RBI Norms for NBFC Registration in India

Posted by Enterslice on June 25th, 2018

Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 or under any other Previous Act. Main Principal business of the NBFC is to do the finance business as of the Banking business, such as to provide loans and advances, acquisition of Shares or any other market securities and it also includes leasing business, hire-purchase business, insurance business, chit business but does not include any institution whose principal business is that of agriculture, industrial, purchase and sale of any goods (other than securities).

What is the Difference Between Banking And Non-Banking Financial Company?

1. Unlike the Bank accept demand deposit but NBFC cannot.
2. As the Bank form the part of the payment and settlement system and can issue cheques drawn on itself; but NBFC cannot.
3. Unlike the  bank deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is available to depositors but not for NBFCs

What are the Criteria for Determining the Principal Business Activity?

It becomes the principal business of the company when a company’s financial assets are more than 50 percent of its total assets and income from financial assets constitute more than 50 percent of the gross income.

What are the Categories of NBFC?

NBFCs are classified on the basis of:

1. Type of Liability

   1. Deposit accepting NBFC
   2. Non-Deposit accepting NBFCs
      • B.1 Systematically important
      • B.2. Non-Systematically important

2. On the basis of the Kind of Activity, they are engaged in.

   There is ten type of activity, they are indulging in:

   1. Asset Finance Company (AFC)
   2. Investment Company (IC)
   3. Loan Company (LC):
   4. Infrastructure Finance Company (IFC)
   5. Systemically Important Core Investment Company
   6. Infrastructure Debt Fund
   7. Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI)
   8. Non-Banking Financial Company – Factors (NBFC-Factors)
   9. Mortgage Guarantee Companies (MGC)
   10. NBFC-Non-operative Financial Holding Company (NOFHC)

   Is NBFC Need to Registered with RBI?

   As Per the Provisions of Section 45-IA of the RBI Act, 1934, NBFC cannot commence its business without obtaining a certificate of registration from the Bank and without having a Net Owned Funds of ₹ 200 lakhs.

   What is the Procedure for Obtaining the COR?

   Now, NBFC Registration has been simplified an NBFC company can be incorporated under MCA without taking the Prior Approval of Reserve Bank of India. After being incorporated, the company has taken to the Certificate of Registration (COR) from the Reserve Bank of India within 6 months.

   The application must be filed online and a Physical copy shall be submitted to the RBI Office.

   Online Registration Procedure:

   Applicant Company must submit an online application on the RBI website, Link for the same is

   https://cosmos.rbi.org.in/COSMOS/company/anonymous/registration.do?perform=loadCompanyTypePage

   Note: while uploading the documents on RBI, there is no need to create the log in the Cosmo, so no login id is required for the applicant company.

   The applicant can click on company registration on the login page of the COSMO application and from the download section can download the Excel utility which needs to be submitting on the website.

   Physical Submission of Document:

   Physical copy  along with all the necessary documents pertaining to directors, shareholders  and Proposed company to the Reserve Bank of India in its regional office:

   When the physical application is filed with the RBI, COR Division of Department of Non-Banking Finance company scrutinize the application submitted by the applicant company, In this regard, RBI has the authority to demand further document or information as required for being satisfied.

   RBI communicates the justification through E-Mail which is provided to the RBI at the time of filing the application for the correspondence.

   RBI also has the authority to summon the person in the RBI office for any clarification or justification in the matter.

   And after scrutinizing the documents RBI may issue COR or may reject the application if not satisfied.

   Note: There is no Application fee from the RBI to apply for the COR.

   What are the Necessary Documents Pertaining to Application?

   • Net worth Certificate
   • Income Proof (ITR for the last 3 years)
   • CIBIL Reports
   • Business Profiles
   • Bankers Report as per the format prescribed by RBI
   • Provisional Balance Sheet of the  Company
   • Fixed Deposit of Rs. 2 Crore
   • Company Identification Information
   • Statutory Auditor Certificate
   • Statement of Funds as per the format prescribed by RBI
   • Information on the Management (IOM) as per the format prescribed by RBI
   • Business Profiles
   • PAN, Passport, Aadhar Card, Highest qualification, Experience certificate.

   While filing the application that all documents pertaining to individuals shall be self- attested, while all the documents pertaining to the applicant company or other interested entity shall be attested, stamped by at least two directors of the concerned companies.