What is NBFC Registration and its License

NBFC means Non-Banking Financial Company which is registered under the Companies Act, 2013. It mainly includes the business activity like loans and advances, acquisition of shares/stocks/bonds/securities which are issued by government or local authority. An NBFC can carry on the business only after obtaining a NBFC license from RBI. There are mainly two types of NBFC i.e. Deposit taking NBFC and Non-deposit NBFC.

What Are The Types Of NBFC?

Asset Finance Company

The main business of these companies is to finance the assets such as machines, automobiles, generators, material equipment’s, industrial machines etc.

Investment Company (IC)

The main business of these companies is to deal in securities.

Loan Companies (LC)

The main business of such companies is to make loans and advances

Infrastructure Finance Company (IFC)

A company havingminimum net owned funds of at least Rs. 300 Crore and has deployed 75% of its total assets in Infrastructure loans is called IFC provided it has credit rating of A or above and has a CRAR of 15%.

Systemically Important Core Investment Company (CIC-ND-SI)

It is an NBFC which is carrying on the business of acquisition of shares and securities which satisfies the prescribed conditions.

Infrastructure Debt Fund (IDF-NBFC)

IDF-NBFC is a company registered as NBFC to facilitate the flow of long term debt into infrastructure projects. IDF-NBFC raise resources through issue of Rupee or Dollar denominated bonds of minimum 5 year maturity. Only Infrastructure Finance Companies (IFC) can sponsor IDF-NBFCs.

Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI)

NBFC-MFI is a non-deposit taking NBFC which has at least 85% of its assets in the nature of qualifying assets which satisfy the prescribed conditions.

Prerequisites for NBFC Registration

Ø  It must be a company registered under Companies Act 2013

Ø  It must have a minimum equity net owned fund of Rs. 2 Crore

Ø  The CIBIL record must be clear

Ø  At least one Director must be from NDFC background or senior banker as full-time director in the company.

REGISTRATION PROCESS

Ø  First the company must be registered under the companies act 2013

Ø  The main object in the MOA must be financial business

Ø  After the company is incorporated an online application is to be filed in RBI website

Ø  Submit the hard copies of the documents to RBI

Ø  Certified MOA and AOA of companies

Ø  Profile of Directors along with their educational qualifications and work profile

Ø  Respective Board Resolution related to authorize signatory, has not accepted any public deposit in the past or without the prior approval of RBI.

Ø  The Company should give a Board Resolution stating that it will not carry any NBFC unless it get NBFC registration with RBI

Ø  Last three years audited financial statements for companies which are in existence

Ø  Business plan of the company for the next three years

Ø  Details of bank statement and bank account details.

RESTRICTIONS & REGULATIONS

Ø  Institution whose principal business is of agriculture

Ø  Business engaged in industrial activity

Ø  Business engaged in purchase or sale of any goods or services

Ø  Business engaged in sale/purchase of immoveable property

Ø  It cannot receive deposits repayable on demand

Ø  Cannot issue cheques drawn on itself

Ø  Public deposits can be taken for a minimum period of 12 months and maximum for a period of 60 months

Ø  The interest rates on deposits cannot be higher than the ceiling rate as prescribed by RBI

Ø  The deposits are not insured and their repayment is not guaranteed by RBI.

ADVANATGES OF NBFC

Ø  Provide loans and credit facilities with more ease than banks

Ø  Less compliances than bank

Ø  The process of loan in NBFC is more faster as compared to banks

Ø  Competitive Interest rates

Ø  Availability of loans for those with poor credit history

WHY NBFC???

NBFC’s provide all types of financial services similar to banks with two major differences – they do not hold a banking license and they cannot accept monetary deposit from individual customers.

NBFC’s are recognized as complementary to the banking sector as a result of the implementation of innovative marketing strategies, the introduction of tailor-made products, customer-oriented services, attractive rates of return on deposits and simplified procedures, etc.The NBFCs has introduced various innovative products such as IPO financing, three-wheeler financing, vehicles financing, small personal loans, finance for tires & fuel, asset management, mutual fund distribution and insurance advisory, etc.

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Brief guide to NBFC- Meaning, Types and Registration

What is NBFC?

Non- Banking Financial Institutions as the names suggest are different from banks on many levels. But they do provide a variety of banking as well as non-banking services.

 Section 45-IF of the RBI Act 1934 defines NBFC. Any company whose primary business consists of following:

-         receiving deposits and advances

-        acquisition of stocks or shares

-        leasing, hire-purchase,

-        insurance business, chit business

-        lending money

Regulated by RBI

NBFCs are registered and regulated by Reserve Bank of India. Various rules and regulations are laid down for the same purpose. Chapter III B of the RBI Act 1934 regulate the activities conducted by every NBFC.

What different Kinds of NBFC can be incorporated?

NBFCs can be categorized depending upon their:

·       Liability or

·       Activity

Depending upon Liability, NBFC can either be

-        Deposit taking (NBFCs-D) or

-        Non-deposit taking (NBFCs-ND). Micro Finance and NBFC Factor are prime examples of non-deposit taking NBFC.

Similarly, based on activity NBFC license can be applied in different categories like

-        Loan Company,

-        Asset Finance Company,

-        Investment Company etc.

NBFC Registration

Section 45-IA of the RBI Act 1934 defines norms for NBFC registration. For registration there are two basic requirements:

1. The applicant must be a company duly registered under Companies Act, 2013
2. The applicant company is required to have minimum Net Owned Fund of Rs.2 Crore. If the applicant is a freshly registered company, then it must have initial capital in the form of fixed deposit of the same amount.

Net Owned funds must be calculated as per the provisions of RBI based on the previous year’s audited balance sheet.

Document Requirement

Following documents are required to be attached with the application for registration of NBFC:

• Certified copies of Certificate Of Incorporation, PAN, AOA and MOA of the applicant company.
• Information of all directors in Annex III, duly signed by them separately;
• Information about sources of funds;
• A declaration given by directors or shareholders stating that they are not associated with any unincorporated entity accepting deposits;
• CIBIL data of the director/shareholders of the company.
• Audited financial statements of last three years
• Business plan for the next 3 years, etc.

Procedure

For registration an online application is required to be filed on the RBI’s official website rbi.org.in.

Simultaneously, hard copies of two complete sets of application are also required to be submitted in the regional RBI office. Please cross check that all the annexure are submitted with the application.

Regional office after scrutiny, forward the application to the central office. If the central RBI office is satisfied after due scrutiny of the application, it will issue Certificate of Registration.

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