How to obtain NBFC Registration in India?
Non-Banking
Financial Company, popularly known as NBFC, is a company registered under the Companies
Act, 2013, which is engaged in several financial
services like providing loans, supporting
credit facilities, assets financing, currency exchange, lending, and many more functions.
An NBFC registration is done as per the rules
and regulations of the RBI Act.
What is NBFC?
Under Section 45-1 (c) of the Reserve
Bank of India Act, 1934, any non-banking company providing any
financial services are considered as NBFC. Ministry Of Corporate Affairs and
RBI governs the NBFCs.
Some NBFCs does not require registration from
the RBI they are-
- Nidhi
company
- Investment
businesses whose assets are less than 100 crores
- Merchant
banking companies
- Companies
engaged in the business of stockbroking
- Companies
involved in venture capital
- Insurance
companies having incorporation certificate
- Chit
fund companies
How can you differentiate between an NBFC and a bank?
NBFC can give and invest money, just like any
traditional bank. The actions of banks and NBFCs are furthermore similar. The
financial mediators are regulated by the Companies Act, 2013, and the
Banking Regulation Act, 1949. The control of both the monetary
intermediaries are under the Reserve Bank of India.
The difference is as
follows:
- NBFC
cannot accept demand deposits like banks;
- NBFC
cannot issue cheques on themself and does not form part of the settlement and
payment scheme;
- If
the facility of deposit insurance provided by Deposit Insurance and Credit
Guarantee Corporation (DICGC)is not available to the depositors of NBFC.
What are the advantages of taking an NBFC License in
India?
- It
can easily trade in the money market instruments
- It
offers loans and credit facilities
- It
provides wealth management by managing stocks and shares
- They
are are the last resorts for borrowing capital
- They
are the most substantial back-up for providing finance
- It
advises the companies for the process of merger and acquisition
- It
prepares for the industry and market studies for the companies.
- The
recent methods exercised by the NBFCs have overcome vital challenges
- They have made use of technological advancements such as the use of mobile phones, the internet, which has reduced the demand and dependence on the bank branches.
What are the role and functions of NBFC registration in
India?
The specific purpose of NBFCs are-
What is the classification of NBFCs?
Based on Activities-
- Investment Credit Company
- NBFC-P2P (Peer to Peer Lending)
- NBFC-AA (Account aggregator)
- NBFC-MFI
- NBFC-ND and CIC
- NBFC-IFC
- NBFC-Factor
- Mortgage Guarantee Company
- NBFC-Financial Holding
Based on Liabilities
- NBFC-D
- NBFC-ND
What are the eligibility criteria for NBFC Registration?
As per Section 45(1A) of the RBI Act, any
individual or Company eager to start a loan or investment business in India
needs to register a company that meets the requirements prescribed for NBFCs.
They are-
The directors
should have knowledge and experience regarding finance, credit and banking
Ø
NBFC
Business Plan
The Company should
have a detailed business plan for the next five years
Ø
Fund
Shareholders must
have two crores as the Net Owned Fund. Investment should not be borrowed fund
Ø
Credit
History
The directors and
shareholders must not have any write-offs
Ø
Quality
Of Capital
The Net Owned Fund must be tax paid, and all
legal compliance of the management of the Company must be clean and legally up
to standard.
What are the documents required for registration of NBFCs?
The documents required for NBFC registration
are-
Ø
MOA
of the Company
Ø
Registration
certificate
Ø
Income
test certificate
Ø
Net
worth certificate
Ø
Clean
banker report
Ø
Education
proof’
Ø
Credit
report of directors and shareholders
Ø
Experience
certificate of directors and shareholders
Ø
Organization
matrix
Ø
Various
policies
What is the procedure for NBFC registration?
The steps in the NBFC registration process
are-
Step 1
Apply for Registration of
the Company
Under the
Companies Act, 2013, the applicant will have to register itself as
a Public Company or a Private Companywhichever is relevant. The Company must be
registered with the regulations of the Ministry of Corporate Affairs.
Step 2
Application Submission on COSMOS
The applicant should apply to the RBI site
that is known as Cluster of Systems of Metadata for Official Statistics(COSMOS).
With the online application, a physical copy
of the form along with the required documents is mandatory to be submitted by
the applicant to the Regional Office of the Reserve Bank of India.
Step 3
Select for Company
Registration
After getting access to the RBI website by
the applicant, the login page of the Cluster of Systems of Metadata for
Official Statistics application will ask for clicking on the Company
Registration tab.
Step 4
Download the Form
A window tab will appear presenting an Excel
application form that is available to be downloaded.
The applicant must download the suitable
application form, which is an NBFC form.
Step 5
Filing of the Form
In the excel form, the applicant needs to
fill the correct name of the Regional Office in the provided filed “C-8” of
“Annex-I Identification Particulars.”
Step 6
Allocation of CARN Number
The applicant, after the submission of the
form, a Company Application Reference Number (CARN), will be allocated for the
Certificate of Recognition.
Step 7
Submission of Application
form to the Regional Office
After receiving the CARN number by the
applicant, the application with all the supportive documents are required to be
submitted to the Regional Office of Reserve Bank of India.
Step 8
Inspection of the
Application by RBI
The RBI will examine the application form and
the relevant documents and will send it to the head office.
Step 9
Issue of NBFC registration
If the application filed is correct, the required
documents are complete, and the records are clean, then the head office of
Reserve Bank of India will issue the NBFC License.
What are the post-registration compliances?
The post-registration compliances are as
follows-
Conclusion
NBFCs play a significant role in the
development of the infrastructure, creation of wealth, and economic
development. Online NBFC registration in India is a complex process, and the
government has encouraged registration since they have a vital role in
channelizing and mobilizing the financial resources in a precise direction. For
incorporating NBFC and getting its certification, the Company should comply with
all the guidelines related to the registration process.
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