Every NBFC, to carry out its operations, is required to obtain a license from RBI. In other words, any establishment desirous of starting the business of NBFCs shall apply to RBI for obtaining permission to operate as NBFCs and must be registered with RBI as an NBFC. It is, therefore, essential to know how to register an NBFC.
Non-Banking Financial Companies (NBFCs) have been making outstanding contributions to India’s economy. However, the Reserve Bank of India (RBI) still controls the working of all NBFCs under the framework of the RBI Act, 1934 and directions issued by it from time to time.
Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 involved in the principal business of lending, investments in shares/stocks/bonds/debentures, leasing, hire-purchase, insurance business, chit business or engaged in the receiving of deposits under any scheme or arrangement. NBFC is under the purview of the Reserve Bank of India (RBI), and in this article, we visit the procedure for NBFC Registration in India and some of the regulations which govern its operations.
As per Section 45-IA of the RBI Act, 1934, no company can commence or carry on the business of a non-banking financial institution without obtaining a certificate of registration and without having a Net Owned Funds of Rs. 200 lakhs. The requirement for registration as an NBFC is a company incorporated under Section 3 of the Companies Act, 1956 and have a minimum net owned funds of Rs.200 lakhs. Net owned funds is the balance of “owned funds” minus the amount of investment in shares of subsidiaries, companies in the same group and all other NBFCs, book value of debentures, bonds, outstanding loans and advances including hire purchase and lease finance made to and deposits with subsidiaries and companies in the same group. Owned funds is the aggregate of paid-up equity capital , preference shares which are compulsorily convertible into equity, free reserves , balance in share premium account and capital reserves representing surplus arising out of sale proceeds of asset, excluding reserves created by revaluation of asset, after deducting therefrom accumulated balance of loss, deferred revenue expenditure and other intangible assets.
Application for becoming an NBFC must be made in the requisite form to the Regional Office of the Reserve Bank of India. A list of documents required to be submitted along with the NBFC application can be accessed here: NBFC List of Document Required.
Following are the types of NBFC’s:
2. On the basis of Deposits
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 engaged in the Business of loans & advances, acquisition of shares / stocks / bonds / debentures / securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business,chit business.
The non-Banking Financial Companies do not possess proper banking licenses like the commercial banks but (after getting NBFC License from RBI) offer a verity of very supportive and helpful services to public depositors borrowers and investors in some selected areas of Business.
RBI has simplified NBFC Registration Procedure by providing an online platform to applicants. An existing company or a newly incorporated Company under companies Act 2013/1956 needs to go through the following Registration process to get a license from RBI
Any entity desirous of securing the NBFC license must fulfill the following two criteria :
Significant documents required for NBFC Registration in India are as follows:
From the above discussion, we can conclude that Non-Banking Financial Companies (NBFCs) Registration is one of the crucial certifications that every company must get after the incorporation. The identity of any company is a personal asset, and it must be protected at any cost.
With NBFCs Registration, any company can provide finance & loan. The non-Banking Financial Companies do not possess proper banking licenses like the commercial banks but (after getting NBFC License from RBI) offer a verity of very supportive and helpful services to public depositors borrowers and investors in some selected areas of Business.