NBFC Registration

NBFC stands for Non-Banking Financial Company. These are financial institutions that provide various banking and financial services but do not hold a full banking license.

1. Determine the Type of NBFC:
Firstly, you need to decide on the type of NBFC you want to establish based on the services you wish to provide. NBFCs are classified into various categories, such as investment companies, loan companies, asset finance companies, etc.
2. Eligibility Criteria:
The minimum net owned fund (NOF) requirement for an NBFC in India is INR 2 crore (INR 20 million). Ensure that your company meets this requirement.
The company should be incorporated under the Companies Act, 2013, or the previous Companies Act, 1956.
3. Incorporation:
You need to incorporate a company as per the Companies Act, 2013, or Companies Act, 1956. For that purpose, draft the Memorandum of Association (MoA) and Articles of Association (AoA) in line with the objectives of an NBFC.
4. Create Necessary Documents:
Next, you need to prepare all necessary documents such as MoA, AoA, certificates of incorporation, board resolutions, and financial statements.
5. Apply for Registration with the RBI:
Visit the RBI's website to access the COSMOS portal, where you can apply for registration and submit the online application form along with the necessary documents and application fee.
6. Submission and Review:
After submitting the application, the RBI reviews your application and may request additional information or documents.
Respond to any requests for additional information from the RBI.
7. Verification and Inspection:
For inspection purpose, the RBI may conduct on-site and off-site verification to ensure compliance with their standards and regulations.
8. Approval:
If the RBI is satisfied with the application and your compliance with regulations, they will grant a Certificate of Registration (CoR) to your NBFC.
9. Post-Approval Compliance:
After the registration process is complete, your NBFC must comply with ongoing regulations, including reporting, asset classification, capital adequacy requirements, and other statutory requirements.
10. Start Operations:
Once the registration is complete, and you have obtained the Certificate of Registration, you can start your NBFC operations.

Documents Required for NBFC Registration:
For NBFC registration, you need to submit all the necessary documents. These documents are necessary for the RBI to assess your eligibility and compliance with its regulations.
Here is a list of documents required for NBFC registration.
1. Corporate Documents:
• Certificate of Incorporation: Issued by the Registrar of Companies (RoC).
• Memorandum of Association (MoA) and Articles of Association (AoA) - highlighting the objectives of the NBFC.
• Board Resolution: Authorizing the NBFC's registration application.
2. Financial Documents:
• Audited Financial Statements: For the last three years (if applicable), including balance sheets and profit and loss statements.
• Net Owned Fund (NOF) Certificate: Certifying the NOF and confirming compliance with the minimum requirement (INR 2 crore).
3. Shareholding and Management Information:
• Details of Directors and Shareholders: Including profiles, addresses, and proof of identity and address.
• Board of Directors’ Profiles: Academic and professional qualifications, background, and experience.
• Ownership Structure: Shareholding pattern of the company.
4. Business Plan and Operational Details:
• Business Plan: A comprehensive plan outlining the proposed NBFC's business model, target market, and strategies.
• Operational and Funding Details: Description of operations, types of activities, and sources of funding.
5. Compliance and Governance Documents:
• Declaration and Undertakings: Various declarations and undertakings as per the prescribed format.
• Compliance Statements: Certifying compliance with various laws and regulations.
• KYC Policies: Know Your Customer and Anti-Money Laundering policies and procedures.
6. Other Documents:
• Certificate from Statutory Auditor: Certifying that the company meets the criteria for registration.
• Copy of Income Tax Returns: For the last three years, if applicable.
• Bankers' Reports: From the company's bankers.
• CIBIL Reports: For the company, directors, and shareholders.
• Proof of Office Premises: Ownership or lease agreement and utility bills.
• Copy of PAN Card: For the company and directors.
• Credit Rating Certificate: If applicable.
7. Other Declarations and Undertakings:
Various forms and undertakings as per RBI's guidelines, including:
• Declaration that the company does not carry on any NBFC business without the RBI's registration.
• Declaration regarding related party transactions and relationships.
• Application Submission: Once you have gathered all necessary documents, you can proceed to submit the application through the COSMOS portal on the RBI website.

Importance of NBFC Registration:
1. Compliance with Regulations:
NBFC adheres to the regulatory framework set by the RBI, promoting transparency and accountability in the business.
2. Risk Management:
Registered NBFCs must comply with strict guidelines on asset classification, provisioning, and capital adequacy, which help manage risks effectively.
3. Market Stability:
NBFC registration promotes market stability by ensuring these entities operate under strict oversight and standards.
4. Protection of Customers:
A NBFC company follows ethical practices and protects customers' interests, thereafter, promoting customers’ benefit.
5. Access to Capital Markets:
Registered NBFCs can access capital markets, raising funds through debt and equity instruments.
6. Professionalism:
NBFC registration enforces a high level of professionalism and corporate governance, elevating the overall quality of services.
7. Contribution to the Economy:
NBFCs play a key role in providing credit and financial services to sectors underserved by traditional banks, contributing to economic growth.
8. Preventing Fraudulent Practices:
Registration and compliance help in preventing fraudulent and unethical practices in the financial sector.

Advantages of NBFC Registration:
Registering an NBFC (Non-Banking Financial Company) and obtaining a Certificate of Registration from the Reserve Bank of India (RBI) has several advantages and is crucial for the company's legitimacy and success.
1. Legal Recognition:
Registration with the RBI provides legal recognition to the NBFC, allowing it to operate as a legitimate financial institution.
2. Access to Banking Services:
Registered NBFCs have better access to banking services, including borrowing from banks, which is crucial for their operations.
3. Public Confidence:
Registration builds trust and credibility among customers, as it indicates the NBFC adheres to RBI's regulations and standards.
4. Access to Funding:
Registered NBFCs can access funding from various sources, including banks, financial institutions, and investors.
5. Regulated Operations:
NBFCs must comply with RBI guidelines and norms, which help maintain high operational standards and reduce risks.
6. Diversified Business Opportunities:
Registered NBFCs can engage in various financial activities, such as lending, investment, and leasing, diversifying their business opportunities.
7. Participation in Financial Markets:
Registered NBFCs can participate in the financial markets, facilitating growth and expansion opportunities.
8. Tax Benefits:
Registered NBFCs may be eligible for certain tax benefits and exemptions under the income tax laws.
9. Customer Protection:
Compliance with RBI regulations ensures NBFCs operate ethically and transparently, protecting the interests of customers.
10. Business Partnerships:
Registration allows NBFCs to form business partnerships and collaborations with other financial institutions and entities.

Thus, NBFC registration comes with a lot of advantages, and it adds credibility to your business. But there is a series of rules and procedures that you need to follow for a NBFC registration. It is advisable to consult professional experts before setting up your own NBFC.

Published on: January 1, 1970, 12:00 am