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Non-Banking Financial Company Incorporation

NBFC or Non-Banking Financial Company is that kind of financial institution which provides various financial and non-financial services to individuals, business enterprises, entrepreneurs, etc. They are different from the Cooperative and Commercial Banks, They do not need to hold a banking license but must strictly follow the rules and regulations provided by RBI from time to time.

NBFCs, most commonly, operate in the field of industrial and commercial loans and advances, deposits, leasing, hire-purchasing, investment funds, chit fund business, insurance business, instruments of the capital & money markets such as stocks, debentures, bonds, and many other similar activities.
India’s financial sector has shown consistent growth for the past two decades. The NBFC part of this sector has transformed tremendously over the past few years. And NBFCs have been at the forefront in driving new credit disbursals for the country’s underserved retail and MSME market.

NBFC License must be taken from RBI u/s 45-IA of the RBI Act of 1934. The financial institution wishing to be registered as NBFC must, first, be duly registered either as per the Companies Act of 2013, or earlier Act of 1956.
RBI strictly regulates and ensures that the NBFCs are complying with the provisions and regulations provided in Chapter III B of the RBI Act.
The principal business activity of NBFCs is to raise capital from the public depositors & investors and lend these further to the borrowers.

NBFCs are the bridges that link the investors or depositors with the borrowers. They have become a better alternative to the banking and financial sector by providing financial solutions to the unbanked and unorganised segments of society.

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About This Plan

Get your NBFC company registered in the fastest possible manner.

Created by potrace 1.15, written by Peter Selinger 2001-2017

Timeline

It usually takes 7 to 10 working days.

Buy Now
Services Covered
Who Should Buy
How It's Done
Documents Required
Services Covered

  • Name approval in RUN
  • Digital Signature Tokens
  • Filing of Forms
  • Issue of Incorporation Certificate along with PAN and TAN
  • Includes Govt Fees & Stamp duty for Authorised Capital upto Rs. 1 Lakh except for the states of Punjab, Madhya Pradesh and Kerala
  • Body Corporate as director or business needing RBI/SEBI approval
  • Assistance in Opening Bank Account
Who Should Buy

  • Businesses looking to expand or scale operations on higher level
  • Businesses aiming to work globally or with reputed clients
  • Businesses looking to expand or scale their operations
How It's Done

  1. DSC Application

  2. Name approval form filing

  3. Preparation of Incorporation Documents

  4. Getting those docs signed by the respective stakeholders

  5. Filing of e-Forms with ROC

  6. Receipt of Incorporation Certificate with PAN, TAN, GST, EPF, ESI & Bank Account.

Documents Required

  1. Name, Contact Number and Email Id of all the Stakeholders.

  2. Directors Identification Number, if already.

  3. Self Attested PAN, Aadhar & Passport size photo of all the Stakeholders.

  4. Apostilled Passport, Mobile Bill and other KYC docs in case of NRI Stakeholder.

  5. Latest Month Personal Bank statement of all the Stakeholders.

  6. Specimen Signatures of all Stakeholders.

  7. Few Proposed Business Names along with Objects.

  8. Latest Electricity Bill/Landline Bill of Registered Office.

  9. NOC from owner of registered office. (If Owned)

  10. Rent Agreement from Landlord. (If Rented/Leased)

  11. Brief description of main business activities of the proposed Company.

  12. Shareholding pattern (50:50 or 60:40) between the Stakeholders.

  13.  Authorised & Paid Up Share Capital of the Company.

Types of NBFC:

NBFCs have been broadly classified on the following basis:

  1. Liabilities:
    • The deposit accepting NBFCs and
    • Non-Deposit accepting NBFCs,
    • (Non-deposit taking NBFCs are classified further as per their size:)

    • systemically important (NBFC-NDSI) and
    • others
  2. Activities:
    • Factors
    • Mortgage Guarantee Companies
    • Investment Credit Company
    • Infrastructure Debt Fund
    • Micro Finance Institution
    • Non-Operative Financial Holding Company
    • Systemically Important Core Investment Company

Application for an NBFC License can be made in any of the following categories:

