NBFC’s Company Registration

About NBFC’s Company Registration

Image result for nbfc registration

Non-banking financial incorporation (NBFC’s) are fast emerging as an important segment of Indian economy.

NBFC’s offers almost everything as banks do, performing financial intermediation in a variety of ways, making loans, accepting deposits, and advances, leasing, hire purchase, etc.

NBFC’s can raise funds from the public, directly or indirectly, and can freely lend them to ultimate spenders.

The minimum tenure to accept deposits is 12 months and the maximum period of 60 months.

NBFC’s advance loans to the various small wholesale and retail traders and self-employed persons.

NBFC’s is very popular due to attractive interest rates on deposits.

The working and operations of NBFC’s are regulated by the Reserve Bank of India (RBI) within the framework of the Reserve Bank of India Act.

Section 45-IA provides that no NBFC’s shall commence or carry on the business of Non- Banking Financial Institution without obtaining a Certificate of Registration issued by the Reserve Bank of India.

A Non-Banking Financial Company (NBFC’s) Similar to that of a bank,

Except for the following differences:

  1. It cannot accept demand deposits
  2. It cannot issue cheque drawn on itself
  3. Non-banking financial incorporation (NBFC’s) in India is classified under three types
  4. Asset finance companies (AFC)
  5. Investment company (IC)
  6. Loan company (LC)

Non-banking finance companies (NBFC’s) is classified into the following categories:

  1. Development finance institutions
  2. Investment companies
  3. Discount & guarantee houses
  4. Corporate development companies
  5. Venture capital companies
  6. Leasing companies
  7. House finance companies

Advantages of an NBFC’s

  1. Provides loans and credit facilities to Public
  2. Trading money market instruments
  3. Funding private education & Business
  4. Wealth management
  5. Discounting services e.g. discounting of instruments
  6. Underwrite stock and shares, TFC and other obligations

Procedure for NBFC’s Registration :

1.Company registration:-The first step is to form a new Company (Private Limited or Public Limited) under the Companies Act.
2.Minimum Net Owned Fund:-NOF should be Rs. 200 Lac After the incorporation of a new Company in the form of Equity share capital. The Capital to be raised after incorporation of a company here should be Equity Share Capital and not Preference Share Capital.
3.The opening of a Bank Account:-The amount which is received post incorporation of the company shall be deposited in a bank account as Fixed Deposit and its must be free from all aliens.
4.Application to RBI for Business Operations.
5.RBI will conduct due diligence and will issue certificate of commencement of business.

Documents required:-

From All Directors and Shareholder.

  1. Certified copy of up-to-date Memorandum and Articles of Association of the Company.
  2. Banker’s Report in a sealed envelope.
  3. Auditors report about receipt of minimum net owned fund.
  4. A certificate of Chartered Accountant regarding details of group/associate/subsidiary/holding companies along with details of investments in other NBFCs as shown in the Proforma Balance Sheet

FAQ’s on NBFC’s Registration:-

1. What does conducting financial activity as “principal business” mean?

IN NBFS’c when a company’s financial assets constitute more 50% of the total assets and income from financial assets constitute more than 50% of the total income.

If a company meets the both condition mandatory required as NBFC’s by RBI.

2. What is difference between banks & NBFCs?

NBFC’s offers almost everything as banks do:

  • Performing financial intermediation in a variety of ways,
  • Making Loans,
  • Accepting Deposits and Advances,
  • Leasing,
  • Hire Purchase,
  • NBFC’S can raise funds from the public, directly or indirectly, and can freely lend them to ultimate spenders.

3. What Maximum Limit to Accept Deposits from Public?

NBFC’S can accept maximum 1.5 times of Net owned fund (W.e.f from 31-03-2016).

4. Is it necessary that every NBFC’s should be registered with RBI?

Section 45-1A of the RBI Act. 1934, for doing lending and accepting deposits from public every such company requires prior approval from the Reserve of bank of India.

5. Requirements for registration with RBI?

The Minimum Net Owned Fund of NBFC’s should be not less than Rs. 200 Lakh and principal objectives making loans, accepting deposits, and advances, leasing, hire purchase, etc.

NBFC’s can raise funds from the public, directly or indirectly.

6. What are banking activities banned for NBFC?

An NBFC’s cannot accept demand deposits and cannot issue cheque drawn on itself.

Compare Chart Between : Nidhi,

Particulars NBFC-ND Nidhi Company
(Mutual benefit Society )
Credit society
(Micro Finance )
Governing Laws RBI Act. 1934 Companies Act. 2013 MSCS Act. 2002 RBI Act. 1934
Recommended for Commercial Banking Business Member based
Mutual benefit society
Non-Commercial Banking and NPO Poor and lower income group.
Initial Capital Minimum Rs. 2 Crore Rs. 10 Lakh For General credit Rs. 2 Lakh and for Urban bank Rs. 4 Crore Minimum Rs. 5 Crore.
Loan Limit No. No. No. Maximum Rs. 50,000
Members 7 7 at the time of registration and after registration min 200. Min 50 from at least 2 state. In total 100 7
Directors 3 3 7 3
Operations PAN India PAN India In a District or state PAN India
Credibility 10/10 8/10 6/10 10/10
Registration time Maximum 120 Working days Maximum 40 working days Maximum 120 working days Maximum 180 Working days
Registering Authority ROC & RBI  Registrar of Companies State Government and Central Govt. ROC & RBI
Popular High Medium Low High
Deposits No. Yes. From only its members Yes. freely from public with certain limitation No.
Loan To Everyone To Members only To Everyone For lower income group
Funding From Members and FDI From Members only From Members and Public From Members and Governments
Government aid No. No Low High
RBI License Yes. No. No. Yes.
RBI Act Yes. Yes. Yes. Yes.