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What are the requirements for registration of NBFC with RBI?

The requirements for registration of NBFC with RBI are as follows –

  1. NBFC should be registered either as a public or a private limited company in India.
  2. It should be registered under section 3 of the act.
  3. It should have a minimum net owned fund of Rs. 2 Crore and must not include borrowed fund (Minimum owned fund varies from NBFC to NBFC)
  4. Company’s financial assets must include more than 50% of the total assets.
  5. Company’s revenue from fiscal assets must include more than 50% of the gross income.
  6. At least 1/3rd of the directors must have a proven experience in the field of Finance.
  7. There should be a detailed plan for the next 5 years.
  8. NBFC’s are allowed to accept or renew public funds for a minimum period of 12 months and maximum period of 60 months.
  9. NBFC’s cannot accept deposits repayable on demand.

Documents Required to obtain NBFC License

The documents required for NBFC license are as follows –

  • Certified copy of certificate of incorporation
  • PAN/CIN copy allotted to the company
  • Certified copies of the extract of the MOA.
  • Copy of FD receipt & Banker’s certificate to support balances of the minimum net owned fund of Rs.2 Crores.
  • Director’s profile in detail signed by each director.
  • CIBIL score of the company directors
  • Copy of highest education and professional qualification certificate with respect to all directors’ NBFC experience.
  • Copy of experience certificate (if any in financial services sector including banking sector) with respect to all the directors.
  • For existing companies –
    • Profit & Loss a/c
    • The audited balance sheet
    • Director or auditors report (for the entire period of company’s existence or last 3 years (Whichever is less)
  • Board resolution as stated in the application form guidelines.

NBFC Registration Fees in India

Non-banking financial corporation bargains in different money related exercises such as giving credits, resource account, microfinance, interest in securities and so on. NBFC is governed by RBI & is mandatory to take RBI permission before starting NBFC operations in India. The most important thing for any non-banking financial corporation to begin in India is RBI permit.

Key points before going ahead with NBFC registration

Before doing NBFC registration, you need to focus on the following points mentioned below -

  1. It is mandatory for every organization to apply for RBI permit before starting their operations as NBFC. Other than organization, nobody can apply for RBI permit in India.
  2. In order to get RBI permit, it is mandatory for a company to have net owned fund of Rs.2 crores as a base. In case of micro finance business, it is Rs.5 crores.
  3. The achievement rate of RBI permit depends on the profile of advertisers.
  4. NBFC’s are of different types and make sure about the NBFC you want to enroll.
  5. NBFC can’t acknowledge open stores until it is specifically approved by RBI.

NBFC Registration Process in India

The procedure for NBFC registration in India is as follows –

  1. If applying offline, you need to submit the hard copy of the application form to the regional office of RBI along with the required documents.
  2. If applying online, you need to apply on RBI’s website – https://cosmos.rbi.org.in in order to submit an application online.
  3. At this stage, there is no need to login to fill the cosmos application. Hence, no need to make User ID’s. Applicant Company needs to click on “Click for company registration” link given on the login page of the cosmos application.
  4. After clicking the link, an application form (NBFC or SC/RC) in the excel form is displayed on the window for downloading.
  5. After downloading the form, Applicant Company needs to fill the data in the application form and upload the same on the website.
  6. You need to put correct regional office name in the field “C-8” of the “Annex – identification particulars” of the excel application form.
  7. After submitting the excel form, a company application reference number is generated online.
  8. After generation of company application reference number online, you need to submit the hard copy of the application form along with the online company application reference number and supporting documents.
  9. The application and the documents are analyzed by the officials of RBI and lastly, the application is approved by RBI. The complete procedure may take time period of 90-120 days.
  10. Applicant company can easily check the status of their application online by inputting the acknowledge number.

What is “Owned fund” and “Net owned fund” in relation to NBFC’s?

Owned Fund

Owned fund means aggregate of –

  • Preference shares (Compulsorily convertible into equity)
  • Free reserves
  • Paid-up equity capital
  • Capital reserves (Surplus out of the sale proceeds of the asset)
  • Balance in share premium account

Owned fund excludes reserves created by asset revaluation after deducting –

  • Deferred Revenue expenditure
  • The accumulated balance of loss
  • Other intangible assets.

Net Owned Fund

Net owned fund equals to owned funds minus

  • The amount of investment made by the company in
    • Companies of the same group
    • Shares of its subsidiaries
    • Other NBFC’s
  • The book value of
    • Bonds, debentures, outstanding loans & advances
    • Deposits with subsidiaries as well as companies in the same group
    • Hire purchase & lease finance made to subsidiaries and companies in the same group.

What is meant by Principal business in the context of a registered NBFC?

There is no term like “Principal business” defined by RBI in RBI act, 1934. Any financial activity performed by business entity will be considered as its principal business if –

  • Company’s financial assets include more than 50% of the total assets.
  • Company’s revenue from fiscal assets includes more than 50% of the gross income.

If the company fulfills the above two mentioned conditions, company will be considered eligible for NBFC registration by RBI.

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