable laws of the land.

    Types of NBFC in India

    Asset Finance Company

    Infrasturcture Finance

    Investment Company

    Core Investment Company

    Loan Companies

    Micro Finance Company

    Housing Finance Company

    Mortgage Guarantee Companies

    NBFCs Which Need Not be Registered With RBI

    The following NBFCs are not required to obtain any registration with the Reserve Bank of India under the idea that they are regulated by other regulators:

    • Core Investment Companies – (assets are less than 100 crore or public funds not taken)
    • Merchant Banking Companies
    • Companies that are engaged in the business of stock-broking
    • Housing Finance Companies
    • Companies engaged in the business of Venture Capital.
    • Insurance companies holding a certificate of registration issued by IRDA.
    • Chit Fund Companies as defined in the Sec 2 clause (b) of the Chit Fund Act, 1982
    • Nidhi Companies as notified under Section 620(A) of the Companies Act 1956

    Advantages of NBFC?

    ·        Can provide loans and credit facilities

    ·        Can trade in money market instruments

    ·        Can do wealth management such as managing portfolios of stocks and shares

    ·        Can underwrite stock and shares and other obligations

    ·        NBFCs are the last resorts of borrowing; NBFCs are there where banks are not there

    ·        NBFCs are the largest propellants of ushering finance into the country

    ·        Agility is very important for NBFCs as it sets the banks apart. Banks function slower as compared to the NBFCs

    ·        The use of modern methods by NBFCs has overcome key challenges that had overwhelmed conventional lending. NBFCS have made great use of technological advancements like the use of mobile phones and the internet which has helped in making information easily accessible anytime anywhere. It has reduced the demand and reliance on bank branches

    ·        Technology is not only at the head of banking and financial services, but also an increasingly digitized India has underpinned the rise of NBFCs. Digitalization has given NBFCs the ability to present multiple choices and reach the larger audience at quicker pace. This indirectly gives rise to larger NBFCs


    ·        Combination of partnership and database helps in increasing penetration of financial inclusion. To reach large numbers of customers successfully, and minimize risks, NBFCs have forged partnerships including the government to use their database and identify customer worthiness. Thus lending has been productive

          Another major advantage of NBFCs is the ground level understanding of their customers profile and the need for their credit, which gives them an edge, as their ability to customize their products according to client needs

    Disadvantages of NBFC:

    • NBFCs cannot accept demand deposits as it falls within the realm of activity of commercial banks
    • An NBFC is not a part of the payment and settlement system and as such an NBFC cannot issue cheques drawn on itself
    • Deposit insurance facility is not available for NBFC depositors unlike in case of banks
    • All NBFCs cannot accept deposits; only some can. Only those NBFCs holding a valid Certificate of Registration with authorisation to accept Public Deposits can accept/hold public deposits
    • The regulatory mechanism for NBFCs is stringent

    RBI has prescribed strict norms on capital adequacy and NPA in order to bridge the regulatory gaps between NBFCs and Banks, asking NBFCs to maintain minimum capital adequacy norms. It is reflected from a statement of the RBI which said that seven NBFCs were not able to meet the regulatory minimum capital adequacy norms of 15% as of March 2016.

    Source : https://muds.co.in/pros-cons-nbfc-business-india/


    Procedure to Incorporate an NBFC

    • A company should first be registered under the Companies Act 2013 or should already be registered under the Companies Act 1956 as either a Private Limited or a Public Limited Company.
    • The minimum net owned funds of the Company should be Rs. 2 Crore.
    • 1/3rd of the Directors must possess finance experience.
    • The CIBIL records of the Company should be clean.
    • The company must have a detailed business plan for five years.
    • The company must comply with the requirements for capital compliances and FEMA.
    • After all of the above conditions have been satisfied the online application on the website of RBI should be filled and submitted along with the requisite documents.
    • A CARN Number will be generated.
    • A hard copy of the application also has to be sent to the regional branch of the Reserve Bank of India.
    • After the application is properly scrutinized, the License will be given to the Company.

    How long does it take?


    Day 1-2

    Review of documents provided + Application for Digital Signature Certificate

    Day 3-4

    Name reservation application under SPICe+

    Day 5-9

    - Drafting of MoA, AoA and other required documents + Filing company registration application + DIN allotment application + Application for PAN and TAN of company

    Day 10-12

    Government processing time

    How does it works?

    Free Consultation
    • Our expert will understand your requirements
    • They will provide basic details and documents list required for              registration
    Make the Payment
    • You make the initial fee payment through secure payment                      gateway towards stamp duty and out of pocket expenses.
    Application for company registration
    • Application for company name registration under SPICe+
    • Procurement of Digital Signature Certificate (DSC)
    • Documents drafting including MOA and AOA
    • Application for Company registration
    • Application PAN and TAN

    What do you get

    Digital Signatures

    Digital signature to digitally sign the documents

    Memorandum of Association

    Defines the objective of the company


    PAN of the company

    Articles of Association

    Defines the rules of the company


    TAN of the company

    Certificate of Incorporation

    Certificate of incorporation bearing company's registration number

    Guidelines an NBFC Needs to Follow

    Once the Company gets a valid license it has to adhere to the following guidelines:

    • They cannot receive deposits that are payable on demand.
    • The public Deposits which the company can take should be for a minimum time period of 12 months and a maximum time period of 60 months.
    • The interest charged by the Company cannot be more than the ceiling prescribed by the Reserve Bank of India from time to time.
    • The repayment of any amount so taken by the Company will not be guaranteed by the Reserve Bank of India.
    • All the information about the company as well as any change in the composition of the Company has to be furnished to the Reserve Bank of India.
    • The deposits taken by the Public will be unsecured.
    • The Company has to submit its audited balance sheet every year.
    • A statutory return on the deposits taken by the company has to be furnished in the form NBS – 1 every year.
    • A Quarterly Return on the liquid assets of the company has to be furnished.
    • A certificate from the auditors had to be taken stating that the company is in a position to pay back all the deposits or money taken from the Public.
    • A half-yearly Asset Liability Management (ALM) return has to be given by the company which has a Public Deposit of Rs. 20 Crore and above or has assets worth Rs. 100 Crore and above.
    • The credit rating has to be taken every 6 months and submitted to the RBI.
    • A minimum level of 15% of the Public Deposits has to be maintained by the Company in Liquid Assets.

    If the NBFC defaults in the payment of any amount taken, the consumer can go to the National Company Law Tribunal or the Consumer Forum to file a suit against the Company.


    Source : https://cleartax.in/s/non-banking-financial-company-nbfc

    More questions? Seek the help of an expert!