NBFC Company Registration

Introduction

The term 'Non-Banking Financial Company' refers to a financial institution that does not have a banking license but is able to provide financial services and products. An NBFC registration is primarily concerned with loans and advances, share acquisitions, hire-purchase agreements, finance leasing, chit funds, etc. In many ways, an NBFC is different from a bank, such as being unable to accept savings and current account deposits, is unable to issue checks drawn on itself, and does not offer deposit insurance or credit guarantees to its depositors.

Non-Banking Financial Companies (NBFCs) are a significant part of the Indian financial system. They play a crucial role in meeting the financial needs of various sectors, especially those that are underserved by traditional banks. The Reserve Bank of India (RBI) classifies NBFCs based on their nature of activities. Below are the types of NBFCs in India:

• NBFC - Asset Finance Company (AFC): Engaged in the principal business of financing physical assets such as machinery, equipment, or vehicles.

• NBFC - Investment and Credit Company (NBFC-ICC): It was introduced to provide a harmonized regulatory framework and simplification of categories. NBFC-ICC is a result of the merger of three categories of NBFCs: Asset Finance Companies, Loan Companies, and Investment Companies.

• NBFC - Infrastructure Finance Company (NBFC-IFC): Engages primarily in the infrastructure loans which are over 75% of their total assets.

• NBFC - Systemically Important Core Investment Company (CIC-ND-SI): Primarily holds shares, stocks, bonds, debentures, or securities but does not trade in them. The investment in the group companies should be at least 90% of its total assets.

• NBFC - Infrastructure Debt Fund (NBFC-IDF): Facilitates the flow of long-term debt into infrastructure projects.

• NBFC - Micro Finance Institution (NBFC-MFI): Provides microfinance loans and services to low-income groups.

• NBFC - Factor: Engages in the principal business of factoring, which means acquiring receivables of assignor or financing, against the security interest of any receivables.

• NBFC - Non-Operative Financial Holding Company (NOFHC): A financial holding company that doesn't carry out any operational activities, financial or otherwise, but holds the bank as well as all other financial services companies regulated by RBI and/or other financial sector regulators.

• NBFC - Mortgage Guarantee Company (NBFC-MGC): Engaged in the business of providing mortgage guarantee.

• NBFC - Peer to Peer Lending Platform (NBFC-P2P): Acts as an intermediary to provide an online platform where borrowers and lenders can match and transact without traditional intermediaries like banks.

• NBFC - Account Aggregator (NBFC-AA): Provides services based on the consent of its users to fetch financial information from financial information providers and display it to the user or any other financial information user.

• NBFC – Housing Finance (NBFC-HFC): Engages in the principal business of financing the acquisition or construction of houses.

• Deposit-taking NBFCs (NBFC-D): They are permitted to accept public deposits. Not all NBFCs can accept deposits, and those who can need to adhere to stringent regulatory requirements.

Different types of NBFCs are subject to different regulatory requirements and guidelines. They might vary in terms of capital requirements, deposit acceptance, and other operational conditions. The RBI continuously reviews and updates the regulatory framework for NBFCs to ensure financial stability and protect the interests of depositors and consumers.

FEATURES OF NBFC COMPANY

• The registration of an NBFC is easier than that of a small bank, which takes more time and costs more money.
• As everyone seeks easy funding sources, the fintech industry is currently expanding. 
• As a result, getting registered under an NBFC and earning a good return will be beneficial for aspiring entrepreneurs.
• NBFCs have an easy registration process.
• Since NBFCs are very systematic and offer a relatively small loan amount, borrowers easily return the amount, making it convenient for lenders.

 

REGISTRATION DOCUMENTS REQUIRED FOR NBFCS

Registration of an NBFC requires the following documents:

• Company Incorporation Certificate.
• The company's brochure along with detailed information about management.
• Please provide a copy of your company's PAN or Corporate Identity Number (CIN).
• Information about the location and address of the office.
• Authenticated copy of the Articles of Association (AOA) and Memorandum of Association (MOA).
• A list of directors' profiles signed by each of them must be attached.
• There is a requirement for the directors of the company to submit CIBIL or credit reports.
• A certified copy of Board Resolution that a company has neither started nor stopped its NBFC operations and will not perform them until it receives its RBI registration.
• The board must pass a resolution on the 'Fair Practices Code' and submit a certified copy of the same.
• The statutory auditor's certificate stating that the company does not hold or accept public deposits.
• The Statutory Auditor must issue a certificate specifying the owned funds as of the date of application.
• It is necessary to provide information about the bank account, loans, balances, credits, etc.
• There are a number of documents that must be submitted, including bank account statements, loan balances, credit balances, and, if applicable, an audited balance sheet and profit and loss statement, as well as the director and auditor's reports for the preceding three years.
• Self-certified copies of a bank statement and income tax returns are required.
• The projection of balance sheets, cash flow statements, and income statements for a company's future, generally for the next three years.

 

HOW TO REGISTER AN NBFC?

For NBFCs, the registration process is as follows:

Step.1 - Apply for a company registration under the Companies Act 2013.

Step.2 - A company is required to have at least Rs. 10 crores in net owned funds.

Step.3 - At least one director should come from the same background as the company.

Step.4 - In order to register as an NBFC, you must have a good CIBIL score.

Step.5 - Now that you have visited RBI's official website, you can fill out an application.

Step.6 - Complete the application form and submit the required documents.

Step.7 - A CARN number will be generated once a completed application form has been submitted.

Step.8 - The application must be sent in hard copy to the regional branch of the RBI.

Step.9 - The license shall be issued to the company after the application has been checked and verified.