NBFC Registration Online: Process, Fees & Advantages

Non-Banking Financial Company (NBFC) is a financial institution that undertakes banking activities. The two major financial activities an NBFC undertakes are lending money and accepting deposits. The first step in setting up a Non-Banking Financial Company is following the NBFC registration online process and registering the company before starting its business activities. Without proper registration, the company will not be considered a legal company that can start operating. The Reserve Bank of India has the power to control the operations of the non-banking financial companies, according to the Reserve Bank of India(RBI) Act, 1934. Registered under the Companies Act, 1956, some of its other major business activities are the acquisition of shares, stocks, bonds, debentures and offering loans and advances.

Non-Banking Financial Company Registration Process

A Non-Banking Financial Company must be registered as per the guidelines mentioned in the Companies Act. Some necessary steps that must be followed are as mentioned below–

• Hire NBFC Registration Consultants

An NBFC Consultant firm must be contacted and a team of members of at least 100 to 150 must be hired that consists of professional lawyers and senior-level bankers.

• Creation of a detailed business plan

The business plan includes some following important elements such as Founders and Executive Summary, Loan Product, SWOT Analysis, Credit & Risk Model, Competitors Analysis, Lending Model and financial Forecast.

• File an application for Certificate of Registration(COR)

Before filing an application for a Certificate of Incorporation, certain important factors must be fulfilled. The first one is including a middle name in the company name, the name of the company must have any one of the words: Finance, Final, Investment, Capital, Fintech, and Leasing, etc.  A fixed deposit of Rs 2 Crores must be made in a commercial bank. Lastly, the application form must be submitted to the regional department with RBI.

How to obtain an NBFC License?

• Establish a Public/Private Limited Company
• Create a business plan and Documentation
• Submit the application on COSMOS
• Send a hard copy of all the documents to the RBI
• Track the status of the application

Documents Required to acquire NBFC License in India

Certain documents that are required and that must be submitted while following the NBFC registration process are mentioned below–

• Verified copies of Certificate of Commencement of Business and Certificate of Incorporation of the company.
• Verified copies of Memorandum of Association (MOA) and Articles of Association (AOA) of the company
• Copies of PAN/CIN made in the name of the company.
• Directors profile filled and signed by every director.
• Experience certificate of the directors from the NBFCs from where the Directors have gained experience related to NBFC.
• The CIBIL Data that affects the Directors of the company.
• Certified copy of the Board Resolution for the presentation of “Fair Practices Code”.
• Board Resolution particularly approving the submission of the application and authorizing signatory.
• Board Resolution that the company is not holding any deposits and has not accepted any public deposits. Also, it must specify that it will not accept any deposits in the future without any prior approval from the Reserve Bank of India.
• Board resolution stating the company does not own any NBFC without properly getting it registered from RBI.
• Financial Statements of the past 2 years of Unincorporated Bodies
• Details of Authorized Share Capital and the latest shareholding pattern of the company.
• Copies of Fixed Deposit receipt & bankers certificate that specifies balances of Net Owned Funds.
• The details of the Profit & Loss account and Audited Balance Sheet of three years along with directors & auditors report.
• Details of bank accounts/ postal address of the branch/bank, loan/credit facilities.
• Self-attested Bank Statement/Income Tax returns.
• The business plan of the company for the next three years that contains details of its business, market segment and balance sheets, cash flow statement, asset or income statement.

Advantages of NBFC Registration

• NBFCs are financial institutions for all types of investors and business persons.
• NBFC is established by taking into consideration the most important individuals which are the customers
• NBFC priorities the customers and their preferences.
• The main focus of NBFCs are the expansion and growth of industrial, commercial, institutional, and service sectors.
• NBFCs have the freedom to decide the rate of interest at which they will sanction loans. This allows them to avail of many benefits and charge short-term lending at a high rate of interest.

What are the types of Non-Banking Financial Companies?

Non-Banking Financial Companies are categorized into different types taking into consideration various factors and attributes.

On the basis of the nature of their activities, they are divided into below-mentioned types–

• Asset Finance Company
• Investment Company
• Loan Company
• Core Investment Company
• Infrastructure Finance Company
• Core Investment Company
• Micro Finance Company

On the basis of deposits, they are divided into the following types–

• Deposit accepting Non-Banking Financial Corporations
• Non-deposit accepting Non-Banking Financial Corporations

NBFC Investment and Credit Company (NBFC ICC)

The NBFC Investment and Credit Company is further divided into three types –

• Asset Finance Company: An asset finance company is a company that lends burrowers any asset for a temporary time period.
• Investment Company: An Investment company is set up with the major aim of acquisition of securities.
• Loan Company: A loan company is a Non–Banking Financial Company that functions with the major aim to offer loans and advances to the public.

Infrastructure Finance Company (IFC)

An Infrastructure Finance Company is a company that consists of net-owned funds of a minimum of 300 crores out of which 75% of its total assets are utilized for the purpose of infrastructure loans.

Systematically Important Core Investment Company

A Systematically Important Core Investment Company is a company that owns assets of 100 crores and above out of which 90% of the assets are used and invested in the form of loans in different companies. The one condition that differentiates it from other types is that- out of 90%, 60% is invested in equity shares.

Infrastructure Debt Fund

The objective of an infrastructure debt fund (IDF) is to fulfill the requirements of the infrastructure industry. The funds invested in IDF are utilized for the construction of buildings, bridges, dams and other public properties.

Micro Finance Company

Also known as small finance bank, these institutions are set up with the objective to provide banking services to the less privileged sections of society.

Non-Banking Financial Company — Factors

This type of company is involved in the factoring business, meaning that the financial assets in the business must be at least 50% of the total assets and the total income must be more than 50% of the gross income.

Mortgage Guarantee Companies

A company in which a minimum of 90% of the revenue must be derived from the mortgage guarantee company and the net owned fund must be Rs 100 Crores.

NBFC Registration Fees in India

An amount of Rs 3,50,000 as a fee must be paid in order to register a company as an NBFC Registration Fees with Net Owned Funds of Rs 2 crores. Also, the applicant must pay a professional fee to the NBFC consultant, if he is hiring one.