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Basic Norms to Start a NBFC Business Know what ‘NBFC’ is! The regulatory body …

Basic Norms to Start a NBFC Business

Know what ‘NBFC’ is!
The regulatory body for NBFCs is the RBI and hence, they have to follow the banking regulations laid down by Section 45-IA of the RBI Act of 1934.

Services NBFCs Can Offer:
The business activities of NBFCs include loans & advances, acquisition of shares or stocks or bonds or debentures or securities that are issued by government or local authority or other marketable securities of similar nature, like leasing, hire-purchase, insurance business, chit business etc.

Services NBFCs Cannot Offer:
RBI clearly defines the domains which cannot be touched by the NBFCs, and thus agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services, sale or purchase or construction of immovable property, cannot be dealt with by NBFCs.

Eligibility Norms for NBFC Registration!
 Company should be registered under the Companies Act, 2013
 Company should have Minimum Net Owned Fund of INR 2 crore

(Net Owned Funds to be calculated on the basis of the last audited balance sheet of the Company)

Types of NBFCs, Based on the Nature of Activities:
• Mortgage Guarantee Company
• Asset Finance Company
• Microfinance Company
• Infrastructure Finance Company
• Housing Finance Company
• Investment Company
• Loan Company
• Core Investment Company

Procedure of NBFC Registration:
1. First formality is forming a company with Minimum Net Owned Fund of INR 2 crore (Equity Share Capital & not Preference Share Capital).
2. Then the company needs to open a Bank Account and keep the entire sum of INR 2 crores in a bank’s deposit account which should be free from all liens).
3. The Applicant Company is then required to file an online application on the RBI’s website.
4. After the submission, the applicant will get a reference number that shall enable to facilitate inquiry in the future.
5. Thereafter, the company needs to submit the hard copies of required documents to the concerned Regional Office of RBI.
6. The Regional Office will verify the accuracy of all submitted documents and on satisfaction; it will forward the application for NBFC registration to the central office.
7. The central office of RBI grants the NBFC registration only after the applicant fulfills all prescribed requirements in the section 45-IA, of its act of 1934.

Documents required to be submitted to RBI:
For NBFC Incorporation the following documents will be required:
 Certificate of Incorporation (Certified Copy Issued by ROC)
 Extract of Main Object Clause in MOA (Clearly depicting Financial Business)
 Board of Resolution stating the following before getting registration from RBI:
 Adherence to the “Fair Practices Code (As per RBI Guidelines)
 Non-carrying out any NBFC activity
 Non-carrying out of acceptance of any public deposit
 Audited Balance Sheet & Profit & Loss account along with directors and auditors report (for entire period of company’s existence or last 3 years, whichever is less)
 Director’s Highest Educational & Professional Qualification (Copy of certificate)
 Director’s experience in the Financial Services Sector, including Banking Sector (Copy of certificate)
 Details of deposits & loans balances as on the date of application & conduct of account (Bankers report)


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