A Non-Bank Financial Company (NBFC) is a company registered under the Companies Act that processes loans and advances, receives deposits (only a few NBFCs), buys stocks or shares, rents, rents, and insurance. Business. NBFC therefore lends and accepts similar deposits to banks; However, there are some differences: a) NBFC cannot accept demand deposits, NBFC cannot withdraw checks written on themselves, and NBFC depositors are not covered by the deposit guarantee and credit guarantee company.
When is an NBFC license with RBI required?
The Reserve Bank of India regulates and supervises non-bank financial companies that are primarily concerned with the loan or purchase of stocks, shares, bonds, etc. 'acceptance of deposits. The main activity of financial activity is that the financial assets of a company represent more than 50% of its total assets and the income from financial assets represents more than 50% of gross income. A company that meets both criteria must have an NBFC license. This test for the NBFC license is commonly called test 50-50.
Therefore, companies that grow, trade, buy and sell property, provide services or buy, sell or build real estate as their main activity and have little financial activity, do not need to be registered with NBFC.
Financial companies that do NOT need an NBFC license
The following types of companies involved in the core business of finance DO NOT require an NBFC license:
Housing finance companies: regulated by the National Housing Bank;
Insurance company: regulated by the Indian Insurance Development and Supervision Agency (IRDA);
Stockbroker: Regulated by the Securities and Exchange Board of India;
Commercial Banking Companies: Regulated by the Indian Securities and Exchange Board;
Venture capitalists: regulated by the Securities and Exchange Board of India; Companies that manage collective investment plans, regulated by the Securities and Exchange Board of India;
Investment funds: regulated by the Securities and Exchange Board of India;
Nidhi Companies: regulated by the Ministry of Business Affairs (MCA);
Chit Fund Companies: Regulated by local governments.
The above types of businesses have been exempt from the NBFC registration requirements and RBFC NBFC regulations because they are regulated by other financial regulators.
The precondition for obtaining the NBFC license
The following basic requirements apply to apply for and receive the NBFC license:
A company registered in India (Private Limited Company or Limited Company);
The business must have a net fund of at least Rs.200 lakhs.
Calculation of net funds as defined by RBI
Net funds would be calculated based on the company's last audited balance sheet. Capital consists of paid-in capital, free reserves, a balance in the share premium account and capital reserves, which represent a surplus from the sale of assets, but not reserves that were formed by the revaluation of assets. The accumulated balance of losses and, if applicable, a book value of intangible assets are deducted from the total elements to obtain equity. Also, investments in other NBFC shares and participations, debt securities of subsidiaries and group companies that represent more than ten percent of the aforementioned equity will be deducted to achieve the Equity held.
Types of NBFC licenses
Before applying for an NBFC license, you must first determine the type and category of the NBFC license. These are NBFC's business categories:
Asset Finance Company (AFC): An asset finance company is a financial institution that, like its core business, funds physical assets such as cars, tractors, mowers, generators, earthmoving and handling machinery, and operates its electrical industrial machines and for general use.
Investment company: An investment company is a company that is a financial institution whose main activity is the purchase of securities (stocks/shares/bonds /other financial instruments).
Loan Company: The Loan Company is a company that is a financial institution primarily engaged in providing funds, whether through loans or advances or otherwise for purposes other than your own, but without asset financing. Society.
Infrastructure Financing Company: The Infrastructure Financing Company is a non-bank financing company that uses at least 75 percent of its total assets in infrastructure loans and has a minimum net fund of Rs 300 million, maintains a rating minimum credit rating of "A" or an equivalent rating with a capital/risk ratio of 15%.
Systemically Important Principal Investment Firm: The systemically important principal investment firm is an NBFC with assets of over Rs 100 billion and accepts deposits associated with the acquisition of shares and securities. and that they meet certain conditions.
Infrastructure Debt Fund: The Infrastructure Debt Fund is a company registered with the NBFC to facilitate the flow of long-term debt in infrastructure projects. Infrastructure debt funds provide resources by issuing bonds in rupees or dollars with a term of at least 5 years.
Nonbank Financial Corporations: Microfinance Institution (Most Popular) - The Microfinance Institution is a deposit-free NBFC that manages microfinance activities.
NBFC factor: NBFC factor is a non-deposited NBFC that operates in the main factorization activity.
NBFC license application
Apply for the NBFC license online and offline with the required documents at the Reserve Bank of India regional office. The following documents must be submitted for the NBFC license:
Management information
Certified true copies of the founding document and the founding document for corporations.
Certified true copies of the current social contract and company statutes. Details of the clauses of the financial transaction protocol.
Copy of the PAN / CIN assigned to the company.
Administrator profiles, which each administrator completes and signs separately.
NBFC certificate (s) in which directors have gained NBFC experience.
CIBIL data on company executives
Financial reports of the last two years of unincorporated entities, if any, of the group in which the directors can have management with/without significant interest.
The decision of the Board of Directors that expressly approve the presentation of the application and its content, as well as the approval of the signatory.
Board decision that the company has not accepted any public deposit in the past (specify period) / does not currently have any public deposit and will not accept it in the future without prior approval from the Reserve Bank of India
Board resolution that business will not continue / will continue and will not continue NBFC activities before receiving RBI registration
Certified copy of the resolution of the board of directors to formulate the "Code of fair practices".
Auditor's certificate proving that the company accepts/does not accept/does not have a public deposit.
Auditor's certificate attesting that the company has no NBFC activities.
Certification of the auditor confirming the net fund at the time of the request.
Information on the authorized share capital and the current participation scheme of the company, including the percentages.
Copy of the deposit note and the bank certificate without privileges, specifying the credit to support the net funds withheld. Information about bank balances / bank accounts / full postal address of the agency /bank, credit/credit, etc.
Balance sheet and profit and loss account audited for the last three years with the report of the directors and accountants or for a shorter period available (for existing companies).
The company's business plan for the next three years with details on
Business growth,
The market segment, and
The expected balance sheets, the cash flow statement, the income statement excluding public deposits.
Documented source of seed capital for the business.
Self-certified account statement/IT statements, etc.
In addition to the above documents, additional documents may be required according to the list of documents required for the NBFC license. For more information on NBFC licensing in India, contact us.
Comments