  • Non-Banking Financial Companies – Factors (NBFC-Factors): These are NBFCs that have factoring as their principal business activity. Factoring is a financial transaction. A kind of debtor finance in which an entity can sell its invoice or bills (accounts receivables) to a third party (NBFC-Factor) at a discount. It is also commonly known as bill discounting or invoice financing.
  • Non-Banking Financial Companies – Mortgage Guarantee Companies (NBFC-MGC):NBFC-MGC must be registered with RBI as a Mortgage Guarantee Company. Its principal business is that of granting a mortgage guarantee. This guarantee is provided for repaying an outstanding housing loan and interest accrued on it. Up to the guaranteed amount to a creditor institution, when a trigger event happens. The minimum NOF requirement and financial asset criteria are different for this kind of NBFC.
  • Non-Banking Financial Companies – Investment Credit Companies (NBFC-ICC):Any financial organization carrying on as its primary business- asset finance, the finance is provided by loans/advances or otherwise, for any activity other than its own and acquiring securities. And its activities must not fall under some other category defined by RBI.
  • Non-Banking Financial Companies – Infrastructure Finance Companies (NBFC-IFC): These types of Companies invest in the debt securities of infrastructure companies or public-private partnership projects, having minimum NOF of Rs. 300 crore. The principal business and rating requirements are also different for such NBFCs.
  • Non-Banking Financial Companies – Micro Finance Institution (NBFC-MFI): A non-deposit taking NBFC lending on a short-term basis to low-income groups in India, with at least 85% of its assets such as qualifying assets satisfying a few conditions:
    1. the loan provided to a borrower with a Rural Household Annual Income less than Rs. 60,000, or Urban and Semi-Urban Household Income of not over Rs. 1,20,000.
    2. the amount of lending does not exceed Rs. 35,000 in the first cycle and Rs. 50,000 in all subsequent cycles.
    3. the total obligation of the borrower doesn’t exceed Rs. 50,000.
    4. if the amount is more than Rs. 15,000, a loan term of at least 24 months, with prepayment without penalty,
    5. loan to be extended without any mortgage,
    6. the aggregate of loans provided for income generation must not be less than 75% of the total loans given by the MFI,
    7. the frequency of repayment, whether weekly, fortnightly or monthly instalments, to be selected by the borrower.
  • Non-Banking Financial Companies – Non-Operative Financial Holding Company (NBFC-NOFHC): Non-Banking Financial Companies – Systemically Important Core Investment Company (NBFC-SI-CIC): These NBFCs obtain shares, stocks, and securities. The transactions must fulfil the below conditions: The financial organization through which promoter or promoter groups will be permitted to set up a new bank. It is a wholly-owned NOFHC that shall hold the bank as well as all other companies involved in financial services, regulated by RBI or other regulators, to the extent permissible under the applicable regulatory prescriptions.
  • Non-Banking Financial Companies – Systemically Important Core Investment Company (NBFC-SI-CIC): These NBFCs obtain shares, stocks, and securities. The transactions must fulfil the below conditions:
    1. it holds at least 90% of its Total Assets as investment in equity or preference shares, and debt/loans in group companies,
    2. its investments in the equity stock/shares (including instruments that are convertible into equity shares within a period of not more than 10-years from the date of issue, in group companies, form not less than 60% of its Total Assets,
    3. it does not trade in its investments in stocks, debt or loans in group companies except by the way of block sale for dilution or disinvestment,
    4. no financial activity, which is listed u/s 45-I(c) & 45-I(f) of the RBI Act, is being carried out by it. Other than for investments in bank deposits, government securities, money market instruments, loans to and investments in debt issuances of group companies or guarantees declared on behalf of group companies,
    5. its asset size is Rs. 100 crore or above,
    6. it accepts public funds.

Pre-Conditions of NBFC Registration

According to Section 45-IA of RBI, below conditions must be fulfilled for a company to be registered as an NBFC:

Registration

The financial institution should be established as a company under Section 3 of the Companies Act 2013 or the previous Companies Act 1956.

Director’s Qualifications

At least 1/3rd of the Directors must hold minimum 10-year experience in finance. And he/she must be employed as a full-time Director.

Unique Business Plan

A business plan must be detailed and ready for operations for the next 5-years.

Net Owned Fund (NOF)

The Company must have at least Rs. 2 Crore as its NOF. 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 specialised NBFCs (NBFC-MFIs, NBFC Factors, and CICs).

Lean Credit History

The CIBIL score of the company, its Directors and its members must be good. They must not have any write-offs or wilfully defaulted on the repayment of loans to NBFC/Bank.

FDI Compliance

If any foreign investment is anticipated, the company should be in compliance with the FEMA Act.