NBFC Registration
NBFCs are primarily engaged in the lending business, dealing with personal loans, business loans, acquisition of shares, finance leasing, hire-purchase, digital lending via apps, and more. NBFCs are legally eligible to facilitate financial activities except issuing cheques, opening bank accounts and accepting deposits.
When is NBFC License with RBI Required?
The Reserve Bank of India regulates and supervises Non-Banking Financial Companies which are into the principal business of lending or acquisition of shares, stocks, bonds, etc., or financial leasing or hire purchase or accepting deposits. The principal business of financial activity is when a company’s financial assets constitute more than 50 percent of the total assets and income from financial assets constitute more than 50 percent of the gross income. A company which fulfils both these criteria must have NBFC license. This test for NBFC license is popularly known as the 50-50 test.
Therefore, companies engaged in agricultural operations, industrial activity, purchase and sale of goods, providing services or purchase, sale or construction of immovable property as their principal business and are doing some financial activity in a small way, will not require NBFC registration.
Therefore, companies engaged in agricultural operations, industrial activity, purchase and sale of goods, providing services or purchase, sale or construction of immovable property as their principal business and are doing some financial activity in a small way, will not require NBFC registration.
Financial Companies NOT requiring NBFC License
The following types of entities that are involved in the principal business of financial activity do NOT require NBFC License:
- Housing Finance Companies – Regulated by the National Housing Bank;
- Insurance Companies – Regulated by the Insurance Regulatory and Development Authority of India (IRDA);
- Stock Broking – Regulated by Securities and Exchange Board of India;
- Merchant Banking Companies – Regulated by the Securities and Exchange Board of India;
- Venture Capital Companies – Regulated by the Securities and Exchange Board of India;
- Companies that run Collective Investment Schemes – Regulated by the Securities and Exchange Board of India;
- Mutual Funds – Regulated by Securities and Exchange Board of India;
- Nidhi Companies – Regulated by the Ministry of Corporate Affairs (MCA);
- Chit Fund Companies – Regulated by the respective State Governments.
The above types of companies have been exempted from NBFC registration requirements and NBFC regulations of RBI as they are regulated by other financial sector regulators.
Applying for NBFC License
Submit the application for NBFC License online and offline with the necessary documents to the Regional Office of the Reserve Bank of India. The following are the documents that need to be submitted for NBFC License:
- Information about the management
- Certified copies of Certificate of Incorporation and Certificate of Commencement of Business in case of public limited companies.
- Certified copies of up-to-date Memorandum and Articles of Association of the company. Details of clauses in the memorandum relating to financial business.
- Copy of PAN/CIN allotted to the company.
- Directors’ profile, separately filled up and signed by each director.
- Certificate from the respective NBFC/s where the Directors have gained NBFC experience.
- CIBIL Data pertaining to Directors of the company
- Financial Statements of the last 2 years of Unincorporated Bodies, if any, in the group where the directors may be holding directorship with/without substantial interest.
- Board Resolution specifically approving the submission of the application and its contents and authorising signatory.
- Board Resolution to the effect that the company has not accepted any public deposit, in the past (specify period)/does not hold any public deposit as on the date and will not accept the same in future without the prior approval of Reserve Bank of India in writing.
- Board resolution stating that the company is not carrying on any NBFC activity/stopped NBFC activity and will not carry on/commence the same before getting registration from RBI.
- Certified copy of Board Resolution for the formulation of “Fair Practices Code”.
- Statutory Auditors Certificate certifying that the company is/does not accept/is not holding Public Deposit.
- Statutory Auditors Certificate certifying that the company is not carrying on any NBFC activity.
- Statutory Auditors Certificate certifying net owned fund as on date of the application.
- Details of Authorised Share Capital and the latest shareholding pattern of the company including the percentages.
- Copy of Fixed Deposit receipt & bankers certificate of no lien indicating balances in support of Net Owned Funds.
- Details of the bank balances/bank accounts/complete postal address of the branch/bank, loan/credit facilities etc. availed.
- Last three years Audited balance sheet and Profit & Loss account along with directors & auditors report or for such shorter period as are available (for companies already in existence).
- Business plan of the company for the next three years giving details of its (a) thrust of business, (b) market segment and (c) projected balance sheets, cash flow statement, asset/income pattern statement without any element of public deposits.
- Source of the startup capital of the company substantiated with documentary evidence.
- Self-attested Bank Statement/IT returns etc.
