NBFC Registration by thelawplanet.com

NBFC Registration


  • Finance Company Registration
  • Business Plan & Marke Analysis
  • End to End Assistance in Securing NBFC License
  • Advisory on building Fintech based lending Business model
  • Legal Advisory for NBFC
  • Audit Support Services
  • Go to Market Strategy

What is an NBFC?

Non-Banking Financial company provides similar services as a Traditional Bank except issuing on Demand drafts and cheques. NBFC mainly provides financial services to individuals and Businesses. NBFC is known for quick loan processing in comparison to the bank, Most of the NBFC matured nowadays and actively using alternative lending model, which is growing faster than the traditional lending model of Bank. Further RBI has been encouraging the startups to come and register NBFC.

NBFC is an integral part of our economy and they play important role in the Country building by increasing the reach of finance to the community. The government has been promoting entrepreneurship so that Local Moneylenders can come and organize their lending business. Unorganized lenders and Ex-Bankers have been very active for NBFC Registration in recent few years.

What is the role of NBFC?

The role of NBFC is very important in the Indian financial sector and NBFC in India has undergone too many transformations in recent years and Most of the NBFC Starts-up has adopted high-end Tech based business model, actively working to promote the financial inclusion & as well aggressively complementing the banking sector. Developing Countries like India, where less than 10% of people have a documented credit history hence the demand vs Supply of loan in very less. More than 70% of Indian Population is under serves with their financial needs. In the recent time, Indian Fintech Start-ups have been using alternative credit scoring model to assess the loan application. NBFC is regulated by the Companies act 2013 and RBI Act 1934. Credit growth of NBFCs is recorded at 24.3% per year as against 21.4% for banks.

How to Apply for NBFC Registration?

The reserve bank of India has bought a series of reforms in NBFC Regulations and New NBFC License process has been simplified after 2016. If you are planning to start a finance business, the 1st Step is to register a Company. After Company registration, you need to follow the following process to get the final NBFC Registration certificate from Reserve bank of India.

  • Bank Account opening
  • Arrange Capital of Rs. 2      Crore
  • Create a Fixed Deposit of Rs      2 CR
  • Create an NBFC Business Plan
  • Application for COR before      RBI
  • RBI Will Examine the      application
  • NBC License In 90-120 days

What are the Types of NBFC in India?

By nature of the activity, they undertake, NBFC License can be categorized into the following -

  • Asset Finance Company
  • Investment Company
  • Loan Company (Most Popular).
  • Peer to Peer Lending      Marketplace.
  • Infrastructure Finance      Company.
  • Core Investment Company.
  • Micro Finance Company.
  • Mortgage Guarantee Company.
  • Housing Finance Company
  • Core Investment Company

What are the Categories of NBFC in India?

By Deposit following Classification

  • The deposit accepting NBFCs      (Type -1)
  • Non-Deposit accepting NBFCs      (Type -2)

Note – Currently is not issuing NBFC license/ COR for Deposit-taking NBFC.

What is Deposits Taking NBFC?

Deposit-taking NBFC is a type-1 NBFC, is eligible for accepting Public deposits, subject to prior approval from the Reserve bank of India. A few years Ago, the Deposit-taking NBFC Registration was very popular. RBI has experienced that small companies who obtained the NBFC License for accepting Public Deposit have defaulted in the repayment of deposits. Currently, reserve bank of India is not encouraging the registration of Deposit-taking NBFC.

What is the NBFC Registration Process?

In order to obtain NBFC License, the Founders are required to follow both online as well offline NBFC application process. As We know that the Central Bank is a completely an autonomous body, RBI has two departments namely DNBR (Department of Non-banking Regulation) & DNBS (Department of Non-Banking Supervision) to regulate and supervise the function of NBFC. The DNBR is responsible for the Fresh NBFC Registration as well for preparing the regulation for the NBFC and DNBS is responsible for post-registration compliance and other administrative issues. The DNBR has transparent as well innovative assessment process of NBFC Application. Hence, during the NBFC registration process, if they need of any additional documents, The DNBR will email you or send you a formal notice, RBI Expects your submission/response to a notice within 30 days.

If you are genuine enough then you can expect NBFC license in 90 to 120 days. Before the filing of Application for COR (Certificate of registration), You should read indicative checklist at below. For further details, you are requested to carefully read the RBI Circular.

