How to Get NBFC Registration in India

NBFC or non-banking financial corporation is a specific type of company that deals with finance and offers shadow banking services to its clients without having a banking license. This article will provide you with a detailed guide on how to apply for NBFC registration in India along with documents, regulations, and requirements.

This is the fundamental difference between financial institutions in the banking sector of the country. NBFCs are under the purview of the Reserve Bank of India (RBI).

Before going into detail let us first understand what is NBFC or Non-Banking Financial Company in India.

What is an NBFC Company in India

The Reserve Bank of India has clearly defined what is an NBFC company.

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, 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 the immovable property. A non-banking institution which is a company and has 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 (Residuary non-banking company).

Different Types Of NBFC Registration in India

In India, NBFC companies are strictly registered as per the rules, provision, and regulations of the Section 45-IA of the RBI Act of 1934. NBFC registration can be categorized broadly into two types. One is based on the nature of the activity of the company and the other is on deposits

Types of NBFC companies on the basis of nature of activity are the following

  • Asset Finance Company(AFC)
  • Investment Company
  • Loan Company
  • Infrastructure Finance Company
  • Core Investment Company
  • Microfinance Company
  • Housing Finance Company
  • Mortgage Guarantee Company

On the basis of deposits, NBFC companies are of two types:

  • Companies eligible to accept deposits
  • Companies not eligible to accept deposits.

Who Does not Require NBFC Registration?

It is worth mentioning here that there various types of companies who do not need NBFC license to operate. The list is mentioned below:

  • Housing Finance Companies: Regulated by the National Housing Bank
  • Insurance Companies: Regulated by Insurance Regulatory and Development Authority of India (IRDA)
  • Stock Broking: Regulated by Securities and Exchange Board of India
  • Merchant Banking Companies: Regulated by Securities and Exchange Board of India
  • Venture Capital Companies: Regulated by Securities and Exchange Board of India
  • Companies with Collective Investment Schemes: Regulated by Securities and Exchange Board of India
  • Mutual Funds: Regulated by Securities and Exchange Board of India
  • Nidhi Companies: Regulated by the Ministry of Corporate Affairs.

Who can Apply for NBFC Registration In India

Basic criteria are to obtain NBFC registration are as follow:

  • The company must be registered in India as Pvt. Ltd. or Ltd. Company.
  • The company must have a minimum Net Owned Fund of Rs.200 lakhs. However, you have to calculate the Net Owned Funds on the basis of the last audited balance sheet of the Company.
  • Additionally, you have to furnish the hard copies of the list of documents to the Regional Officer of RBI. You can find a detailed list here.

What is the Procedure For NBFC Registration

  1. Applicant company has to file an online application with the RBI’s website www.rbi.org.in. After the submission, the applicant will get a reference number to facilitate inquiry in the future.
  2. Then, the company requires to submit the duplicate hard copies to the concerned regional office of RBI.
  3. The regional office will check the accuracy of all submitted documents. And after getting satisfied, the regional office will send the application for NBFC registration to the central office.
  4. The central office of RBI grants the NBFC registration only when applicant company fulfills the all prescribed things in the section 45-IA, of its act of 1934.

The Reserve Bank of India regulates and supervises NBFC Registration in India. If any unincorporated entity or an NBFC without authorization to take deposit is found accepting public deposits, it is liable for criminal action.