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NBFC Registration in India
Roles and Functions of NBFC
Some of the Roles and Functions of NBFC are as follows:-
1)NBFC creates a favorable balance in addressing the Financial needs of the country, also when large number of applicants are turned down by Traditional Banks of India.
2)NBFC provides loan on alternative credit basis to assess the loan application.
3)Indian Fintech startup use these registrations in order to offer Financial Services.
Role and Functions of NBFC License in India
Obtaining an NBFC license in India (Non-Banking Financial Company) enables a company to perform various financial activities without being classified as a traditional bank. Here are the key roles and functions associated with an NBFC license:
Financial Intermediation:
NBFCs facilitate financial intermediation by accepting deposits, providing loans and advances, leasing, hire-purchase, insurance business, etc.
Credit Services:
They extend credit facilities like loans, advances, and investments, often focusing on specific sectors or customer segments not fully served by banks.
Investment Activities:
Investment operations carried out by NBFCs include the purchase of stocks, bonds, debentures, shares, and other securities issued by municipal or federal governments.
Asset Financing:
They provide asset financing services including equipment leasing, hire-purchase finance, and infrastructure financing, contributing to capital formation.
Payment Services:
Some NBFCs offer payment services and facilitate electronic fund transfers, money market activities, and other payment and settlement functions.
Wealth Management:
NBFCs may offer wealth management services, portfolio management, and advisory services related to investments, insurance, and financial planning.
Microfinance:
Many NBFCs focus on microfinance, providing small loans and financial services to low-income individuals and small businesses.
Regulatory Compliance:
NBFCs are regulated by the Reserve Bank of India (RBI) and must comply with regulatory requirements concerning capital adequacy, prudential norms, reporting, and disclosure standards.
Financial Inclusion:
They play a crucial role in promoting financial inclusion by reaching out to underserved and unbanked segments of society and providing them with access to financial services.
Risk Management:
NBFCs manage various financial risks such as credit risk, interest rate risk, liquidity risk, and operational risk through appropriate risk management practices and frameworks.
Overall, an NBFC license empowers companies to participate actively in the financial sector, offering a range of services that complement those provided by traditional banks while catering to specific market niches and customer ne
Type of RBI Registered NBFC in India
In India, registered Non-Banking Financial Companies (NBFCs) can be categorized based on their principal activities and the type of services they offer. Here are some common types of RBI RBI-registered NBFCs in India :
Asset Finance Company (AFC):Primarily finances the purchase of physical assets such as automobiles, machinery, equipment, etc.
Investment Company (IC):
Engages in the acquisition of securities.
Loan Company (LC):
Provides loans and advances.
Infrastructure Finance Company (IFC):
Finances infrastructure projects as defined by the RBI.
Systemically Important Core Investment Company (CIC-ND-SI):
Holds investments in its group companies and is systemically important.
Micro-Finance Institution (MFI):
Provides microfinance services, typically to low-income groups.
Non-Banking Financial Company - Micro-Finance Institution (NBFC-MFI):
Specifically engages in microfinance activities.
Non-Banking Financial Company - Factors (NBFC-Factors):
Engages in factoring business.
Non-Banking Financial Company - Infrastructure Finance Company (NBFC-IFC):
Raises funds through bonds and loans for infrastructure projects.
Benefits of NBFC license from RBI
Obtaining a Non-Banking Financial Company (NBFC) license from the Reserve Bank of India (RBI) can offer several benefits to entities looking to engage in financial activities. NBFCs play a crucial role in the Indian financial system by providing various financial services, excluding traditional banking services. Here are some key benefits of obtaining an NBFC license from RBI:
Diversification of Financial ServicesNBFCs has the flexibility to offer a wide range of financial services such as loans and advances, acquisition of shares/stocks/bonds/debentures, leasing, hire-purchase, insurance business, and more. This allows for diversification and adaptation to market demands.
Targeting Specific Segments
NBFCs can specialize in catering to specific market segments, industries, or types of financial products, allowing them to develop niche markets and build expertise in specific areas.
Credit Enhancement
NBFCs can play a crucial role in providing credit to sectors that may be underserved by traditional banks. This can contribute to financial inclusion and economic development by reaching out to a wider range of borrowers.
Flexible Business Models
NBFCs have a more flexible regulatory framework compared to banks, allowing for innovation and adaptation to changing market conditions. This flexibility can be advantageous in responding to customer needs and market trends.
Quick Decision-Making
NBFCs often have streamlined decision-making processes compared to traditional banks. This agility can be beneficial in responding quickly to market opportunities and adapting to changing economic conditions.
Less Stringent Regulatory Requirements
While regulatory oversight is still present, NBFCs generally face less stringent regulations compared to banks. This can reduce the regulatory burden and compliance costs for smaller financial entities.
Filling Gaps in Financial Services
NBFCs can fill gaps in the financial services landscape by providing complementary services to traditional banking institutions. This contributes to a more robust and comprehensive financial ecosystem.
