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NBFC Company Registration in India
A Non-Banking Financial Company (NBFC) in India is a financial institution that provides banking-like services without holding a banking license. NBFCs are regulated by the Reserve Bank of India (RBI) under the Reserve Bank of India Act, 1934. They offer a range of financial services, including loans, asset financing, leasing, and investment in securities, but are restricted from accepting demand deposits. NBFCs play a crucial role in India’s financial sector by providing credit access to individuals, SMEs, and other underserved segments, filling gaps left by traditional banks.
Why Registration is Important
- Regulatory Compliance : Ensures that the company operates within the legal framework established by the RBI, increasing credibility.
- Market Access : Legally permits the company to provide financial services like lending, leasing, and asset financing.
- Limited Liability : Protects personal assets of shareholders by limiting liability to the NBFC's capital.
- Customer Trust : Builds trust among clients, investors, and financial partners due to RBI oversight.
- Government Schemes Access : Eligible for schemes and incentives provided to NBFCs by the government for financial inclusion.
Documents Required
The documentation required for registering an NBFC in India is extensive and includes both legal and financial documentation
Company Documents
Procedures
The registration process for an insurance company in India is rigorous and involves the following steps
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Incorporate the CompanyIncorporate the Company:Register as a Public or Private Limited Company under the Companies Act, 2013, with a minimum paid-up capital of ₹2 crore.
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Open an FD AccountOpen an FD Account: Deposit a minimum of ₹2 crore in a Fixed Deposit (FD) account with a scheduled bank, earmarked for meeting RBI’s capital requirements
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Prepare a Business PlanPrepare a Business Plan: Draft a detailed five-year business plan, covering all proposed NBFC activities, financial projections, and risk management
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Submit Application on RBI’s COSMOS Portal:Submit Application on RBI’s COSMOS PortalCreate an account on the RBI’s COSMOS portal, fill out the NBFC registration application, and upload all required documents
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Submit Hard Copy to RBI Regional Office:Submit Hard Copy to RBI Regional OfficeAfter online submission, send a hard copy of the application, with all supporting documents, to the regional RBI office.
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RBI Review and Due DiligenceRBI Review and Due DiligenceThe RBI conducts due diligence and may seek additional clarifications or conduct inspections as part of the review process.
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Grant of Certificate of Registration (CoR)Grant of Certificate of Registration (CoR)If satisfied, RBI grants a Certificate of Registration (CoR) under Section 45-IA of the RBI Act, allowing the company to operate as an NBFC.
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Commence OperationsCommence OperationsStart operations as a regulated NBFC in India
Features
Features & Benefits of NBFC Company Registration in India
Regulated by RBI
Diverse Financial Services
No Demand Deposits
Credit Rating Requirement
NBFC Company Registration in India
Corporate Structure
Prudential Norms
Financial Inclusion
Limited Scope of Activities
Transparency and Disclosure
Comparison between NBFC, Bank And Microfinance Institution (MFI)
| Features | NBFC | Bank | Microfinance Institution (MFI) |
|---|---|---|---|
| Capital Requirement | ₹2 crore (minimum NOF) | ₹500 crore (minimum paid-up capital) | ₹5 crore (minimum net worth for national level) |
| Accepting Deposits | No demand deposits | Can accept demand deposits | Cannot accept demand deposits |
| Lending Activities | Wide range of lending activities | Wide range of banking and lending | Small loans to low-income individuals |
| Credit Rating Requirement | Mandatory | Not applicable | Mandatory |
| Public Confidence | Moderate | High | Moderate |
| Financial Services | Loans, asset finance, leasing, investment | Full range of financial services | Microloans |
| Compliance Requirements | High | Very High | Moderate to High |
Frequently Asked Questions
What is the minimum capital requirement to start an NBFC in India?
The minimum Net Owned Fund (NOF) required to start an NBFC in India is ₹2 crore.
Can an NBFC accept deposits?
NBFCs cannot accept demand deposits (such as savings accounts) but may accept term deposits if they obtain specific authorization from the RBI.
How long does it take to register an NBFC with the RBI?
The registration process typically takes several months, depending on the completeness of the application and the RBI’s scrutiny process.
What is the role of the RBI in regulating NBFCs?
The RBI regulates NBFCs to ensure financial stability, protect depositors, and maintain public confidence in the financial system.
What ongoing compliance requirements must an NBFC adhere to?
NBFCs must comply with various RBI regulations, including maintaining capital adequacy, submitting periodic financial reports, and adhering to asset classification and provisioning norms.
Can foreign companies invest in Indian NBFCs?
Yes, foreign companies can invest in Indian NBFCs, subject to FDI regulations and sector-specific caps.