NBFC Registration

What are the Annual Compliances of NBFC Registration?

NBFC is registered as per the Companies Act, 2013, and are involved in the business of loans and advances, attainment of shares/stock/bonds, debentures and securities issued by the Reserve Bank of India.


NBFC is registered as per the Companies Act, 2013, and are involved in the business of loans and advances, attainment of shares/stock/bonds, debentures and securities issued by the Reserve Bank of India. NBFCs are the financial institutions that function according to the set of rules and regulations prescribed by the Reserve Bank of India (RBI). Additionally, these rules and regulations keep on changing from time to time as per the condition. So for the smooth operation of NBFC, management should know about all the mandatory compliances. In addition to this, management should understand the procedure and working of NBFC, what to do, and how to do it. So for all the NBFCs, it’s essential to keep themselves updated with every new rule.

What is NBFC Registration?

Non-Banking Financial Company is the financial institution that offers banking services, but does not hold any banking license. A Non-Banking Institution has the principal business of receiving deposits underneath any scheme or arrangement or in any other prescribed manner. Such deposits and can be obtained in one lump sum or installments by way of contribution.

What does ‘Principal Business’ means in NBFC?

The financial activity of the company becomes ‘principal businesses 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 taxable income. The corporation fulfilling both these criteria then that corporation is eligible for registration of NBFC by RBI. The RBI Act, does not define the term ‘principal business’, yet, RBI has defined that companies which are mainly involved in financial activity obtain registration with RBI  and are regulated and supervised by it. Hence, therefore if the companies involved in agricultural actions, purchase and sale of goods, sale or production of the immovable property, industrial activity, as their principal business and are doing some financial transaction in a small way, these do not fall under the category which can be regulated by the Reserve Bank.

What is the classification of NBFCs?

 

 

Based on Activities-

  • Investment Credit Company

Also known as a loan company, with ICC license you can lend and invest

  • NBFC-P2P (Peer to Peer Lending)

 Collaborates lenders and Borrowers and Manage funds online

  • NBFC-AA (Account aggregator)

 Financial Information service provider

  • NBFC-MFI

Provides credit and loans to the fragile section of the society

  • NBFC-ND and CIC

 Investment in shares for Debt in the same group of companies

  • NBFC-IFC

 Long term debt to Infrastructure companies

  • NBFC-Factor

 Receivable Financing or Bill Discounting

  • Mortgage Guarantee Company

 Providing Mortgage guarantee services

  • NBFC-Financial Holding

 Created for Banking License

Based on Liabilities

  • NBFC-D

Deposit-taking NBFC

  • NBFC-ND

Non-deposit taking NBFC

How can you differentiate between an NBFC and a bank?

NBFC can give and invest money, just like any traditional bank. The actions of banks and NBFCs are furthermore similar. The financial mediators are regulated by the Companies Act, 2013, and the Banking Regulation Act, 1949. The control of both the monetary intermediaries is under the Reserve Bank of India. The difference is as follows:

  • NBFC cannot accept demand deposits like banks;
  • NBFC cannot issue cheques on themself and does not form part of the settlement and payment scheme;
  • If the facility of deposit insurance provided by Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to the depositors of NBFC.
  • The non-banking company that are registered with the Reserve Bank of India, are allowed 0nly to receive the public deposits, and they are required to fulfill the following regulations, as stated under the Non-Banking Financial Company Acceptance of Public Deposits Directions, issued by RBI. These are as follows;
  • All NBFCs are allowed to take public deposits for the minimum period of 12 months, which goes up to a maximum period of 5 years.
  • NBFC are not allowed to take deposits, which have to be refunded on request.
  • The company cannot offer the interest rate higher than the ceiling rate fixed by RBI from time to time.
  • The company are not allowed to offer any gift, incentives, or any other assistance to the depositors.
  • The deposits are not protected.
  • The NBFC should have minimum investment-grade credit rating.
  • The RBI provides no guarantee of the repayment of deposits by the NBFCs.

 

What do you mean by NBFC Annual Compliances?

If a company has effectively gotten its online NBFC license, then it’s obligatory to fulfill all the NBFC annual compliances. Where NBFC is failing to fulfill with the agreements, NBFC becomes liable for the hefty penalties. The penalties could be even cancellation of the NBFC Registration.

