When NBFC Registration with RBI is Required?

When NBFC Registration with RBI is Required?

NBFC stands for Non-Banking Financial Company incorporated under Companies Act 2013 and regulated by Reserve Bank of India. No NBFC is allowed to operate as such without obtaining an NBFC registration certificate with RBI. NBFCs are engaged to perform financial activities similar to that of banks. In this blog, we have discussed in brief about NBFC and NBFC Registration with RBI.

Pre-requisite for NBFC Registration with RBI in India Entity seeks forward to get registered under RBI shall have following requirements fulfilled:    

NBFC shall be registered as a Company through MCA under Companies Act 2013 Such Company shall have Net Owned Fund of INR 2 Crore.

NBFCs can accept deposit with a minimum of 12 months and a maximum of 60 months and no deposit repayable on demand shall be accepted.

NBFCs cannot offer interest rates higher than prescribed by RBI

The Procedure of NBFC Registration with RBI Once the NBFC is registered as a Company under Companies Act 2013 and has obtained Certificate of Incorporation shall apply to the regional office of RBI for registration as per the following steps:       

Incorporate the Company either as a private or public company with main objects of carrying the financial activity.

Prepare a business plan with additional details such as capital induced, costing, expansion plan, etc.

Apply online to RBI through its official website COSMOS Fill the application form with necessary details, and after the online submission of the form, Application Reference Number is generated which can be used for future reference.

The applicant also needs to submit a hard copy of all the documents to the concerned RBI authority.

Once the application is completed and submitted, application status can be checked using Application Reference Number RBI upon receipt of application verifies the same for its correctness and allots the license to an applicant.

Documents Required for Registration        

Updated KYC of directors and signed director’s profile MOA and AOA Certificate of Incorporation PAN of the company Board resolution for authorization If any experience in the financial sector, supporting documentation of the same CIBIL score of every director Banker’s certificate indicating Net Owned Fund which shall not be less than INR 2 Crore

Difference between NBFC and Banks Banks NBFC Banks provide banking services as a financial NBFC also provides banking service however intermediary needs no bank license Banks are registered under the Banking NBFCs are incorporated under the Companies Regulation Act 1949 Act 2013/1956 Banks accept repayable deposits NBFC cannot accept a deposit that is repaid on demand Foreign investment cannot exceed 74% NBFCs can accept deposit up to 100% Banks have to maintain SLR and CRR No such requirements for NBFCs mandatorily Banks provide several customer services such NBFCs cannot provide such services to its as overdraft, traveler’s cheque, etc customer

Conclusion NBFCs play a vital role during economy distress by acting as a most vibrant financial system.

NBFCs provide wide financial services; including long-term investment and financing services have gained popularity in the banking sector. Our team (Swarit Advisors)of experts will provide complete assistance for NBFC registration, including the coverage of legal and professional services as well as complete compliances.