NBFC Registration in India: Know It More

NBFC License or Registration is an RBI-issued business certificate that allows private institutions to provide prescribed financial services by registering as a Non-Banking Financial Company. This article discusses this unique financial business entity in a simplified language.

If you want to start a company that performs a bank’s functionality but still retains a unique identity, a Non-Banking Financial Company (NBFC) has got you covered. Registered under the Companies Act 2013 and governed as per the RBI Act, 1934, an NBFC will enable you to conduct the following business activities:

1. Lending loans and engage in the business of advances
2. Acquiring shares, stocks, bonds, debentures or securities that either the government issues or are part of the marketable security.
3. Leasing
4. Hire purchase
5. Insurance business
6. Chit Business

Much of those business activities are quite similar to banks. So, what are the factors that differentiate an NBFC from a traditional bank? Read More: Section 8 Company Registration

Difference between a Bank and an NBFC

While you can’t deny the similarities that an NBFC has with a bank, the following are the factors that differentiate the two:

1. Demand Deposits: Traditional banks possess the authority to accept demand deposits. NBFCs on the other hand don’t have permission to do so by the Reserve bank of India.
2. Payment and Settlement System: Banks for the part of the payment and settlement system, but that’s not the case with an NBFC.
3. Issuing Cheque: NBFCs aren’t allowed to issue cheques that are drawn on themselves.
4. Deposit Insurance: A Bank, unlike an NBFC can provide deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation

The points that we have mentioned merely state the things that a Bank is capable of and an NBFC isn’t. So, why should you care? What do you have to gain if you get an NBFC License and starting a Non-Banking Financial Company in India?

Benefits of NBFC Registration

Non-Banking Financial Companies emerged to cut through the red tape that exists in the banking sector. Although there are some(many) restrictions to how an NBFC can operate, the benefits that it provides widen the scope of services a financial institution can provide:

1. Provide Wealth Management Companies: You can get involved in activities such as portfolio management or shares and stocks – facilitating your customers with wealth management services.
2. Private education funding: Reserve bank of India gives power to an NBFC to expedite the funding process. You can use that ability to provide funding for private educations to the parents/students.
3. Guiding companies: NBFCs have integrated with the nerve of the private ecosystem to such a degree that they understand the best acquisition and merger moves. Businesses around the world are evolving. It lets you be of service to those businesses by providing them with proper guidance.
4. NBFCs can be quicker than banks: Customers require fast-paced services. Thus, they are willing to pay more for even the most common financial tasks. As an NBFC, as you capitalize on that because you can expedite all the business processes in your company. Read More: Nidhi Company Registration

How to obtain NBFC License in India?

To obtain the NBFC License and registering your Non-Banking Financial Company with the Reserve Bank of India, you have to:

1. Become eligible for the NBFC License.
2. Gather the required documents, and
3. File an online COSMOS application.

To become eligible for the license, you have to match the following eligibility criteria:

1. You must register a company under the Companies Act, 1956. In the company’s Memorandum of Association, you must specify that it’s a Non-Banking Financial Institution as defined in the RBI Act, 1934
2. You must ensure that your company’s minimum net owned fund is 2 crore rupees.

NBFC License requirements when it comes to documents entail that you carefully furnish a file and keep a Chartered Accountant, a Company Secretary or a Corporate Lawyer on speed dial. These experts will certify the following documents that you will put inside the said file:

1. Certificate of Incorporation
2. Memorandum of Association
3. Articles of Association
4. Net-worth Certificate of the company
5. Board Resolution
6. Fixed Deposit Receipt
7. Banker certificate
8. Banker’s report
9. Highest qualification certificate of the directors of the company.
10. Experience certificate of the directors of the company in the financial sector (if applicable)

NBFC License procedure hinges to taking all the steps of application filing

They are as follows;

1. Go the COSMOS portal.
2. Click on the Company Registration Option
3. Download the application form
4. Enter the data and upload the application form. Obtain the reference number.
5. Submit the physical copy of the application and the required documents at the regional office of Reserve Bank of India.
6. Keep monitoring the application’s status after submitting its physical copy to check for any discrepancies.
7. If your application has any issues, RBI would notify you. In that instance, you need to make the necessary corrections with the deadline mentioned in the notification.
8. After accepting the application, Reserve Bank of India will issue you a certificate of registration, known as the NBFC License.

Conclusion

Starting an NBFC is a fairly convoluted task. But if you understand its intricacies and willing to give it a try, we are willing to help you.

Read More: Top 5 Startup Ideas For Your Business

Our business registration experts will help you not only file the application form, but also monitor its assessment and make necessary corrections in case of errors.

Thus, if you’re looking for experts willing to assist you at minimum professional NBFC License cost, you know who to call.