#Step 1 Hire NBFC Consultant

  • Experience Matters - Select      an Experienced Consultant with Minimum 10+ years of Experience in NBFC      & Banking laws.
  • Credibility - NBFC      Consultant should have a good team size of 100 to 150 with Combination of      professionals like CA, CS, Lawyers, and Senior Bankers.
  • Verify Reference - Ask NBFC      Consultant to give you a minimum 3 references of clients
  • Avoid New/Small Firm
  • Sign SLA (Service level      agreement)

#Step 2 – Business Plan

  • Founders and Executive      Summary
  • Loan Product
  • Lending Process with SOP
  • SWOT Analysis
  • Credit & Risk Model
  • Competitors Analysis
  • Lending model – Digital /      Branch Model
  • Financial forecast

# Step 3 – Application for Cor

  • Create Fixed Deposit of Rs.      2 Cr with Scheduled commercial bank
  • Verify the Backgrounds of      Promotors
  • Submit an online COR      application on RBI's website (COSMOS)
  • Physical submission of      Application to the RBI.

What is the NBFC Registration Requirement?

Before the filing of Application for COR with RBI, you need to understand what are the documents required for NBFC registration.

  • Company Name Registration - The Middle name of Company      Must be Finance, Finserv, final, Investment, Capital, Fintech, Leasing      e.t.c. Example ABC Capital Limited
  • MOA of the NBFC Company - The object clause in the      MOA clearly depicting the financial/Investment/Lending business.
  • Certified Copy of      Registration Certificate - Obtain a Certified copy of Certificate of      Incorporation, MOA & AOA from the Regional registrar of companies
  • Auditor Appointment in NBFC      –      Need to Appoint an experienced chartered accountant in practice as      Statutory Auditor of the applicant company. Please check whether he/she      has prior auditing experience of NBFC or Not.
  • Latest KYC – Need updated KYC &      Income proof of Directors and shareholders
  • Net worth Certificate – Collect updated Net worth      certificate of Directors, Shareholders, and Company
  • Clean Banker Report – Need to Obtain a Banker      report about the no Lien remark on the Initial Fixed deposit of Rs 2 Cr.
  • Education Proof - Submit highest      educational/professional qualification of the directors of the Applicant      company
  • Credit report of Directors      and shareholders – Latest Credit reports of directors and      Shareholders are required.
  • Experience in the Financial      sector - Submit      at least one Director's profile with 10+ years’ experience in the      Financial Services Sector.
  • Underwriting model - Submit a detail action plan      about the Loan products, Fair Practice code, Credit and Risk Assessment      Policy
  • Organization Matrix – Need to provide      Organizations structure and decision-making process for approval/Rejection      of a loan application
  • System and IT Policy - Submit Information      technology policy in case you lend via the use of FinTech based lending      model
  • FDI Compliance - In case of FDI, Necessary      FDI Compliance as per FEMA Act must have complied
  • Application Submission - Online and Offline      Application Submission to RBI

How Are NBFCs different from Banks?

NBFCs provide financial services similar to banks but they are more concentrated on an unorganized sector of the society having low or no credit rating score. NBFC use big data to assess a loan application.

The other differences are:

  • NBFCs are barred to accept      demand deposits, however, they can accept public deposits after getting      NBFC Deposit-taking license from the RBI. Currently, Deposit-taking NBFC      License is not possible in our view.
  • NBFCs are not entitled to      issue cheque drawn on itself as they do not form part of payment and settlement      system.
  • Credit guarantee and      insurance facility are not available to depositors in case of NBFC.

Why do I go for fresh NBFC Registration Instead NBFC Takeover?

Applying for fresh NBFC Application is always a better option, after 2016 RBI has simplified the process of NBFC Registration and especially for foreigner company, who intend to enter into the Indian Financial service market, we always advise them to apply for fresh NBFC registration Application instead of buying existing NBFC License.

