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    Non-Banking Financial Corporation [NBFC] Company

    Non-Banking Financial Company (NBFC) is a financial institution that does not have banking license but is allowed to offer financial products and services to customers. NBFC is primarily concerned with the business of loans and advances, acquisition of shares, finance leasing, hire-purchase, chit fund, etc. It is important to note that an NBFC is different from bank in ways like an NBFC cannot accept savings and current account deposits, cannot issue cheques drawn on itself and its depositors do not get a deposit insurance and credit guarantee coverage.

     

    NBFCs are known to provide quick loans to the individuals as well as the corporates in contrast to the other banks which is the major reason for their popularity over the Traditional Banks. The NBFC Registration comes under the Companies Act, 2013 and the RBI Act 1934. In India, The Reserve Bank of India is the supreme regulator of the NBFCs.

     

    ComplianceIndia can be your legal and professional partner in India to get you registered your NBFC Company quickly and cost-effectively.

    Advantages of NBFC Company

    NBFC can provide loans and credit facilities

    NBFC can provide loans and credit facilities

    NBFC can trade in money market instruments

    NBFC can trade in money market instruments

    They can do wealth management such as managing portfolios of stocks and shares

    They can do wealth management such as managing portfolios of stocks and shares

    They can underwrite stock and shares and other obligations

    They can underwrite stock and shares and other obligations

    NBFCs are the last resorts of borrowing; NBFCs are there where banks are not there.

    NBFCs are the last resorts of borrowing; NBFCs are there where banks are not there.

    NBFCs contribute largely to the economy by lending to infrastructure projects, which are very important to a developing country like India.

    NBFCs contribute largely to the economy by lending to infrastructure projects, which are very important to a developing country like India.

    Eligibility to form a NBFC Company

    i) Registration: It should be a company registered under Section 3 of the Companies Act, 2013 or Companies Act, 1956
    ii) Net Owned Funds: It should have a minimum net owned fund of Rs. 2 crore. It must comprise of only equity paid-up share capital. Preference share capital is not to be included. The premium on shares & reserves, if any, shall be included. But it should not be a borrowed fund. Though, gifts from the spouse can be included in the NOF. The minimum NOF requirement differs for specialized NBFCs (NBFC-MFIs, NBFC Factors, and CICs)
    iii) Directors Qualification: At least 1/3rd of the Directors must hold a minimum 10-year experience in finance. And he/she must be employed as a full-time Director.
    iv) Unique Business Plan: A business plan must be detailed and ready for operations for the next 5-years.
    v) Credit History: The CIBIL score of the “company, it’s Directors, and it’s members” must be good. They must not have any write-offs or default on the repayment of loans to an NBFC/ Bank.
    vi) FDI Compliance: If any foreign investment is anticipated, the company should be in compliance.

    How we Work?

    Step 1

    Fill-up our Contact Form and Submit

    Step 2

    Our Expert/ Legal Professional will contact you and provide brief guidance into the related context

    Step 3

    All Required Documents and Details to be provided as discussed with our Expert

    Step 4

    Our Expert will start Drafting of required documents for registration process

    Step 5

    Collect all required information as per checklist for RBI registration

    Step 6

    Once all required documents are collected, Fill Online application.

    Step 7

    Submit the Hard Copy to the Regional Office of Reserve Bank of India (RBI) office.

    Packages

    Consultation Charges

    Nil

    Complete assistance by Experts or Professionals indicating Process, Documents required, Benefits, Tax compliance, Legal Compliance, etc.

    Start-up Plan

    Rs. 2999/- only

    • – Registration of your NBFC Company with MCA
    • – Company MOA and AOA
    • – Allotment of DIN of all Directors
    • – PAN and TAN Registration
    • – Expert advice from Experts/ Legal Professionals

    Basic Plan

    Rs. 9,999/- only

    • – Registration of your NBFC Company with MCA
    • – Company MOA and AOA
    • – Allotment of DIN of all Directors
    • – PAN and TAN Registration
    • – GST Registration
    • – Board Minutes of First year on Incorporation
    • – Legal Drafting of consent letter and Appointment of First Auditor
    • – Expert advice from Experts/ Legal Professionals

    Advance Plan

    Rs. 14,999/- only

    • – Registration of your NBFC Company with MCA
    • – Company MOA and AOA
    • – Allotment of DIN of all Directors
    • – PAN and TAN Registration
    • – GST Registration
    • – Current Account Opening in your nearest Branch
    • – Board Minutes of First year on Incorporation
    • – Legal Drafting of documents
    • – Appointment of First Auditor
    • – MCA Annual Filing of Form AOC-4/ AOC-4 XBRL and MGT-7
    • – DIR-3 KYC filing
    • – Expert advice from Experts/ Legal Professionals

    Ultimate Plan

    Rs. 29,999/- only

    • – Registration of your NBFC Company with MCA
    • – Trademark Application
    • – Company MOA and AOA
    • – Allotment of DIN of all Directors
    • – PAN and TAN Registration
    • – GST Registration
    • – Current Account Opening in your nearest Branch
    • – Board Minutes of First year on Incorporation
    • – Legal Drafting of documents
    • – Appointment of First Auditor
    • – MCA Annual Filing of Form AOC-4/ AOC-4 XBRL and MGT-7
    • – DIR-3 KYC filing
    • – Income Tax Return filing of Company and its Directors
    • – Financial Statements preparation
    • – GST Return filing for 6 months
    • – Expert advice from Experts/ Legal Professionals

    Documents required for NBFC Company Registration

    Certificate of Incorporation

    A certified copy of Certificate of Incorporation along with copy of MOA & AOA is required.

