NBFC or Non-Banking Financial Company is a business entity that engages with a wide range of financial activities including investments, loans, market place lending and others that are mentioned in the section 45-IA of the RBI Act, 1934 and the Companies Act.
Even though an NBFC engages with all types of financial activities, it’s not a bank. There are many discernable differences between the two based on the services each of them have the permission to provide.
In this article, we will give you the steps you must take to register an NBFC in India. Additionally, we will cover, Related Content: NLD License
- The eligibility criteria to start an NBFC,
- The documents that you need to submit for the registration, and
- The terms and conditions under which RBI issues NBFC registration.
What are the steps of the NBFC procedure?
To establish a Non-Banking Financial Company, the steps of the NBFC procedure are as follows:
- Company incorporation under the Companies Act 2013: First, the applicant has to incorporate their company as per Companies Act. As the operative word of an NBFC is a company, it’s obvious that you need this business entity to provide a foundation for your operations.
- Arranging for the minimum capital: Reserve Bank of India issues the certificate of registration only to those companies that have the minimum net worth of 2 Crore rupees. Thus, once you have registered your company, you have to fund it properly with the aid of either banks of investors.
- Complying with the FDI rules: If you have successfully gotten funding from foreign investors, you have to ensure that you comply with Foreign Direct Investment Rules. It’s an important aspect to cover without which all the subsequent steps will be useless.
- Start preparing the documents for the NBFC license: Once you’re certain that you’re complying with all FDI rules, proceed by furnishing the documents needed to initiate the certification process.
- Download the Registration form from the RBI portal: Download the application form for NBFC registration and start filling it.
- Submit the application form online: Go back from where you downloaded the application form. Log in and upload the application form you’ve just filled. The website will issue you a registration number. Keep it with you for future reference.
- Upload all the documents mandatory for the NBFC registration: Once you’ve submitted the application form, you will get a link to complete the application process. When you follow that link, you’ll get options to upload the required documents. Do so, pay the registration fees and exit.
Reserve Bank of India will scrutinize your application and if it finds that you’ve committed no errors while filling it, it will grant you NBFC registration. Related Content: ILD License
Eligibility criteria for NBFC registration in India
To acquire NBFC registration, you must meet the following eligibility criteria:
- The directors of the company must have experience in Finance, Credit and Banking
- The applicant must provide a business plan for the next 5 years
- The net worth of the applicant company should be at least INR 2 Crore
- All the directors of the company must have a clean credit history.
- The quality of capital of the company should be optimal. It means that the company should’ve already paid all the taxes, fulfilled all the compliances and must be legally optimal.
Documents required for NBFC Registration in India
Following are the documents required for NBFC Registration in India:
- Certificate of incorporation
- MOA and AOA
- Capital Test report
- Income and ID test report
- Net worth certificate
- Banker Certificate
- Proof of highest qualification
- Credit report
- Experience in the financial sector
- Model of underwriting
- Organizational chart
- IT policy in place
NBFC is a company that can provide financial services akin to a bank. However, it’s still different and thus, requires different business license – NBFC registration – to operate. Related Content: Prepaid Wallet License
How to start an NBFC in India? Read about the procedure to start a Non Banking Financial Company in India. For more details, contact our experts.