Rapid Growth Potential
With the right business model and strategy, NBFCs have the potential for rapid growth, especially in sectors with high demand for specialized financial services.
Access to Funding
Being regulated by the RBI enhances the credibility of an NBFC, making it easier to attract funding from banks, financial institutions, and investors. This access to funding is crucial for the growth and sustainability of the NBFC.
Contribution to Economic Growth
NBFCs plays a vital role in supporting economic growth by providing financial services to various sectors, facilitating investment, and contributing to overall economic development.
Eligibility Criteria for Online NBFC Registration in India
The eligibility criteria for online registration of an NBFC (Non-Banking Financial Company) in India typically include the following:
Company Structure:
The applicant must be registered as a company under the Companies Act, 2013 or earlier acts.
Minimum Net Owned Fund (NOF):
The minimum Net Owned Fund (NOF) requirement varies based on the type of NBFC. For example:
- For NBFCs engaged in non-financial activities: NOF of at least ₹15 lakhs.
- For NBFCs engaged in financial activities: NOF requirements can vary, often starting from ₹2 crores.
Management
The management must be competent, with at least one director having experience in financial services or related fields.
Fit and Proper Criteria:
Directors and shareholders must meet the fit and proper criteria as per RBI guidelines, which include criteria related to financial soundness, integrity, and track record.
Business Plan:
A detailed business plan outlining the activities and projections for at least the next three years.
Compliance:
The applicant must comply with all regulatory requirements and guidelines issued by the Reserve Bank of India (RBI) for NBFCs.
Infrastructure:
Adequate infrastructure must be in place to conduct the proposed business activities.
Online Application Requirements:
The applicant must have the necessary documents ready for online submission, including identity proofs, address proofs, financial statements, business plans, etc.
Documents Required NBFC Registration Online in India
The documentation required for NBFC Registration Online in India typically involves a comprehensive set of documents to establish the entity's eligibility, compliance, and financial soundness. The specific documents may vary based on the type of NBFC and the nature of financial services it intends to provide. Here is a general list of documents commonly required for NBFC registration Online :
Incorporation Documents
Certificate of Incorporation issued by the Registrar of Companies (RoC).L Memorandum and Articles of Association (MOA and AOA). Board resolution for NBFC registration.
Company PAN and TAN
Audited financial statements, including balance sheets, profit and loss statements, and cash flow statements for the last three years (if applicable).
Net Owned Funds (NOF) Certificate
Certificate from a Chartered Accountant confirming the Net Owned Funds as per RBI guidelines.
Fit and Proper Declaration
Fit and Proper declarations from directors and key management personnel.
Business Plan
Comprehensive business plan outlining the proposed activities, target market, and operational plans.
Credit Information Report (CIR)
Credit Information Report of the company and its directors from credit information companies.
Details of Group Companies
Details of any group companies, along with their financials and NOC (No Objection Certificate) from the parent company if applicable.
Banker's Report
Banker's report on the company's account conduct and financial soundness.
Infrastructure and Systems
Details of the infrastructure and systems in place for conducting financial operations.
Risk Management Framework
Framework for risk management, including policies and procedures.
Details of Promoters and Shareholding
Details of promoters, shareholding pattern, and share certificates.
Compliance Certificate
Compliance certificate from a Company Secretary or Chartered Accountant confirming adherence to regulatory requirements.
Regulatory Approval
Regulatory approval from the RBI for NBFC registration.
Due Diligence Reports
Due diligence reports on directors and key management personnel.
Application Forms
Completed application forms as prescribed by the RBI.
Undertaking and Declarations
Various undertakings and declarations as required by the RBI.
NBFC Registration Fee
A company registering as an NBFC with a Net Owned Fund of Rs. 2 crores must pay an approximate processing cost of Rs. 3, 50,000 to complete the NBFC license registration process. If you choose to use an NBFC consultant's professional knowledge, there will be an additional fee of 10–12 lakhs rupees. As a result, the total cost to obtain an NBFC license for you might be between Rs. 15 and 16 lakhs.
What is the NBFC Registration in the India Process?
The registration process for a Non-Banking Financial Company (NBFC) in India is regulated by the Reserve Bank of India (RBI). The process involves several steps, and applicants need to adhere to the guidelines provided by the RBI. Here is a general overview of the NBFC registration process:
Preparation and Eligibility Assessment
Understand the specific type of NBFC registration you are seeking (e.g., Asset Finance Company, Microfinance Institution, etc.). Ensure that your entity meets the eligibility criteria, including the minimum Net Owned Funds (NOF) requirement.
Incorporation of the Company
Incorporate the company as per the Companies Act, 2013, with the necessary documents such as the Certificate of Incorporation, Memorandum of Association (MOA), and Articles of Association (AOA).
Minimum Capital Requirements
Ensure that the company has the minimum required Net Owned Funds (NOF) based on the type of NBFC.
Appointment of Key Personnel
Appoint directors and key management personnel who meet the fit and proper criteria specified by the RBI.
