NBFC Registration

Non-Banking Financial Companies (NBFCs) play a crucial role in the financial sector by offering various financial services like loans, investments, and asset financing. NBFC registration is a mandatory process governed by the regulatory authority of the respective country. It involves stringent scrutiny of the company's financial health, business model, and compliance standards to ensure stability and safeguard the interests of stakeholders. Obtaining NBFC registration signifies adherence to regulatory norms, instills trust among customers, and facilitates access to funding and partnerships. Compliance with ongoing regulatory requirements is vital to maintaining registration status and sustaining operations in the financial market.

NBFC Registration

NBFCs or Non-Banking Financial Company are registered under the Companies Act 1956/Companies Act 2013. Though these do not possess a banking license, yet are involved in various financial services. Some of the services include:

  • Loan and credit facilities
  • Asset Financing
  • Acquisition of shares/stocks/bonds
  • Hire-purchase
  • Insurance business
  • Chit business
  • Currency exchange
  • Peer to peer lending
  • Hedge funds
book your appointment now
Untitled design (94)
Untitled design (95)

Benefits of NBFC Registration

  • NBFCs can provide loan and credit facilities to its clients
  • These companies can also trade in money market instruments.
  • The NBFCs can also take part in wealth management such as managing a portfolio of stocks and shares.
  • These companies become the last resort for many other businesses as these are pumping huge amounts of money in country-wide projects.
  • The functioning of these companies is much faster than banks.
  • Due to the use of technological advancements, you don’t have to depend on bank branches.
  • Due to its digitization, the reach of the NBFCs has broadened and it can reach a wider audience within seconds.
  • Investments in property with NBFCs are profitable due to its flexible rates, easy repayment, acceptable property collaterals with quick and easy processing.
  • Most of the NBFCs have formed partnerships with the government and used their database and identify customer worthiness before granting loans. This would reduce the risks and maximize profits.

Documents Required for NBFC Registration

Significant documents required for NBFC Registration in India are as follows:

  • Documents related to the administration and management of the company
  • Company Incorporation Certificate
  • The Memorandum of Association and the Articles of Association of the applicant-company or firm
  • Documents describing the location of the company
  • Detailed information about Directors or Partners of the Company
  • Accounts of the company well-audited for last three consecutive years
  • Board Resolution in favor of NBFC formation
  • Should have a bank Account with a minimum paid up equity share capital of INR-2 Crore
  • Income tax PAN, etc.

Pre-requirements of NBFC

For a company to be considered an NBFC, it should be registered as per the rules, regulations, and provisions mentioned in the Companies Act 2013 of the Companies Act 1956.

The minimum owned fund for this should be Rs.2 crore and this shouldn’t be borrowed fund. (This limit is different in other cases like that of specialized NBFCs like NBFC-MFIs, NBFC Factors, CICs, as it is decided on the kind of NBFC). Any gift from spouse comes under owned-funds.

At least 1/3rd of the directors must have some experience in finance.

Also, there must be a detailed plan for the next 5 years.

NBFCs as sponsors of IDF-MF

For a company to be considered as IDF-MF, the minimum owned fund should be at least Rs.3 crore, CRAR of 15% and NPA not more than 3% of the net advances. Along with this, the company should be operational for the last 5 years and profitable in the last 3 years.

Untitled design (96)
book your appointment now

Role of NBFCs

NBFCs can lend both secured and unsecured loans based on their alternative lending models. These companies play a significant role in the financial services of the economy and have gone considerable changes in recent years. And after adopting high-end tech-based business models, the roles offered by them are:

  • NBFCs create a favorable balance in the financial needs of the country as most of the applications are rejected by the traditional banks.
  • These companies use alternative credit scoring model to assess the potential client and after this process the loans.
  • Most of the Indian Fin-tech companies have been using the NBFC model to offer financial services.

Regulations of NBFC

Company TypeRegulators
NBFCs registered with RBIRegulation, supervision, surveillance and enforcement under RBI
NBFC regulated by other regulatorsDepends on the type of institution
Housing Finance InstitutionsNational Housing Bank
Merchant Banking Company/Venture Capital Fund Company/Stock Broking/Collective Investment Schemes (CIS)Securities Exchange Board of India
Nidhi Companies and Mutual Benefit CompaniesMinistry of Corporate Affairs
Chit Fund CompaniesState Government
Insurance CompaniesInsurance Regulatory and Development Authority
Non-Banking Non-Finance CompaniesRegulation, supervision, surveillance, and enforcement under the Companies Act 1956.

A FinTech platform that understands your need

A comprehensive package of services for starting and managing your whole business, offered to you by a firm with a long-term goal to improve the way you do business.

book your appointment now