NBFC annual compliance has to be filed by any NBFC within six months after attaining the registration from the RBI. There are mainly two categories of NBFCs-

 

  • Deposit-taking NBFC(NBFCs – D)
  • Non – Deposit NBFCs (NBFCs- ND)
  1. Systematic Important NBFCs- ND
  2. Other NBFCs- ND

 

The types of returns that are mandatory by both the categories of NBFCs-

Return by Deposit Taking NBFC

NBS-1

They are the Quarterly return based on deposit in the first schedule. Such additional is expected to be furnished to capture financial particulars such as Profit and Loss Account, Components of assets and Liability of the company.

 

NBS-2

These are the Quarterly Return on provident standards. The obligation to file this return is to get the details related to several standards like asset Organization, Capital Adequacy, NOF, Provisioning and many more.

 

NBS-3

They are the Quarterly Return on liquid possessions. The intention behind filing such standards is to capture information about legal investment in liquid situations.

 

NBS-4

They are the annual return of critical parameters which are rejected by companies that has public deposits. The motive behind filing of this return is to find the repayment position of the rejected NBFC that are accepting public deposits till date.

 

NBS-6

It is filed as monthly return on disclosure to capital marketplace by deposit-taking NBFC with the total assets of INR 100 crore or more.

 

ALM return

These returns are file as Half-yearly by NBFC holding Public Deposit, which is more than the amount of Rs. 20 Crore or asset size of more than Rs. 100 Crore.

Requires Audited Balance Sheet and Auditor’s Report by NBFC accepting public deposits, to be furnished; Return related to branch Information

 

Returns required in case of  Non-Deposit NBFC

It is a quarterly declaration providing information associated with risk assets ratio,  capital funds, risk-weighted assets.

 

NBS-2

It is filed on Monthly return on a critical financial parameter of NBFCs-ND-SI.

 

ALM Return

  • Declaration of short-term dynamic cash in form NBS-ALM-1 filed monthly.
  • Declaration of structural cash in form NBS-ALM2 filed Half Yearly.
  • Declaration of interest rate sensitivity in form NBS-ALM-3 filed Half Yearly.

Branch information return

Quarterly return on critical financial parameters of non-deposit taking NBFC having assets of more than INR 50 crores and above but less than INR 100 crores. The prerequisite like name of the company, address proof, Net Owned Fund, profit or loss during the last three years, needs to be well-appointed quarterly by non-deposit taking NBFCs with asset size between INR 50 crores and INR 100 crores.

 

Compliances for NBFC-ND with RBI

Annual Compliances

No.

Particulars

Duration

 

Unaudited March Monthly return or NBS7

on or before 30th June

 

Audited March Monthly return or NBS7

Upon completion

 

Statutory Auditors certificate on Income & Assets

on or before 30th June

 

Information about Cos having FDI or Foreign Funds

on or before 30th June

 

Non-acceptance of Public Deposit by board resolution

starting of the new Financial year

 

Annual Balance Sheet with profit and loss statements

One month from the date of signoff

 

Declaration by Auditors, or acting auditors of the company

annual basis

 

Monthly Compliances

No.

Particulars

Duration

 

Monthly Return

by 7th of every month

 

Upload monthly

by 7th of every month

 

Periodical Compliances

S No.

Article

Term

 

Appointment of Director(Annexure-III)

within 30 days of appointment

 

Upload monthly return

within 30 days of the resignation

 

 

Half-yearly return (BRANCH INFORMATION)

Form – Schedule ‘A’

It is a Special Return that is required to be submitted by all NBFCs, whether deposit-taking or non-deposit-taking.

NBS-8

Annual return to be well-appointed by NBFCs, which are having asset size between INR 100 to INR. 500cr

NBS-9

Annual returns are well-appointed by NBFCs, which are having asset size below INR 100cr.

Conclusion

Annual compliances are strictly obligatory for those NBFCs which have acquired the license from RBI. Besides, under ‘Section 45-IA of the RBI Act, 1934, the applicant needs to have a net owned fund of INR 2 crores, and it must obtain a certificate of registration from the bank and should have NBFC Registration.

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