Prepare Business Plan
Develop a comprehensive business plan outlining the proposed activities, target market, and operational plans of the NBFC.
Compliance with Regulatory Requirements
Ensure compliance with the regulatory requirements prescribed by the RBI, including risk management frameworks, infrastructure, and systems.
Credit Information Report (CIR)
Obtain the Credit Information Report of the company and its directors from credit information companies.
Due Diligence Reports
Prepare due diligence reports on directors and key management personnel.
Application Forms
Obtain and fill out the prescribed application forms provided by the RBI for NBFC registration.
Submission of Application
Submit the completed application forms and supporting documents to the Regional Office of the RBI under whose jurisdiction the registered office of the company is located.
Acknowledgment of Application
Upon submission, the RBI will provide an acknowledgment of the application.
Verification and Processing
The RBI will undertake a detailed examination of the application, including the business plan, financial statements, and compliance with regulatory requirements.
Clarifications and Additional Information
The RBI may seek clarifications or additional information during the processing of the application.
Issue of Certificate of Registration
Once satisfied with the application, the RBI will issue the Certificate of Registration, allowing the entity to operate as an NBFC.
Public Notice
Publish a public notice indicating that the company has obtained NBFC registration from the RBI.
Benefits of Choosing BiatConsultant as an NBFC Registration Consultant in Delhi
Choosing BiatConsultant as your NBFC registration consultant in India offers several benefits:
Expertise and Experience:
BiatConsultant specializes in NBFC registration, bringing deep knowledge and experience in navigating the regulatory landscape and ensuring compliance with RBI guidelines.
Efficiency:
They streamline the registration process, leveraging their expertise to handle paperwork, filings, and documentation efficiently, saving you time and effort.
Tailored Solutions:
They provide customized solutions based on your specific business needs and objectives, ensuring that the NBFC structure and activities align with regulatory requirements.
Comprehensive Support:
BiatConsultant offers end-to-end support, from initial consultation to post-registration compliance, including assistance with drafting business plans, financial projections, and other necessary documents.
Regulatory Compliance:
They keep abreast of the latest RBI regulations and guidelines, ensuring that your NBFC registration process remains compliant at all stages.
Risk Management:
They help mitigate risks by ensuring that all aspects of the registration process are handled meticulously and by regulatory standards.
Transparent Communication:
BiatConsultant maintains transparent communication throughout the process, keeping you informed about the progress and any regulatory updates.
Cost-Effective:
Engaging a specialized consultant like BiatConsultant can often be cost-effective in terms of avoiding potential delays, penalties, or regulatory non-compliance issues.
Some FAQs Related to NBFC Registration in India
NBFC based on the authorization to take deposits
1.The Deposit taking NBFC (Type 1)
2.Non- Banking accepting NBFC (Type 2)
NBFC based on their activities :
1.Non-Banking Financial Company-- Investment and credit company
2.Infrastructure Debt Fund
3.Peer to peer lending marketplace
4.Infrastructure Finance company
5.Core investment company
6.Mortgage guarantee company
7.Mutual benefit Finance company
2.Minimum capital of 2 crores in the account holder is Compulsory.
3.Create a Fixed Deposit of 2 Crores.
4.FDI compliance as per FEMA Act ( in case of Foreign investment)
5.Complete Documentation is required
6.Necessary documents along with FD Receipt is to be submitted before RBI.
2.Certified copy of registration certificate is required from the Regional Registrar of Companies.
3.Latest updated KYC and income Proof of directors and shareholders are required.
4.Updated net worth of Director and shareholders of the company is to be attached along with the documents.
5.Banker report on initial Fixed deposit of Rs. 2 cr.
6.Proof of Educational qualification of directors and shareholders.
7.Latest credit reports of directors and shareholders.
8.Submission of Director’s profile which proves at least 10+ years experience in financial institution
9.Detailed action plan about the Loan products, Fair practice code, credit and Risk assessment policy
10.Submission of IT process.
2.Then there should be some Business plan in its registration process which involves Founders and executive services, Loan Product, lending procedure with standard operating procedure, SWOT analysis, credit and risk model, competitors analysis, Financial forecast etc.
3.Formation and incorporation of the company and that company must be NBFC registration under companies act, 2013 or earlier Companies Act, 1956.
4.The minimum amount of net owned capital or fund which must be possessed by the aspirant company for NBFC registration in india is 2 Cr, i.e. paid up equity share capital.
5.Open a fresh bank account. Here NBFC registration required minimum capital has to be kept in the deposit account opened which must be free from all liens. Generally such amounts are maintained in the form of Fixed deposit, but while making the application to the RBI then this amount has to be maintained in their Bank account as RBI verifies the deposits of the company with the concerned bankers.
6.The aspirant company is required to submit the application for NBFC registration online to the RBI. after which the Applicant company will get an application reference number for NBFC registration. After that, the company is required to submit the hard copy of the online application along with the required documents to the concerned regional office of the RBI.
