In India, the financial industry comprises both commercial banks and Non-Banking Financial Companies (NBFCs). Banks are not our country’s exclusive source of lending and borrowing capital. NBFCs are an option for those who do not want to wait in long queues at banks to borrow money to start a business. NBFCs offer a wide range of services such as chit-funds, loans, and so on, and their role is distinct from that of banks.. NBFCs are the most effective technique for lending and borrowing funds in developing nations such as India, where there is a continual demand for short-term resources for individuals living in rural regions. In this post, we will go through the step-by-step nbfc registration process in India and to understand the nbfc registration online process.

What are NBFCs?

Non-Banking Financial Companies, or NBFCs, are corporations formed under the Companies Act of 2013. These businesses provide services such as loans, advances, hire-purchase, debt, equity, currency exchange, financing assets, P2P lending, and many others. NBFCs operate in accordance with the Reserve Bank of India’s standards (RBI).

According to Section 45-I(c) of the Reserve Bank of India Act, 1934, an NBFC is a non-banking company that operates as a financial institution. The Ministry of Corporate Affairs also oversees and manages the NBFCs’ operations.

*To know more about nbfc company registration fees kindly contact our consultants and book free consultation with us.

What are the Roles and Functions of NBFCs?

The following are the duties and functions of NBFCs:

Increase and assist in wealth building;

provide financing to economically disadvantaged elements of society;

development of certain sectors such as infrastructure;

significant employment generation;

specialised credit and long-term auditing

Contributes to the country’s economic development;

aids in the development of financial markets and

contributes to the state exchequer.

What are the different types of NBFCs?

NBFCs are classified under the following sections:

Basis of Liability

In terms of liability, NBFCs are classified as follows:

Deposit-Taking NBFCs (NBFCs-D) (Deposit Taking)

Non-Deposit Accepting NBFCs (ND-NBFCs) (Non-Deposit Taking)

The Non-Deposit Accepting NBFCs are even further classified based on their size. The following are the different sorts of NBFCs according on their size:

NBFCs with Systemic Importance [NBFCs-ND-SI]
Non-Deposit-Taking NBFCs [NBFCs-ND] are non-deposit-taking NBFCs.

On the basis of Activity

NBFCs carry out the following categories of activities according on the nature of the activity:

Investment Company (IC)
Housing Company
Micro Finance Company (MFI)
Asset Finance Company (AFC)
Mortgage Guarantee Company (MGC)
Loan Company (LC)
Infrastructure Finance Company (IFC)
Core Investment Company (CIC)

Which Companies do not require nbfc registration process from RBI?

The following firms do not need to be registered with the RBI:

Housing finance companies
Companies engaged in Stock Broking
Core Investment Companies with assets of less than 100 crore rupees
Nidhi Companies
Chit Fund Companies
Venture Capital Companies
Merchant Banking

*To know more about nbfc registration fees kindly contact our consultants and book free consultation with us.

Differences between a Bank and NBFCs

NBFCs, like traditional banks, can lend and invest money. Furthermore, the actions of banks and NBFCs are comparable. The Companies Act of 2013 and the Banking Regulation Act of 1949 govern financial intermediaries. The Reserve Bank of India has oversight over both financial intermediaries. The following are the distinctions between financial intermediaries:

NBFCs cannot take demand deposits like banks
NBFCs cannot issue cheques on their own and are not part of the settlement and payment system
NBFC depositors are not eligible for deposit protection offered by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

Essential Requirements For NBFC Company Registration from RBI

NBFCs formed under the Companies Act, 2013, or the Companies Act, 1956, that want to launch a non-banking finance company must meet some fundamental standards in order to obtain RBI registration. The following are the essential prerequisites for obtaining NBFC License from the RBI:

The NBFC must be a registered company under the Companies Act, 2013;
the NBFC must have a minimum net owned fund of 2 crore rupees (except for NBFC-Factors, NBFC-MFIs, CIC).

The net owned funds may be computed using the firm’s most recent audited balance sheet. Capital Reserve, Paid-up Equity Capital, Share Premium Account Balance, and Free Reserves comprise a firm’s total owned funds.

What documents are required for the nbfc registration process?

The following documents are necessary for NBFC Registration online process:

The Certificate of Incorporation or the Certificate of Commencement of Business of the Company;
The Company’s management data are included in the Company’s brochure.
a copy of the Company’s PAN card;
a copy of the company’s Corporate Identity Number (CIN);
All documentation relating to the office’s address and location;
A genuine and verified copy of the Company’s Memorandum of Association (MoA);
A legitimate and verified copy of the Company’s Articles of Association (AoA);
Company directors’ credit reports;
The full list of Directors’ profiles, individually filled out and signed by each Director;
A copy of the Board Resolution declaring that the Company has stopped or is carrying out any NBFC activity and will not carry out any NBFC activity until the RBI grants nbfc license;
A copy of your income tax returns and a bank statement that you have self-certified;
Detailed information on bank accounts, loans, credits, balances, and so on;
A real and verified copy of the Board Resolution on the “Fair Practices Code”;
A Statutory Auditors certificate indicating that the Company does not hold any public deposits and does not accept such deposits;
A certificate from the Statutory Auditor stating the amount of money possessed by the Company as of the date of application;
Company Directors’ CIBIL data;
A copy of the document containing information about the Company’s startup capital;
the balance sheet audited and profit and loss statement, as well as Auditors and Directors reports for the three preceding years;
detailed information about the Company’s future plans for the next three years, including cash flow statement, income statement, and balance sheet projections.