Advantages of fresh NBFC Registration

  • Low Legal Risk - If you are willing to apply      for fresh NBFC Registration application, then no need to worry about the      Past Non-Compliances. In case of NBFC Takeover, Any Past Non-compliance      with RBI Act may lead to cancellation of NBFC License.
  • Timeline - Fresh NBFC Registration can      be completed in a period of 90 to 120 days whereas NBFC Takeover takes      usually 5 to 9 Months.
  • Title Risk – There is no title risk of Ownership      after New NBFC Registration as you are the 1st shareholder of the company      at another side in acquiring an existing NBFC, you will not able to      establish the clear title of shares.
  • Tax Liability – There are no assets held by      newly incorporated company hence there is no short term or long term gain      but at another side, if you are acquiring existing NBFC, you need to      prepare for future Capital gain liability, Penalty from Registrar of      companies etc.
  • Capital – In the case of fresh NBFC      License application, you may need to block your Rs. 2 Cr / Rs. 20 Million      FD in Bank Account and definitely you will earn some amount of interest in      it. At another side, in a case of the takeover, the proposed shareholders      are required to submit the Bankers report stating the Bank Balance      equivalent to book value of the shares.

What are the NBFC Registration Fees?

For registering a Private Limited company with Capital Rs. 2 Cr, you will require to pay a government fees Approximate Rs. 3,50,000 and further Professional fees may require to be paid to the NBFC Consultant in case you are taking expert advice.

What are the NBFC compliances after COR?

After you successfully complete the NBFC Registration Process and from here need to follow the RBI Act, RBI Guidelines, Circular, and notification published in the public domain from time to time.

  • Cosmos Registration
  • FIU-Ind Registration
  • CIC Registration
  • C-KYC Registration
  • Secretarial compliances.
  • Statutory Audit.
  • Tax Audit.
  • Income tax Returns.
  • ROC Returns.
  • Filling of NBS-9 by use of      Online Platform of RBI (COSMOS)
  • Any other Compliance /      Returns required by the Competent Authority

What is Core the function of Fintech based business model?

Addressing mass problems and Customer acquisition process platform based, modular, and focusing on the Mass need Actively shaping customer behavior, Attracting user for an online loan

Working on financial inclusion – app based loan in 30 minutes. Creating space for the alternative digital banking system Disrupting conventional business models facing significant legacy issues;

Use of Big data, AI & Machine learning tools to minimize the fraud

How Fintech Enablement by the RBI?

UPI: the “Unified Payment Interface”, commonly known as UPI, holds the potential to bring the much-needed revolution in the in the digital payment systems thereby leading towards a cashless economy

  • Payments;
  • Lending;.
  • Security/Biometrics – Aadhar      based payment system
  • Wealth Management

Know Alternative Lending before You register an NBFC?

  • Low Operation Cost - Fintech based NBFC - Extensive      Use of the technology and IT Infrastructure hence operating cost (Salary      & Infra cost is lower than traditional NBFC)
  • Unlimited Reach - Fintech NBFC has been      targeting a customer demographic who were outside the scope of the      traditional banking system.
  • Higher ROI - Fintech based NBFC has      higher fund cost as Compare to Bank, however, enjoys a lower customer      acquisition cost and Lower servicing cost than the bank.
  • Lower NPA than Bank - Fintech based NPA has      higher NPA compare to banks. But ROI is much higher than a secured lending      model. Alternative lending business has 2 times better profit than      Traditional Lending

What are the supports or Services will I get from thelawplanet.com after Certificate of registration from RBI?

  • Advisory for Fintech Based      Credit Assessment model
  • Assistance in SOP of the      Organization
  • Assistance in designing your      loan product
  • Finalizing reporting formats      from various verticals of the organization
  • Guidance on Digital      Financial Services Marketing
  • Assistance in designing      Company Policies
  • Development of High-Level      Business Plan & Investor Deck
  • Helping founders in      preparing to Go to market strategy
  • Assistance in the      fundraising process via FDI Automatic route
  • Assistance in meeting      Secretarial compliances
  • Assistance in meeting RBI      Compliance
  • Advisory on Adoption of      Ind-AS
  • Internal Audit Services
  • Virtual CFO Services

What is thelawplanet.com's SOP for NBFC Registration Advisory Services?

Thelawplanet.com is in NBFC/IRDA/SEBI advisory services. We offer financial services advisory services in more than 22+ Countries.

