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Non-Banking Financial Company (NBFC) Registration is a process for entities that wish to engage in financial services like lending, investment, or other non-banking activities. NBFCs are regulated by the country's central bank to ensure stability, transparency, and adherence to financial norms. In India, NBFCs are governed by the Reserve Bank of India (RBI) under the Reserve Bank of India Act, 1934 and the Companies Act, 2013.
Key Features of NBFCs:
Permitted Activities:
- Lending and investment in various financial instruments.
- Asset financing, hire purchase, and leasing.
- Microfinance and housing finance.
- Peer-to-peer (P2P) lending and infrastructure financing.
Excluded Activities:
- Cannot accept demand deposits like banks.
- Cannot issue cheques drawn on itself.
Types of NBFCs:
- Asset Finance Company (AFC).
- Loan Company (LC).
- Investment Company (IC).
- Infrastructure Finance Company (IFC).
- Microfinance Institution (MFI).
- Core Investment Company (CIC).
- Housing Finance Company (HFC).
Eligibility Criteria for NBFC Registration:
Entity Type:
- The applicant must be a company registered under the Companies Act, 2013.
Minimum Net Owned Funds (NOF):
- At least INR 2 crores for most NBFCs (may vary based on the type).
Directors and Promoters:
- The company must have directors with financial sector experience and a clean track record.
Business Plan:
- A detailed business plan outlining the nature of business, target market, and financial projections.
Compliance with Regulatory Norms:
- The company must comply with RBI guidelines related to risk management, customer protection, and anti-money laundering.
Registration Process for NBFC:
Incorporation:
- Incorporate a company under the Companies Act, 2013 with a principal objective to carry out financial activities.
Meet Capital Requirements:
- Ensure the company meets the minimum NOF requirement, certified by a statutory auditor.
Prepare Application:
- Compile all required documents and complete the prescribed application form.
Documentation:
- Submit the following:
- Memorandum and Articles of Association.
- Certificate of Incorporation.
- KYC details of directors and shareholders.
- Audited financial statements.
- Bankers’ report regarding the company’s deposit accounts.
- Business plan with projected financials for at least three years.
- Submit the following:
Submit Application:
- Apply online through the RBI’s COSMOS portal and send a physical copy of the application to the regional RBI office.
Application Review:
- The RBI reviews the application, verifies the credentials of directors, and evaluates the business plan.
Inspection and Approval:
- The RBI may conduct a site inspection or request additional documents before granting the certificate.
Grant of Registration:
- Upon approval, the company receives a Certificate of Registration (CoR) and can start NBFC operations.
Post-Registration Compliance:
Adherence to RBI Guidelines:
- Follow prudential norms for asset classification, provisioning, and capital adequacy.
Submission of Returns:
- File periodic returns on financial performance, asset quality, and compliance status.
Fair Practice Code:
- Implement a code of conduct for customer dealings, ensuring transparency and ethical practices.
Audits and Inspections:
- Maintain updated financial records for statutory audits and RBI inspections.
Benefits of Registering as an NBFC:
- Legitimacy:
- Operate as a recognized financial entity under RBI regulation.
- Business Expansion:
- Access diverse financing options and products for customers.
- Customer Trust:
- Gain credibility and trust among clients and investors.
If you need further guidance on preparing your NBFC application, creating a business plan, or ensuring compliance with RBI norms, let me know!