NBFC (Non-banking Financial Company)
Create a strong financial business entity to conduct lending business, investments, asset management, micro-finance and wide range of financial activities.

Overview

Today, businesses and individuals are growing at a pace, faster than before. People are spending more than before on lifestyle, companies are diversifying their assets to a great extent, and to sustain this growth, everyone needs strong financial institutions. These financial institutions carry out different activities based on their structures and plans. And while building a Bank isn’t easy and allowed to everyone, RBI has come up with NBFC (Non-Banking Financial Company) to allow businesses in the categories like Asset Management, Investments, Loan, Infrastructure, Housing and Micro-finance. sThis structure, being under RBI, mitigates risks, brings transparency and enables to carry out activities of loans and advances, acquisition of shares/ stocks/ bonds/ debentures/ securities of government or private organisation, managing assets, mortgages and other financial activities. Organisations like Bajaj, Muthoot, Tata, Indiabulls, ICICI Securities, Capital first, Reliance, Indian Railways, all operate with NBFC entities to provide financial services.

Types of NBFCs:

Different types of NBFCs are categorized on the basis of Liability and Activity. Every entity has its own set of diligence and compliance. These are some of the activities you can conduct as an NBFC:
1. Asset Finance Company
2. Investment Company
3. Loan Company
4. Infrastructure Finance Company
5. Core Investment Company
6. Micro -Finance Company
7. Housing Finance Company
8. Mortgage Guarantee Company

Documents required:

  1. Copy of PAN /CIN of company.
  2. Documents related to Address of the company.
  3. MoA &AoA copy
  4. List of Directors duly signed by each director.
  5. CIBIL reports of Directors
  6. Income Tax returns & Bank Statement ( Self Certified )
  7. Details of mergers and acquisition with/of other companies if any together with supporting documents.
  8. Certified copy of Board resolution for formulation of “Fair Practices Code”
  9. Last three years Audited balance sheet and Profit & Loss account along with directors & auditors report or for such shorter period as are available (for companies already in existence).
  10. Business plan of the company for the next three years giving details of its (a) thrust of business; (b) market segment; and (c) projected balance sheets, Cash flow statement, asset/income pattern statement without any element of public deposits.
  11. Declaration by the company to own electronic infrastructure and its capability regarding electronic submission of data through the internet as and when required by Reserve Bank of India. Email id of the company should also be provided.

Services covered:

  1. Filling of E -forms and application.
  2. Issue of Incorporation of Company Certificate.
  3. Drafting the MoA & AoA.
  4. Coordination with Statutory Auditors regarding various Certificates.
  5. Includes government fees regarding the registration process to MCA,DSC,RUN,DIN.etc.
  6. Issuance of various certificates required by RBI.
FAQs
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.

Are NBFC’s allowed to accept 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.

What is the difference between Banks and NBFC’s?

NBFCs lend and make investments therefore their activities are similar to that of banks.

However there are a few differences: NBFCs cannot accept demand deposits; NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself. NBFCs cannot issue Demand Drafts like banks. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.

What’s needed to form an NBFC:
  1. An incorporated company.
  2. Having minimum net owned funds of Rs 200 lakh (Required for NBFC License). For Foreign Investors and Companies minimum net owned funds of Rs 500 lakh is required.
  3. Bank A/c with minimum paid up equity share capital of Rs 200 lakh.
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