    Updated KYC

    Latest KYC details, income proof, credit report, and Net-worth Certificate of Directors and shareholders.

    Net Worth Certificate

    Collect updated net worth certificate of Directors, member/ shareholders, and Company.

    Education

    Education & qualification proof of the Directors.

    Address Proof

    Copy of Aadhaar Card/ Voter ID/ Passport/ Driving License or Bank Statement/ Utility Bills not older than 2 Months of all Directors.

    Office AddressProof

    Copy of Electricity bill or rent agreement and latest self- attested electricity bill in case of rented accommodation not older than 2 months.

    NOC from owner

    No Objection Certificate to be obtained from the owner(s) of registered office.

    PAN card

    PAN card copy of Company and all Directors.

    Bank Account

    Details of the bank account of the company. This account must have at least Rs. 2 crores deposited as the minimum NOF requirement. And it must be well audited for the last 3-years.

    Banker’s Report

    A report to be obtained from the bank confirming the No Lien remark on the Initial Fixed Deposit of Rs. 2 crores.

    Board Resolution

    The board’s resolution must include, “approving the formation of the NBFC”.

    Identity Proof

    Copy of Aadhaar Card/ Voter ID/ Passport/ Driving License of all Directors.

    Underwriting model

    A detailed action plan, for the next 5-years, about the loan products, complying with the Fair Practices Code, credit, and risk assessment policy must be present.

    Organizational Structure

    Complete plan of the organization hierarchy and decision-making process. The proposed criteria on which a loan application will get approved or rejected.

    Comparison Between NBFC Company and Bank

    Non-Banking Financial Corporation [NBFC] Company Bank
    NBFC’s cannot deposit demand deposit A Bank can deposit demand deposit
    NBFC’s cannot issue drawn a cheque in itself A Bank can issue drawn a cheque in itself
    Deposits done with NBFCs are not insured by Deposit Insurance and Credit Guarantee Corporation. Deposits done in Banks are insured by Deposit Insurance and Credit Guarantee Corporation
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    Procedure for Incorporating a NBFC Company

    1. Incorporation as Company

    The first step towards the incorporation of NBFC is to register the Company under the Companies Act 2013.

    2. Net owned capital fund

    The minimum Net owned capital fund of the Company should be Rs 2 crore.

    3. CIBIL record

    The CIBIL record of the Company should be clean without any exception.

    4. Capital compliances and FEMA Rules

    The Company must also comply with the requirements for capital compliances and FEMA.

    5. Submission of Detailed Application Form

    After all the above-mentioned conditions are fulfilled, visit the official website of the Reserve Bank of India (RBI) and fill the details in the application form.

    6. Submission of Documents

    Next, you will have to submit all the required documents.

    7. Company Application Reference Number

    After filling up the application and submission of documents, a Company Application Reference Number (CARN) is generated.

    8. Submit hard copy of all documents

    The hard copy of the required documents as mentioned in the website needs to be submitted in the Regional Office of the RBI.

    9. RBI checks the application in detail

    Further, the regional office sends the application to the central office of the Reserve Bank of India (RBI), which then scrutinizes the application and does a background check of the documents.

    10. Generation of License

    If all the requirements mentioned in section 45-1A of the Reserve Bank of India Act are satisfied, the License is granted to the Company.

    Frequently Asked Questions

    1. What is Non-Banking Financial Company (NBFC)?

    NBFC is a Non-Banking Financial Company which the principal business of which is:
    – lending money or
    – investing in shares/stocks/bonds/debentures or
    – leasing hire purchase, or
    – doing insurance business, chit business or
    – Receiving deposits under any scheme or arrangement.
    Note: NBFC is regulated by Reserve Bank of India.

    2. Is every business is allowed to carry on the business of NBFC?

    The following business cannot be registered as NBFC:
    – Any institution whose principal business is of agriculture.
    – Or any business who is engaged in industrial activity.
    – Or any institution which is engaged in purchase or sale of any goods (other than securities).
    – Or which is providing any services.
    – Or which is engaged in sale/purchase/construction of the immovable property.
    – Or any other company whose principal business is receiving deposits under any scheme or arrangement in one lump-sum or in installments by way of contributions or in any other manner.

