All about the registration of NBFCs

What are NBFCs?

Non-banking Financial Companies (NBFC) are fast emerging as an important segment of Indian economy.  NBFCs offer almost everything as banks do, performing financial intermediation in a variety of ways, making loans, accepting deposits, and advances, leasing, hire purchase, etc. NBFC can raise funds from the public, directly or indirectly, and can freely lend them to ultimate spenders. The minimum tenure to accept deposits is 12 months and the maximum period of 60 months. NBFC advance loans to the various small wholesale and retail traders and self-employed persons. NBFC is very popular due to attractive interest rates on deposits. However, In the current scenario, RBI is not issuing any license to Deposit-Taking NBFCs. The working and operations of NBFCs are regulated by the Reserve Bank of India (RBI) within the framework of the Reserve Bank of India Act. Section 45-IA provides that no NBFC shall commence or carry on the business of Non- Banking Financial Institution without obtaining a Certificate of NBFC Registration issued by the RBI. NBFCs are classified into the following categories:
  1. Development finance institution
  2. Investment Companies
  3. Discount & Guarantee houses
  4. Corporate Development Companies
  5. Venture Capital Companies
  6. Leasing Companies
  7. House Finance Companies
Types of NBFCs:
  1. Investment Company
  2. Loan Company
  3. Infrastructure Finance Company
  4. Housing Finance Company
  5. Core Investment Company
  6. Micro Finance Company
  7. Asset Finance Company
  8. Mortgage Guarantee Company
Most popular NBFC types:
  1. Asset Finance Company (AFC):
  • Financing of physical assets like car, Machine
  • 60% of total loans and income should be from Assets finance
  • NOF requirement- Rs. 200 lac.
  1. Loan Company (LC):
  • Personal loan, Business loan, Secured loan, Gold loan, loan against shares etc. and all types of unsecured loans and loans that can not be given by AFC.
  • NOF requirement- Rs. 200 lac.
  • Micro Finance Institution (MFI):
  • Only unsecured loans to lower income group )rural 1 lakh per annum and urban 1.6 lakh per annum.
  • Loan max Rs.60,000 in the first cycle and subsequent Rs.100,000.
  • NOF requirement- Rs. 500 lac.
  1. Peer to Peer lending (NBFC – P2P):
  • Market place lending platform
  • P2P NBFC will provide only services not loan and will manage
  • Credit Reporting, collection etc.
  • NOF requirement- Rs. 200 lac.
Procedure for registration of NBFC and TAT 
S.No
 
Task
 
TAT
 
Ratio of completion
 
1
 
Company Incorporation
 
10 days
 
10%
 
2
 
Opening of Bank account
 
10 days
 
10%
 
3
 
Minimum NOF and Fixed Deposit
 
5 days
 
10%
 
4
 
Application to RBI for the License
 
30 days
 
30%
 
5
 
RBI conducts Due Diligence of and will raise questions
 
60 days
 
60%
 
6
 
Filing of objections and requirements by RBI
 
20 days
 
75%
 
7
 
Follow up with RBI
 
15 days
 
80%
 
8
 
Presentation and Meeting with the concerned officer of RBI
 
15 days
 
90%
 
9
 
Certificate of Registration issued by RBI
 
30 days
 
100%
**TAT for NBFC registration is subject to RBI discretion. Above mentioned time is only an estimate based on our past experience.

The basic documents required for the incorporation are:

  1. DSCs and DINs of the proposed promoters and Directors
  2. Proposed name of the Company. Name is subject to availability (We will check with MCA and let you know if the name is available).
  3. PAN card, Aadhar cards, passports, latest utility bills of all the promoters and Directors.
  4. Proposed main objects of the Company
  5. A declaration stating that the Company will not commence business unless a Certificate of Registration as an NBFC is issued by the RBI.

The basic documents required for the registration as an NBFC with the RBI are:

  1. COI (Certificate of Incorporation) of the Company
  2. Minimum NOF/Paid up capital of Rs. 200 lakhs..
  3. The business plan for 5 years
  4. Certified copies of Memorandum and Articles of Association of the Company
  5. Banker's report in a sealed envelope.
  6. Auditors' report about receipt of minimum net owned fund and certain other certifications from Auditors
  7. KYC, Income proof (ITR), Net worth Certificates, Credit Reports, Education proofs of all directors and shareholders, Experience letters of the directors in the field of banking and finance.
  8. Business profiles of all directors
  9. A certificate of CA regarding details of group/associates/subsidiary/holding companies along with details of investments in other NBFCs as shown in the proforma Balance Sheet.
  10. Self-declaration about any penalty imposed by Government authority / Charge sheet / NI 138 proceedings etc.
  11. Various other certifications anddeclarations
*** Atleast one promoter/Director of the proposed NBFC shall have sound experience of working with an NBFC or shall be a professional having en experience of handling NBFCs or should have sound experience of working with a bank. *** The CIBIL reports of the promoters shall not have any negative remarks. If there are any, care shall be taken to correct them before submitting them to RBI. For any further assistance, you can contact Suneetha from NSSK Corporate Advisors Private Limited at suneetha@nsskca.com / 040-42607457.

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