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A non-banking financial company (NBFC) is a financial firm that does not possess a banking licence but can provide consumers with financial goods and services. Loans and advances, stock acquisition, hire-purchase, financing leasing, chit funds, and other financial services are all covered by NBFC registration. An NBFC should always be distinguished from a bank in several ways, including the fact that it cannot take savings or current account deposits, cannot issue checks drawn on itself, and does not provide deposit insurance or credit guarantee coverage to its depositors.
Role of RBI in NBFC Registration
The Reserve Bank of India oversees and supervises non-banking financial companies. When a company’s financial assets account for more than 50% of total assets and revenue from financial assets accounts for more than 50% of gross income, it is considered to be in the primary business of financial activity. A firm that meets both of these requirements is required to get an NBFC licence from RBI. The 50-50 test is a popular NBFC licence test.
When is NBFC Registration Not Mandatory?
Because they are controlled by other financial sector authorities, the following categories of financial organisations have been exempted from the RBI’s NBFC registration requirements and NBFC rules:
- Housing Finance Companies
- Insurance Companies
- Stock Broking Companies
- Merchant Banking Companies
- Venture Capital Companies
- Companies that run Collective Investment Schemes
- Mutual Funds
- Nidhi Companies
- Chit Fund Companies
NBFC Registration: Requirements
- The company should already be registered as a limited company under the Company Act 2013 or the Company Act 1956.
- The company should have a business financial plan for at least 5 years.
- A good CIBIL or credit rating
- The net owned money must be at least ₹ 2 crores.
- The assets must be worth at least ₹ 200 crores.
- FEMA and capital compliance must be met.
- One-third of the board of directors should have financial experience.
Documents Required for NBFC Registration
The following documents must be provided in order to get an NBFC licence:
- In the case of public limited businesses, certified copies of the Certificate of Incorporation and the Certificate of Commencement of Business.
- Certified copy of the company’s most recent Memorandum and Articles of Association.
- PAN/CIN.
- CIBIL Data relating to the directors
- Financial Statements of the previous two years of Board Resolution stating that the firm has not taken any public deposits in the past (specify period)/does not hold any public deposits as of the date and will not accept any in the future without prior written clearance from the Reserve Bank of India.
- Certified copy of the Board Resolution for the creation of the “Fair Practices Code.”
- Statutory Auditors Certificate attesting to the fact that the firm accepts/does not accept/does not hold Public Deposit.
- Statutory Auditors Certificate attesting to the net owned fund as of the application date.
- Authorised Share Capital and the company’s most recent ownership structure, including the percentages Copy of Fixed Deposit receipt and banker’s certificate of no lien reflecting amounts in support of Net Owned Funds.
- Details about bank balances/accounts/complete postal address of the branch/bank, loan/credit facilities where such services have been availed.
- The previous three years Audited balance sheet and profit and loss account, as well as directors’ and auditors’ reports, or for the shortest period available (for companies already in existence).
- Bank statements/IT returns, which must be self-attested.
In addition to the documentation and information listed above, to acquire an NBFC License additional documentation and paperwork is required. To seek further information about the kind of paperwork necessary for an NBFC License in India, get in touch with the experts at Zolvit right away!
NBFC Registration: Step by Step Process
Step 1: Register the company under the Companies Act 2013, or the Companies Act 1956, whichever is applicable. The company’s net owned funds must be at least ₹ 2 crores and it should have at least one director from the same background.
Step 2: Ensure a good CIBIL score as it is essential in order to register as an NBFC.
Step 3: After that, go to the RBI’s official website and fill out the application form.
Step 4: Attach all relevant documentation to the application form.
Step 5: After submitting the application form, you will be assigned a CARN number.
Step 6: Send a physical copy of the application to the RBI’s regional branch.
Once the application has been verified, your NBFC licenced will be approved or rejected. In order to ensure that you come out victorious in the fight for an NBFC license, get in touch with the experts at Zolvit for professional assistance.