NBFC

An Overview of NBFC Registration

NBFC or Non-Banking Financial Company is a Company registered under the Companies Act, 2013 involved in the business of loans & advances, acquisition of bonds or securities or shares or bonds or stocks issued by the Government or Local Authority or other marketable securities like leasing, insurance business, hire-purchase, chit business. NBFCs in India doesn’t possess proper banking Licenses such as Commercial Banks (after obtaining NBFC License from RBI) provide a variety of very supportive & helpful services to public depositors, borrowers & investors in some selected areas of Business. Following are some conditions that should be fulfilled to continue NBFC License:

1. Total Assets comprise more than 50% of Financial Assets;
2. More than 50% of the gross income must be generated from Financial Assets.

Restricted Activities:

1. Industrial Activity;
2. Agricultural Activity;
3. Sale or Purchase of Goods & Services;
4. Sale or Purchase of Construction of Immovable Property.

Different Types of NBFCs in India

Basically, NBFCs are categorised into two different parts and you can check the same below:

• On the Basis of Liabilities:

1. All NBFCs-ND whose asset size is Rs. 500 crores and more as per the last audited balance sheet is deemed as Systemically Important NBFC (NBFC-ND-SI);
2. The asset size of the group companies to be clubbed;
3. NBFC-ND-SI has to follow the policies suggested by the Reserve Bank of India mandatorily & exempt from Credit Concentration Norms;
4. NBFC-ND- Non-Systemically Important is exempt from observing Prudential Norms, 2015 (except Annual Certificate).

• On the Basis of Activities:

1. NBFC- Investment and Credit Company (ICC): ICC is one common License for all types of financing business in India. Earlier, there were three different licenses, namely Loan Company, Asset Finance Company and Investment Company. Now, after the merger into one single License defined as ICC (Investment & Credit Company), it allows the license holder to engage in various kinds of wholesale, retail loans and Investment business. The ETA for the NBFC ICC License is estimated to be 120 days.
2. NBFC-Microfinance Companies (MFIs): NBFC-MFI is mainly formed to provide credit to economically disadvantaged groups.
3. NBFC-Factors: It is concerned with the acquisition of receivables of an assignor/extending loans against the security of the receivables at a discount.
4. NBFC-Peer to Peer Lending (P2P): It provides an online or digital platform to being lenders & borrowers together to help mobilise funds.
5. NBFC-Account Aggregators: Collecting & facilitating detaiuls of customer’s financial assets in a consolidated, organised & retrievable manner to the customer/others as specified by the customer.
6. Infrastructure Finance Company (IFC): This type of NBFC deploys at least 75 per cent of its total assets in infrastructure loans.
7. NBFC-Systemically Important Core Investment Company (CIC-ND-SI):  It’s mainly involved in investment in equity shares, preference shares, debt or loans of group companies.
8. NBFC–NOFHC (Non-Operative Financial Holding Company): Facilitation of promoter groups or promoters in establishing new banks.
9. MGC (Mortgage Guarantee Company): Undertaking of mortgage guarantee business.
10. NBFC-IDF (Infrastructure Debt Fund): The activities of this NBFC are mainly concerned with the facilitation of the flow of long-term debt into infrastructure projects.

Documents Required for NBFC Registration

The following documents are required for NBFC Registration as follows:

1. Certified or original copy MOA (Memorandum of Association), AOA (Articles of Association), COI (Certificate of Incorporation);
2. Net worth certificate of Shareholders, Directors, and Company;
3. Business profile of Directors and Shareholders;
4. Income Tax Returns;
5. Educational qualification certificates of the proposed directors;
6. KYC details such as PAN of the company, GST Number, and address proof of the company;
7. Highest experience certificate;
8. Bank account details of the company;
9. Format of Board Resolution regarding NBFC Registration;
10. IT Returns;
11. Loan and Business Structure;
12. Credit report of directors and shareholders;
13. Last 3 years of the audited balance sheet;
14. Related party disclosures;
15. Detailed action plan for next 5 years, including Risk Assessment Policy & Fair Practice Code;
16. Report of Banker confirming no lien on fixed deposit.

Procedure for NBFC Registration

The steps involved in the process of NBFC Registration are as follows:

• First you need to hire an experienced NBFC Consultant who is having at least 10 years of experience having a team of professionals such as CA, Lawyers, CS, and Senior Banker.
• Then, you need to select a name of the company that must include, Fintech, Finance, Capital, Finserv, Investment, Leasing, etc.;
• Then the applicant need to arrange all the required documents to initiate the NBF Registration process;
• After that, the applicant must file the application with the Authority.
• After submitting the application to the Authority, then they will verify the documents & application to check the accuracy of the submission made by the applicant;
• Once satisfied, the Authority will issue the NBFC Registration Certificate.

Conditions Specified by RBI for NBFC Registration After filing the application, the RBI will examine the file & issue the License only after fulfilling the below mentioned conditions:

• Ability of NBFC to repay all its dues to investors & Business Plan of the Company must fulfil the larger interest of the Society;
• Earning capability of the proposed Business;
• Proposed NBFC shall comply with RBI regulations;
• Activities shall be carried out in a way that it shall be in the public interest;
• Capability to infuse sufficient capital;
• NBFC activities shall not be damaging any public interest at large;
• Board shall act in the interest of depositors or public.

Cancellation of NBFC Registration or License

1. The business plan is not up to the mark;
2. NBFC consultants are not experienced;
3. It can be cancelled in case of insufficient financial experience;
4. Shareholder and Directors business profile is not satisfactory;
5. The area of carrying NBFC operations is not promising;
6. Capital is arranged from a prohibited source.