What You Need to Know About the NBFC Registration Procedure

If you’re planning to set up a Non-Banking Financial Company (NBFC) in India, one of the first steps is understanding the procedure of NBFC registration. NBFCs play a critical role in the Indian financial sector by offering services like loans, asset management, and wealth management. However, to operate legally, an NBFC must be registered with the Reserve Bank of India (RBI).

In this blog, we’ll break down everything you need to know about the NBFC registration process. We’ll guide you through the steps and requirements involved, so you can easily navigate the registration procedure.

What is an NBFC?

Before diving into the registration process, it’s important to understand what an NBFC is. A Non-Banking Financial Company (NBFC) is a financial institution that provides services such as loans, asset management, and micro-financing, but it doesn’t have the same powers as a traditional bank. While NBFCs can offer similar services to banks, they do not have a banking license, meaning they cannot accept demand deposits or run checking accounts.

In India, the RBI regulates NBFCs to ensure they comply with financial and legal regulations, protecting both the financial system and consumers.

Step-by-Step Procedure for NBFC Registration

Let’s go through the procedure of NBFC registration in India step by step.

Step 1: Incorporate a Company

To begin, the first step in the NBFC registration procedure is to incorporate a company in India. Your business must be registered as either a private limited company or a public limited company under the Companies Act, 2013. The company must be specifically formed to carry out financial services like lending, investment, or asset management.

Step 2: Check the Net Owned Funds (NOF) Requirement

A key requirement for NBFC registration is the minimum Net Owned Funds (NOF). The company must have a minimum NOF of ₹2 crore to qualify for registration. This is a requirement set by the RBI to ensure the financial stability of the company applying for registration.

The NOF refers to the company’s capital, and it includes the paid-up equity capital, free reserves, and surplus funds available. Make sure you have the necessary financial resources to meet this requirement.

Step 3: Prepare the Necessary Documents

Once the company is incorporated, you need to prepare the following documents for submission to the RBI:

• Certificate of Incorporation of the company.
• Memorandum of Association (MOA) and Articles of Association (AOA), which outline the company’s objectives.
• KYC (Know Your Customer) documents for directors and promoters.
• Proof of the registered office address of the company.
• Audited financial statements (if the company has been in operation).
• Business Plan with a detailed financial plan for the first five years.
• Proof of Net Owned Funds (₹2 crore).

It is essential to have these documents prepared correctly, as they will be reviewed thoroughly by the RBI.

Step 4: Apply to the RBI for Registration

After gathering all the necessary documents, the next step is to apply for NBFC registration with the Reserve Bank of India (RBI). You will need to submit the completed application form (Form A) along with the required documents to the RBI.

Once your application is submitted, the RBI will review it to ensure that your company meets all the eligibility criteria. The RBI may also request additional information or clarification if necessary.

Step 5: Wait for RBI’s Approval

After submitting your application, you’ll need to wait for the RBI to process and approve your registration request. The RBI will evaluate the company’s financial stability, the qualifications of its directors, and compliance with the legal requirements.

If everything is in order, the RBI will grant a Certificate of Registration (CoR), allowing your company to operate as an NBFC in India.

Step 6: Compliance with Ongoing Regulations

Once you’ve received your Certificate of Registration, your company will need to comply with ongoing regulations set by the RBI. These include:

• Conducting regular audits by qualified chartered accountants.
• Maintaining the minimum Net Owned Funds (NOF) of ₹2 crore.
• Filing annual returns with the RBI.
• Complying with guidelines on governance, risk management, and financial reporting.

Failure to comply with these regulations can result in penalties or cancellation of the Certificate of Registration.

In Summary

The procedure of NBFC registration in India can seem like a detailed process, but following the steps outlined in this blog will guide you through the journey. From incorporating your company to applying for the Certificate of Registration with the RBI, every step is critical for ensuring that your company complies with the regulatory framework set by the Reserve Bank of India.

By meeting the necessary requirements and following the correct procedure, you can successfully register your NBFC and operate legally in the financial services industry, helping contribute to the growth and stability of India’s economy.