    3. Do NBFCs need to be registered with RBI?

    Section 45-1A of the RBI Act, 1934, makes it mandatory for all NBFCs to be registered with the Reserve Bank of India for the purpose of commencing any business or carrying on the businesses defined in clause (a) of Section 45-1 of the Act of 1934. However, this comes with an exception.
    Certain categories of NBFCs like Venture Capital fund, Chit funds, Housing Finance etc. are regulated by regulators like SEBI, State Governments, National Housing Banks etc. To eliminate the possibility of dual regulation, these categories of NBFCs are spared from the requirement of registering with RBI.

    4. What categories of NBFCs are to be registered with RBI?

    The NBFCs registered with RBI have been classified as:
    – Asset Finance Company (AFC)
    – Investment Company (IC)
    – Loan Company (LC)
    – Residuary Non-Banking Companies

    5. Which NBFCs are entitled to accept public deposits?

    Only NBFC’s which have special authorization from the Bank and have an investment-grade are allowed to accept and hold deposits up to 1.5 times of its Net Owned Funds. However, all NBFC’s are barred from accepting demand deposits that include savings and current account deposits.

    6. At what rate of interest can NBFCs accept deposits?

    Currently, the maximum interest rate at which an NBFC can accept deposits is 11%. Further, the interest can be compounded or paid at rests longer than monthly rests.

    7. What is the time period for which NBFC can accept deposit?

    A time period has been provided regarding the maximum and minimum time limit for which NBFC can accept the deposit –
    Minimum time period: 12 months
    Maximum time period: 60 months

    It is the discretion of deposit accepting NBFC that it can pay back the amount of deposit before its maturity period but such deposit cannot be paid back before 3 months from the date of its acceptance. If the deposit is paid back after 3 months but before 6 months of its acceptance no interest will be paid. But if the deposit is paid back after 6 months of its acceptance but before the maturity period then interest shall be paid but that interest shall be lower than 2% of the contracted rate.

    8. What compliances are required to be fulfilled once the firm is registered?

    Certain guidelines have been laid down by RBI that has to be complied with. Submission of Income Tax Returns, ROC Returns, Statutory Audit, Tax Audit, various NBS returns for Deposit accepting and non-deposit accepting companies are some of the most important statutory compliances.

    9. What are the powers of the Reserve Bank with regard to 'Non-Bank Financial Companies’, that is, companies that meet the 50-50 Principal Business Criteria?

    The Reserve Bank has been given the powers under the RBI Act 1934 to register, lay down policy, issue directions, inspect, regulate, supervise and exercise surveillance over NBFCs that meet the 50-50 criteria of principal business. The Reserve Bank can penalize NBFCs for violating the provisions of the RBI Act or the directions or orders issued by RBI under RBI Act. The penal action can also result in RBI cancelling the Certificate of Registration issued to the NBFC, or prohibiting them from accepting deposits and alienating their assets or filing a winding up petition.

    10. Why is the RBI so restrictive in allowing NBFCs to raise public deposits?

    The Reserve Bank’s overarching concern while supervising any financial entity is protection of depositors’ interest. Depositors place deposit with any entity on trust unlike an investor who invests in the shares of a company with the intention of sharing the risk as well as return with the promoters. Protection of depositors’ interest thus is supreme in financial regulation.

    11. What action can a depositor take if any NBFC fails to return principal, interest thereof on deposits?

    If an NBFC registered with the RBI fails to return depositor’s money, the depositor can complain against the NBFC to the nearest Regional Office of the Reserve Bank. Depositors can also approach the Company Law Board or a civil court or Consumer Disputes Redressal Forums for recovery of their money. Affected persons can complain to the State Police authorities/Economic Offences Wing of the State Police as well. Some States have passed the Protection of Interest of Depositors (in Financial Establishments) Act, which empowers the States to attach the assets of such entities and distribute the proceeds thereof to the depositors.

    12. Can the exempted category of NBFCs accept/hold deposits?

    No. NBFCs which are exempted from the provisions of the RBI Act or its directions cannot hold/accept deposits from the public as not holding or accepting deposits is one of the conditions for granting them such exemption. HFCs can however accept deposits to the extent allowed by NHB.

    13. What does RBI do to protect the interest of NBFC depositors?

    RBI has issued detailed regulations on deposit acceptance, including the quantum of deposits that can be collected, mandatory credit rating, mandatory maintenance of liquid assets for repayment to depositors, manner of maintenance of its deposit books, prudential regulations including maintenance of adequate capital, limitations on exposures, and inspection of the NBFCs, besides others, to ensure that the NBFCs function on sound lines.

    14. What is the significance of the 50-50 test for NBFC’s?

    A 50/50 test means that a firm’s financial assets constitute more than 50% of the total assets and income from financial assets constitute more than 50% of the gross income. A firm which fulfils both these criteria will be registered with the RBI as an NBFC. If, after registration, a firm violates the 50/50 criteria then RBI has the authority to penalize the NBFC.

    15. How long is the NBFC Company Registration process in India?

    Compliance India can process NBFC Company registration process in 10-15 working days. The time taken for incorporation will depend on submission of relevant documents by the client and speed of Government Approvals. To ensure speedy incorporation, please choose a unique name for your Company and ensure you have all the required documents prior to starting the incorporation process.

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