Regulatory Guidelines of RBI for NBFC Registration in India

The Reserve Bank of India regulates the operation of NBFCs (RBI). The Reserve Bank of India’s rules must be followed by NBFCs (RBI). The RBI’s guidelines for NBFC registration online are as described in the following:

The sum taken by NBFCs will not be insured by the Reserve Bank of India (RBI); NBFCs really shouldn’t accept demand deposits from public investors or depositors.
The Corporation’s interest rate shall not be higher than the rate set by the Reserve Bank of India (RBI).
NBFCs cannot issue cheques to make settlements and payments; the Company must file a statutory return on deposits every year in Form NBS-1; the Company must file a quarterly return on liquid assets in Form NBS-3; the Company must submit a quarterly return on prudential norms in Form NBS-2; and the Company must submit an audited balance sheet every year.
Credit ratings should be provided to the Reserve Bank of India (RBI) every six months.
Depositors are unable to use the Deposit Insurance and Credit Guarantee Corporation (DICGC) security service.
There would be no additional bonuses, gifts, or extra incentives for NBFC depositors or consumers.
For a minimum of 12 months, the Company may accept public deposits.
The maximum duration of public deposits is 60 months.
The Company cannot accept deposits which are repayable on demand as per the strict guidelines of RBI;
NBFCs that match and are duly rated in accordance with the Minimum Investment Grade Credit (MIGC) score will be qualified for recognising conditional deposits from public depositors;
The Company must keep at least 15% of public deposits in liquid assets.

Step-by-Step Process of NBFC Company Registration in India

The following is a step-by-step approach for registering an NBFC:

Register for Company Incorporation

The candidate must register as a Public Company or a Private Company underneath the Companies Act of 2013. Under the Companies Act of 2013, the company must be approved by the Minister of Corporate Affairs (MCA).

COSMOS Application Submission

The applicant must submit the application using the RBI’s COSMOS website (Cluster of Systems of Metadata for Official Statistics).
Together with the online application form, the applicant must send a physical copy of the application along with the requisite papers to the Reserve Bank of India’s Regional Office (RBI).

Select Company Registration

After gaining access to the RBI website, the login screen of the COSMOS (Cluster of Systems of Metadata for Official Statistics) programme will prompt the applicant to select the Company Registration option.
The applicant should proceed by clicking on the Company Registration of COSMOS (Cluster of Systems of Metadata for Official Statistics) application.

Form Downloading

A window will emerge with an Excel application form that may be downloaded.
The candidate should obtain the proper application form, which is NBFC, from the COSMOS website (Cluster of Systems of Metadata for Official Statistics).

Form Completion

The applicant must enter in the right name of the Regional Office in the given section “C-8” of “Annex-I Identification Particulars” in the excel form.

Company’s CARN Number Is Assigned

Following the applicant’s completion of the form, a Company Application Reference Number (CARN) will be assigned to the Certificate of Recognition (CoR), which was filed online on the website.

Application Submission to Regional Office

Once the applicant has received the CARN number, the physical application, along with all relevant supporting papers, should be sent to the Reserve Bank of India’s Regional Office (RBI).

RBI Examines the Application

The RBI will review the application form and accompanying materials before forwarding it to the main office.

NBFC License Issuance

If the application is valid, the supporting paperwork is comprehensive, and the records are clean, the Reserve Bank of India (RBI) head office will award an NBFC license.
The NBFC License will be provided by the main office within 90 days.
By inputting the acknowledgement number, the applicant can follow the status of the application.

What are the benefits of registering an NBFC?

The following are the features of NBFC company registration:

1. Time and cost savings: When compared to small banks, registering an NBFC is considered a simple operation. Opening a bank requires an exorbitant amount of money and time; however, this is not the case with NBFCs.

Simple Sign-Up: When opposed to operating a bank, registering an NBFC is simple. It is much easier to obtain NBFC registration if one has a good consultant with a lot of expertise.

Loan recovery is simple: NBFCs are systematic and provide borrowers with a significant modest quantity of loans. Borrowers readily return such tiny amounts of loans within the time frame specified, making it easier for lenders.

Industrial Development: Everyone nowadays requires an easy source of finance for their new company. NBFCs give simple loans in a short period of time to customers starting new enterprises. As a result, new companies were formed, resulting in total industrial expansion in the country.

Conclusion

NBFCs are businesses that compete with traditional banks in some ways. Because of limitations and differences, NBFCs cannot perform all of the functions of traditional banks; this is what distinguishes NBFCs. The NBFC Registration procedure is difficult in and of itself since authorisation from the Reserve Bank of India (RBI) is required. The procedure of registering an NBFC is lengthy and time-consuming. As a result, if you want to create an NBFC, you’ll need an experienced adviser who understands NBFC registration and works with the RBI. At MUDS Management, we have experienced individuals that can assist you with the registration procedure. Our expertise will support and guide you through the NBFC Registration procedure.