NBFC REGISTRATION
A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company)
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NATURE OF NON-BANKING FINANCIAL COMPANY (NBFC)
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/ bonds /debentures/ securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).
WHAT IS DIFFRENCE BETWEEN BANKS & NBFCs
NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
- NBFC cannot accept demand deposits;
- NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
- deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
WHAT ARE THE DIFFRENT TYPES/CATEGORIES OF NBFCs REGISTRATIONS OF NBFCs REGISTERED WITH RBI
NBFCs are categorized
- in terms of the type of liabilities into Deposit and Non-Deposit accepting NBFCs,
- non deposit taking NBFCs by their size into systemically important and other non-deposit holding companies (NBFC-NDSI and NBFC-ND) and
- by the kind of activity they conduct.
Within this broad categorization the different types of NBFCs are as follows:
- Asset Finance Company (AFC) : An AFC is a company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines. Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising therefrom is not less than 60% of its total assets and total income respectively.
- Investment Company (IC): IC means any company which is a financial institution carrying on as its principal business the acquisition of securities,
- Loan Company (LC): LC means any company which is a financial institution carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own but does not include an Asset Finance Company.
- Infrastructure Finance Company (IFC): IFC is a non-banking finance company a) which deploys at least 75 per cent of its total assets in infrastructure loans, b) has a minimum Net Owned Funds of Rs 300 crore, c) has a minimum credit rating of ‘A ‘or equivalent d) and a CRAR of 15%.
- Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI): NBFC-MFI is a non-deposit taking NBFC having not less than 85% of its assets in the nature of qualifying assets which satisfy the following criteria:
- A loan disbursed by an NBFC-MFI to a borrower with a rural household annual income not exceeding Rs 1,00,000 or urban and semi-urban household income not exceeding Rs 1,60,000;
- Loan amount does not exceed Rs 50,000 in the first cycle and Rs 1,00,000 in subsequent cycles;
- Total indebtedness of the borrower does not exceed Rs 1,00,000;
- Tenure of the loan not to be less than 24 months for loan amount in excess of Rs 15,000 with prepayment without penalty;
- Loan to be extended without collateral;
- Aggregate amount of loans, given for income generation, is not less than 50 per cent of the total loans given by the MFIs;
- Loan is repayable on weekly, fortnightly or monthly instalments at the choice of the borrower
- Non-Banking Financial Company– Factors (NBFC-Factors): NBFC-Factor is a non-deposit taking NBFC engaged in the principal business of factoring. The financial assets in the factoring business should constitute at least 50 percent of its total assets and its income derived from factoring business should not be less than 50 percent of its gross income.
- NBFC- Non-Operative Financial Holding Company (NOFHC) is financial institution through which promoter / promoter groups will be permitted to set up a new bank .It’s a wholly-owned Non-Operative Financial Holding Company (NOFHC) which will hold the bank as well as all other financial services companies regulated by RBI or other financial sector regulators, to the extent permissible under the applicable regulatory prescriptions.
CLASSIFICATION BASED ON SIZE OF ASSETS
NBFCs-ND may also be classified into
- Systematic Investment NBFCs with assets size of more than 500 Crores and
- Non-Systematic Investment NBFCs with assets size of less than 500Cr.
Table of Contents
RETURNS TO BE SUBMITTED BY DEPOSIT-TAKING NBFCs
NBS-1 Quarterly Returns on deposits in First Schedule.
NBS-2 Quarterly return on Prudential Norms is required to be submitted by NBFC accepting public deposits.
NBS-3 Quarterly return on Liquid Assets by deposit-taking NBFC.
NBS-4 Annual return of critical parameters by a rejected company holding public deposits. (NBS-5 stands withdrawn as submission of NBS 1 has been made quarterly.)
NBS-6 Monthly return on exposure to capital market by deposit-taking NBFC with total assets of ₹ 100 crores and above.
Half-yearly ALM return by NBFC holding public deposits of more than ₹ 20 crores or asset size of more than ₹ 100 crore
Audited Balance sheet and Auditor’s Report by NBFC accepting public deposits.
FAQs ON NBFC REGISTRATION
Q1: What is an NBFC?
NBFC stands for Non-Banking Financial Company. It is a type of financial institution that provides banking services like loans, investments, asset financing, and other financial services, excluding traditional banking activities.
Q2: Who can register an NBFC in India?
Any individual or company can apply for NBFC registration in India. However, there are specific eligibility criteria set by the Reserve Bank of India (RBI) that must be met, including minimum net owned funds, management experience, and compliance with the Companies Act.
Q3: What is the process of registering an NBFC?
The process of NBFC registration involves several steps, including the incorporation of a company, obtaining a Digital Signature Certificate (DSC) and Director Identification Number (DIN), preparing the necessary documents, submitting the application to RBI, and fulfilling their requirements and conditions.
Q4: What are the documents required for NBFC registration?
The required documents for NBFC registration include the Memorandum and Articles of Association, certificate of incorporation, board resolution, KYC documents of directors, audited financial statements, business plan, fit and proper criteria documents, and other relevant supporting documents.
Q5: What is the minimum capital requirement for an NBFC registration?
The minimum capital requirement for an NBFC registration depends on the type of NBFC. For most NBFCs, the minimum capital requirement is Rs. 2 crore (Indian Rupees Two Crore) or more. However, certain specialized NBFCs may have different capital requirements.
Q6: How long does it take to obtain NBFC registration?
The timeframe for NBFC registration can vary depending on various factors such as the completeness of the application, RBI’s processing time, and any additional clarifications required. On average, it may take around 4 to 6 months to complete the registration process.
Q7: Are there any ongoing compliance requirements after NBFC registration?
Yes, after NBFC registration, the company is required to comply with various regulations and guidelines prescribed by the RBI. These include maintaining minimum capital adequacy ratios, conducting regular audits, reporting to the RBI, complying with KYC norms, and adhering to anti-money laundering (AML) regulations.
Q8: Can an NBFC undertake banking activities?
No, an NBFC cannot undertake traditional banking activities such as accepting demand deposits, issuing checks, or providing savings accounts. However, it can provide certain financial services that are similar to banking activities, subject to RBI regulations.
Q9: Can an existing company convert into an NBFC?
Yes, an existing company can apply for conversion into an NBFC. The company must meet the eligibility criteria, comply with the prescribed capital requirements, and follow the conversion process as specified by the RBI.
Q10: Can a foreign company register as an NBFC in India?
Yes, a foreign company can register as an NBFC in India. However, it must meet the eligibility criteria and comply with the regulations set by the RBI. The registration process for foreign companies may have additional requirements and documentation.
