NBFC Registration, NBFC India, Non Banking Financial Company

NBFC Registration in India

Guides » Business Registrations » NBFC Registration in India

NBFC Registration in India

Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 involved in the principal business of lending, investments in shares/stocks/bonds/debentures, leasing, hire-purchase, insurance business, chit business or involved in the receiving of deposits under any scheme or arrangement. NBFC are under the purview of the Reserve Bank of India (RBI) and in this article we visit the procedure for NBFC Registration in India and some of the regulations which govern its operations.

Non-Banking Financial  Company

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 with activities similar to that of a bank, except for the following differences:

  • NBFC’s cannot accept demand deposits
  • NBFC’s cannot issue cheque drawn on itself
  • Bank deposits are insured by Deposit Insurance and Credit Guarantee Corporation. However, deposits in NBFC’s are not insured.

NBFC’s like banks except for the above differences are engaged in the business of making loans and advances, acquisition and trading of shares/stocks/bonds/debentures/securities, 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. Also a company which is in the 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.

Categories of Non-Banking Financial Company (NBFC)

NBFC’s are mainly categorized into deposit taking NBFC’s and non-deposit taking NBFC’s. Deposit taking NBFC’s and non-deposit taking NBFC’s are further classified  based on their size. Within this broad categorization, there are again many types of NBFC’s like Asset Finance Company, Investment Company, Loan Company, Infrastructure Finance Company, Systemically Important Core Investment Company, Infrastructure Debt Fund, Micro Finance Institution and Factors.

NBFC Registration

As per Section 45-IA of the RBI Act, 1934, no company can commence or carry on business of a non-banking financial institution without obtaining a certificate of registration and without having a Net Owned Funds of Rs. 200 lakhs. The requirement for registration as a NBFC are a company incorporate under Section 3 of the Companies Act, 1956  and having a minimum net owned funds of Rs.200 lakhs. Net owned funds is the balance of “owned funds” minus the amount of investment in shares of subsidiaries, companies in the same group and all other NBFCs, book value of debentures, bonds, outstanding loans and advances including hire purchase and lease finance made to and deposits with subsidiaries and companies in the same group. Owned funds is the aggregate of paid-up equity capital , preference shares which are compulsorily convertible into equity, free reserves , balance in share premium account and capital reserves representing surplus arising out of sale proceeds of asset, excluding reserves created by revaluation of asset, after deducting therefrom accumulated balance of loss, deferred revenue expenditure and other intangible assets.

Application for becoming an NBFC must be made in the requisite form to Regional Office of the Reserve Bank of India. A list of documents required to be submitted along with the NBFC application can be accessed here: NBFC List of Document Required.

Financial Companies NOT Regulated by RBI

The Reserve Bank of India regulates and supervises companies which are engaged in financial activities as their principal business. A company which has financial assets  of more than 50% of its total assets and derives more than 50% of its gross income from such assets is termed as a NBFC and regulated by the Reserve Bank of India. However, some financial businesses have specific regulators and are given exemption from Reserve Bank od India from its regulatory requirements. For instance, Insurance Regulatory and Development Authority (IRDA) regulates insurance companies, Securities Exchange Board of India (SEBI) regulates Merchant Banking Companies, Venture Capital Companies, Stock Broking companies and Mutual funds, National Housing Bank (NHB) regulates housing finance companies, Department of Companies Affairs (DCA) regulates Nidhi companies and State Governments regulate Chit Fund Companies.

Deposit Taking NBFCs

Deposits are monies collected in any manner, other than that collected by way of share capital, contribution of capital by the partners of a partnership firm, security deposit, earnest money deposit, advance consideration for purchase of goods, services or construction, loans taken from banks, financial institutions and money lenders and subscription to chit funds. Monies collected in any manner other than these would be termed as deposits. All NBFCs cannot accept public deposits. Only  NBFCs that hold a deposit accepting Certificate of Registration can accept deposits. Moreover, RBI is of the purview that only nationalized banks can accept deposits and hence has not authorized any NBFC started after 1997 to accept deposits.

Penalties for Deposit Taking without Authorization

If any unincorporated entity (Proprietorship / Partnership) or an NBFC without authorization to take deposit is found accepting public deposits, it is liable for criminal action. Also, if NBFCs associate themselves with proprietorship/partnership firms accepting deposits in contravention of RBI Act, they are also liable to be prosecuted under criminal law or under the Protection of Interest of Depositors (in Financial Establishments) Act, if passed by the State Governments.

To know more about NBFCs, visit IndiaFilings.com

 

Want to Consult a Incorporation Expert?

IndiaFilings provides the entire range of services required to register a business in India. We can help you register a Proprietorship, LLP, Indian company or USA company. Please provide your information to consult an Incorporation Expert for free.


Income Tax eFiling

We have made the Income Tax eFiling, simple and easy. File your income tax return online with the dedicated Tax Experts support from IndiaFilings.


Authorised eReturn Intermediary

IndiaFilings.com (ERI ID: ERIA100945) is an Income Tax Department authorised eReturn Intermediary.



Comments (12)

santosh bhandari

Nov 01, 2014 at 11:10 PM

I want to register new NBFC company

Reply

devesh

Dec 24, 2014 at 5:34 PM

if a company has its main object of Financing but has not taken the nbfc certificate from RBI and now the company doesnt wish to carry on that object and wish to change its object and name what is the proper procedure required to be followed by it?

Reply

IndiaFilings

Dec 24, 2014 at 11:15 PM

We recommend changing the object of the company in the MOA.

Reply

Naveen

Jan 13, 2015 at 12:04 PM

want to register a nbfc. pls contact

Reply

Sanjeev

Mar 18, 2015 at 12:09 AM

Sir pls call me for loan 09815475755

Reply

VANKA JAGADEESH

Jul 10, 2015 at 10:12 PM

I want to start NBFC in rural areas.by giving loans like Agriculture, gold, mortagage,personal,auto,etc to rural area peoples

Reply

rahul bhosale

Nov 19, 2015 at 3:02 PM

I want to start NBFC in rural areas.by giving loans like Agriculture, gold, mortagage,personal,auto,etc to rural area peoples

Reply

Mohit Grover

Feb 22, 2016 at 2:14 PM

I have a query regading registration of NBFC kindly contact

Reply

IndiaFilings

Feb 26, 2016 at 1:39 PM

Hi mohit, you can discuss this with our Business Advisors. Please contact 04440247777 or email [email protected]

Reply

Ranjan

Apr 07, 2016 at 12:08 PM

Intetrested in registering a financial company or NBFC call 09422314030

Reply

Sumesh

Apr 07, 2016 at 6:22 PM

Hi Ranjan,
Our business advisors will explain about this.please call @ 04440247777

Reply

Mithilesh kumar

Dec 18, 2018 at 11:22 PM

Nbfc ma Registration Karan hai
Campany Name gita microfinanc Company pvt.ltd

Reply

Leave a comment