What is a Non-Banking Financial Company?

NBFC is totally governing & regulated by the Reserve Bank of India Act 1934. Non-Banking Financial Company facilitates banking-related services like investment services, financial services, risk pooling & contractual savings.

NBFCs (Non-banking financial Co) are financial companies that provide banking services but do not hold a banking license.

They are not permitted to take deposits from the public. But all activities of these institutions are still subject to banking rules.

NBFCs give most types of banking services, such as credit facilities, TFCs (Term Finance Certificate), loans, money market trading, private education funding, retirement planning, stock, share underwriting, and other obligations.

These institutions also provide wealth management, such as portfolios managing of stocks & shares, discounting services. e.g. advice on mergers and acquisitions activities and instruments discounting.

HOW NON-BANKING FINANCIAL COMPANIES ARE DIFFERENT FROM A BANK?

Activities of a Non-Banking Financial Company are like that of a bank; however, there are some differences between the 2 as stated below:

A Non-Banking Financial Company cannot accept demand deposits;

• Unlike a bank, a Deposit insurance facility is not available to the depositors of Non-Banking Financial Company.
• Non-Banking Financial Company cannot issue cheques drawn on itself;
• Non-Banking Financial Company are not a part of the payment and settlement system.

Advantage Over NBFC

The No of Non-Banking Financial Company has increased considerably over the last few years, with venture capital companies, retailers, and industrial companies entering the lending business.

Non-banking institutions also frequently encourage investment in prepare feasibility studies, industry studies or market studies for companies & also in real estate.

Nevertheless, they are generally not allowed to take deposits from the general public & have to find other ways of financing their operations, such as the issuing of debt securities.

Basically, NBFCs is dividing into 2 Type (Based on their Liability Structure):

1. companies (NBFCs accepting public deposits or NBFCs-D). – Category ‘A’
2. companies (NBFCs not raising public deposits or NBFCs-ND). – Category ‘B’

Kind of NBFC in India

• INVESTMENT AND CREDIT COMPANY (NBFC-ICC): It required a Net Owned Fund of Rs 2 Cr to start with this business.
• INFRASTRUCTURE DEBT FUND (IDF)-NBFC:It can raise resources through the issue of Rs or $ denominated bonds of minimum Five Years maturity.
• INFRASTRUCTURE FINANCE COMPANY (NBFC-IFC): It required a minimum of 75% of its total assets of the NBFC should be invested in the infrastructure loans. It required a Net Owned Fund of Rs 300 Cr to start with.
• NBFC-NON OPERATIVE FINANCIAL HOLDING COMPANY [NOFHC]:A NOFHC will be allowed to set up a new bank, which will hold the bank and all other financial services companies regulated by RBI or other financial sector regulators.
• MORTGAGE GUARANTEE COMPANY (MGC)-NBFC: It can be started with a Net Owned Fund of Rs 100 Cr. These NBFC shall comply with at least 90% of the business sales from mortgage guarantee business or at least 90% of the gross income is from mortgage guarantee business.
• Non-Banking Financial Company (NBFC – MFI): Loan to be extended without Collateral. It has criteria of Qualifying Assets not to be less than 85% of its total assets, to remain MFI. Qualifying assets are loan disbursed to borrowers with rural household income not exceeding 1,25,000 or urban and Semi-Urban household income not exceeding INR 200,000/-.  Non-deposit taking financial company with Minimum Net Owned Funds of INR 5 Cr & above (for North Eastern Region of India, it will be INR 2 Cr).
• NBFC – FACTORS (NBFC-FACTORS): Non-Banking Financial Company-Factors is having the principal business of acquisition of receivables on discount or financing against such receivables by way of loans or advances or by the creation of security interest over such receivables but excludes normal lending by a bank and minimum net worth of the Company is INR 5 Cr,
• Core Investment Company (NBFC – CIC): The minimum requirement of asset size is INR 100 Crore. CIC NBFC is engaged in the business of acquisition of securities and shares which its holds 90% of its total assets in the form of investment in shares and equity

RBI issued draft directions for the prohibition of abuse in the fixed income markets, stating, among other things, that market participants, either acting independently or in collusion, shall not undertake any action with the intention to manipulate the process of calculation of a benchmark rate or reference rate.

The Reserve Bank of India has issued a notification regarding the Co-origination of loans by Banks and NBFCs for lending to the priority sector.

Start Your Process Today

How do we get an NBFC license?

In case you interested in exploring the financial market in India?

• If the answer to that is yes, then the NBFC license is what you should be looking for. NBFCs have become people’s first choice as they provide Fastrack services in the loan eligibility process compared to banks and other financial institutions.
• The entire process is on the RBI website & an individual must have the Rs. 2 Cr Net Owned Fund in place otherwise he/she will not be eligible for NBFC Registration.

Preconditions for having obtained an NBFC License:

Registration Process Non-Banking Financial Company

• Any person can take NBFC registration by fulfilling the following eligibility criteria.
• The first step to take NBFC is to register its Company under Companies Act 2013.
• KYC of Director or/and Shareholders
• Address proof for Company registered office address
• Registration is 15-20 days process. After getting the registration Certificate from the Registrar of the Company, we need to file an application to the RBI for NBFC license.
• Minimum Capital requirement is 2 Crore, means shareholder should have amount of minimum 2 crore to invest in NBFC
• Minimum 2 Persons act as Director or Shareholders (Shareholder can be a corporate Entity also)

Basic Steps for filling the For Non-Banking Financial Company (NBFC) Registration: Application Process & Requirement for NBFC registration

The applicant must submit an application to the RBI. Once logged in to the secure site of the Reserve Bank, click on one of the excel sheets and download the application form.

Fill in the accurate name of the Regional Office (RO) in the “C-8” field of Annexure-I Identification Particulars in the given Excel form.

Related links are there:

Payment of Scurity to MSME according to LAW

Micro Small and Medium Enterprises

Top Taxation Relaxation to MSMS

Cheer for SMEs and manufactures

Once the form has been filed, the company will receive a unique Company Application Number against the Company Registration Application that has been filed website.

The applicant must obtain a printout and must submit the same form, including the Company Application Reference Number, in addition to the basic documents to the Regional Office of the Reserve Bank of India concerned.

It must be noted that Necessary documentation should also be attached to the RBI website (COSMOS).

BASIC DOCUMENTS NEEDED FOR NBFC REGISTRATION:

Application must complained the following documentation:

• COI of the Private limited company or Public limited company
• Minimum Net owned fund / Paid-up Capital ₹ 2 Crore,
• Auditors report about the receipt of a minimum net owned fund.
• A certificate of CA regarding details of associate/subsidiary/ group/holding companies along with details of investments in other NBFCs as shown in the Proforma Balance Sheet
• Certified copy of up-to-date MOA and AOA of the Company.
• The high-level business plan for three to five year
• KYC, Income proof (ITR), Net worth Certificate, Credit report, Education proof of All directors and shareholders
• Self-declaration about any penalty imposed by Charge sheet/ Government authority / NI 138 proceeding e.t.c
• Business profile of all the directors (Including Central banker profile/ independent banker)
• Banker’s Report in a sealed envelope of Directors each shareholder of the Company.

If the Reserve Bank has any queries regarding the NBFC application submitted, it may issue a notice.

One must be both quick and successful in replying to the query otherwise there is a possibility that the request will be rejected.

Contact the most competent team at www.carajput.com for the best technical support and inquiry. Acknowledge the problem-free process and get the right support in all financial aspects.