Brief guide to NBFC- Meaning, Types and Registration

28 Jun

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:

The applicant must be a company duly registered under Companies Act, 2013
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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