  • Request a Call Back - Please visit our website      Provide your name, Email Id & Mobile No Get Started
  • On Call Discussion with      Expert – Get      Free 60 Minutes on Call discussion with our expert and Clear your      questions.
  • Sign SLA – After on Call discussion      sign SLA (Service level agreement
  • Documents Checklist - After understanding of      Founders Profile, We will share a detailed checklist for your necessary      review and further action.
  • Upload Documents - Upload documents..
  • Work with Our Team - We assign a small team of 4 people      on each assignment with a Combination of Professionals like CA, CS,      Lawyer, and Senior Banker.
  • Transparent Servicing - You can Track the order      status on our website or by use of Mobile App
  • All-Inclusive Package - Our team will handle end to      end process like Company formation, Business plan Creation, Application      drafting and assist you answering RBI Questions and will work with you as      Part of your team until you get the NBFC COR.

Frequently Asked Questions on NBFC Registration

1. Is a registered NBFC is a financial Institution? 

Yes. NBFCs are the companies registered under the Companies Act, 2013 and after company registration, You need to obtained Certificate of registration or NBFC License from the reserve bank of India.

2. What are the sources of funds for an NBFC? 

Yes. NBFCs are the companies registered under the Companies Act, 2013 and after company registration, You need to obtained Certificate of registration or NBFC License from the reserve bank of India.

3. What is meant by principal business in the context of a registered NBFC? 

If an NBFC has more than 50 percent of the total assets or revenue from financial services comprises more than 50 percent of the gross income. A company fulfilling both these conditions will be eligible to Apply for NBFC license to the RBI.

4. Can NBFCs accept deposits? 

Only those NBFCs which have been granted a license depicting their eligibility to accept deposits from the public shall proceed for the same. However, such deposits are not demanded deposits.

5. What is the maximum limit to accept deposits from the public? 

An unrated NBFC complying with all the prudential norms and maintaining capital adequacy ratio of at least 15% and having NOF of 25 Lakhs is allowed to accept or renew public deposits not exceeding 1.5 times of its NOF or up INR 10 crores, whichever is lower.

On the other hand, a rated NBFC complying with all the prudential requirements are allowed to accept deposits up to 4 times of their NOF.

6. Does every NBFC required to be registered with RBI? 

The Reserve Bank of India (RBI) controls the working of all NBFCs under the framework of RBI Act, 1934 and directions issued by it from time to time. Therefore, every NBFC, to carry out its operations, is required to obtain NBFC license from the Reserve Bank of India to commence its business.

7. What are the basic requirements for the takeover of NBFC? 

Prior approval of RBI is required to initiate any takeover of NBFC. An application is submitted on the letterhead of the company to the Regional office of the RBI for getting the approval. Once the approval is granted, a public notice in the leading newspaper shall be published. Thereafter, the Share-Purchase agreement is signed and takeover is affected. It shall further be kept in mind that only an NBFC can take over another NBFC.

8. What is the definition of Net Owned Funds (NOF) of NBFC? 

The addition of paid-up equity share capital and free reserves as per the latest balance sheet of the company and deducting the following items from it:

•    Accumulated losses;
•    Deferred Revenue expenditures;
•    Other intangible assets;
•    The consequential amount is further condensed by following items

Investment of such NBFCs in its subsidiaries, same group companies, and other NBFCs; the book value exceeding 10% of the amount calculated in (1) above, of debentures, bonds, outstanding loans and advances (including hire-purchase and lease finance) made to, and deposits with its subsidiaries or companies within the same group

9. What shall be considered as Change in management in an NBFC? 

For any change in the shareholding resulting in 26 per cent acquisition/ transfer of the paid-up equity capital, or any takeover or acquisition of control of NBFC, or change in the management as a consequence of more than 30 % change in the Board excluding independent directors, prior approval from the Reserve Bank shall be taken. The application shall be made to the RBI for the approval, on the letterhead of the company along with all the necessary documents. The approval usually takes 1-3 months of processing time. After getting approval from RBI, a public notice shall be given in one leading national and one leading local newspaper. Then, the Share Purchase Agreement is prepared and signed, the management is handed over and the consideration remaining, if any, is paid off within the stipulated time of 31 days from public notice or such other time period as mutually agreed upon by the acquirer and transferee.

10. Is FDI is allowed in Newly incorporated NBFC? 

There is no limitation on FDI in NBFC, but FDI must be in the form of T1 Equity. 

NBFC Registration services by www.thelawplanet.com

NBFC Registration services by www.thelawplanet.com