NBFC registration is the process through which companies obtain a valid certificate of registration under Section 45 IA of the RBI Act of 1934. This registration allows companies to meet the credit demands that traditional banking systems do not target, thereby expanding their reach and services.
What is an NBFC?
NBFC stands for Non-Banking Financial Company. It is a financial institution or company registered under the Companies Act of 2013. NBFCs in India are authorized to carry out business activities associated with the advancement of loans and the acquisition of shares, stocks, bonds, debentures, and securities issued by the local government or other authorities.
Category of NBFCs
NBFCs are categorized into four layers based on their size, activity, and perceived riskiness:
- Base Layer NBFC (NBFC-BL): Includes non-deposit-taking NBFCs below an asset size of Rs. 1000 Crores.
- Middle Layer (NBFC-ML): Includes all deposit-accepting NBFCs and certain non-deposit-taking NBFCs.
- Upper Layer (NBFC-UL): Includes the top 10 eligible NBFCs by asset size.
- Top Layer (NBFC-TL): Typically remains empty but may include NBFCs from the upper layer if systemic risk increases.
Types of NBFCs
NBFCs can be classified based on their activities and liabilities:
Based on Activity
- Asset Finance Company: Provides financing for assets such as machinery and automobiles.
- Investment and Credit Company (ICC): Engages in lending and investment activities.
- Mortgage Guarantee Company: Offers mortgage guarantee services to lenders.
- Infrastructure Finance Company: Focuses on financing infrastructure projects.
- Non-Operative Financial Holding Company (NOFHC): Allows promoters to establish a new bank.
- Micro Finance Company: Provides financial services to low-income individuals and small businesses.
- Housing Finance Company: Regulated by the RBI and National Housing Banks.
Based on Liability
- Deposit Accepting NBFCs: Currently, no new licenses are being issued in this category.
- Non-Deposit Accepting NBFCs: Includes core investment and loan companies, further categorized into type I and type II.
Benefits of NBFC Registration
- Online Loan Facility: Simplified loan, credit, and lending services.
- Better Risk Management: Enhanced customer interest protection.
- Low Cost and Time: Lower operating costs and faster license acquisition.
- Simple Registration Process: Easier than small bank registration.
- Addresses Customer Grievances: Advanced technology for customer problem resolution.
- Allowed FDI: Permits up to 100% foreign direct investment.
- Diversified Financial Services: Wide range of services including loans and asset financing.
- Profitable Business Structure: Highly profitable with potential market growth.
Eligibility Criteria for NBFC Registration
- Company Registration: Must be registered under the Companies Act.
- Quality of Management: Requires experienced directors with clean records.
- Quality of Capital: Only Tier-I Capital is accepted.
- Minimum Net Owned Fund: Rs. 10 Crores, varying by NBFC type.
Documents Required for NBFC Registration
- Company’s Brochure
- PAN/Corporate Identity Number
- Address proof
- Memorandum & Articles of Association
- List of Directors' profiles
- Directors' qualifications and experience certificates
- CIBIL/credit reports of directors
- Board resolution on ‘Fair Practices Code’
- Statutory Auditor owned funds certificate
- KYC, CIBIL report, ITR, and banker report
- Audited balance sheet
- Profit and loss statement
- Last 3 years' directors' & auditors' reports
- Self-certified copy of bank statement
- Income Tax Return (ITR)
NBFC Registration Process
- Company Registration: Must be a registered company.
- Draft and Submit Business Plan: A comprehensive 5-year business plan.
- Application for NBFC Registration: Submit online application on the RBI website.
- Prepare and File Documents: Submit necessary documents for verification.
- Issue of Registration Certificate: Granted after successful verification.
Compliance Requirements for NBFC Registration
- Anti-Money Laundering & KYC: Adequate systems for compliance.
- CIC Reporting: Reporting standards for credit history.
- Grievance Redressal Mechanism: Effective customer support.
- Prohibited Business Activities: Follow RBI’s prohibited activities.
- Annual Compliance: Filing annual returns with RBI and MCA.
- Obtain Necessary Licenses: Secure GST, Aadhar verification, and other licenses.
- Adherence to Digital Guidelines: Compliance with RBI digital lending guidelines.
Penalty for Non-Compliance
Non-compliance with RBI guidelines can result in penalties, including imprisonment and fines as specified under Section 58B (4A) of the RBI Act of 1934.
Recent Updates on NBFC Registration
The RBI has introduced a scale-based regulatory framework classifying NBFCs into four layers, each with specific regulations.
Why Choose NBFC Advisor for NBFC Registration?
NBFC Advisor specializes in simplifying the NBFC registration process with the following services:
- Simplified Registration Process
- Expert, Experienced Service Providers
- Ensures Risk Management
- Innovative Business Solutions
- Financial Advisory Services
Choose NBFC Advisor to navigate the complexities of NBFC registration and unlock your business's full potential in the financial sector. Contact us today to get started!