Eligibility Norms to Start a NBFC Business

1. Eligibility Norms to Start a Business?

2. ‘NBFCs’ Non-Banking Financial Companies (NBFC) do not fall in the legal definition of Banks but they proffer banking facilities and financial services. It is a well-known fact that Banks are not able to cater to the financial needs of all Indians, however hard they try; therefore, more and more companies are applying forNBFC Registration.  The functioning of NBFCs is regulated and monitored by the RBI in compliance with the provisions mentioned in Chapter III B of the RBI Act of 1934. The segments which are largely served by the NBFCs are instruments of the capital and money markets such as stocks, bonds, along with hire-purchasing, deposits, leasing, insurance business, investment funds, and chit business and many more similar activities.

3. Services NBFCs Can Offer The business activities of NBFCs include loans & advances, acquisition of shares or stocks or bonds or debentures or securities that are issued by govt or local authority or other marketable securities of similar nature, like leasing, hire-purchase, insurance business, chit business, etc. Services NBFCs Cannot Offer: RBI clearly defines the domains which cannot be touched by the NBFCs, and thus agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services, sale or purchase or construction of the immovable property, cannot be dealt with by NBFCs. Services

4. Eligibility Norms • Company should be registered under the Companies Act, 2013 or Companies Act, 1956 • Company should have Minimum Net Owned Fund of INR 2 crore • (Net Owned Funds to be calculated on the basis of the last audited balance sheet of the Company)

5. Types of NBFCs, Based On The Nature of Activity • Mortgage Guarantee Company • Asset Finance Company • Microfinance Company • Infrastructure Finance Company • Housing Finance Company • Investment Company • Loan Company • Core Investment Company

6. Decode the Procedure Of NBFC Registration • First formality is forming a company with Minimum Net Owned Fund of INR 2 crore (Equity Share Capital & not Preference Share Capital). • Then the company needs to open a Bank Account and keep the entire sum of INR 2 crores in a bank’s deposit account which should be free from all liens). • The Applicant company is then required to file an online application on the RBI’s website. • After the submission, the applicant will get a reference number that shall enable to facilitate inquiry in the future. • Thereafter, the company needs to submit the hard copies of the required documents to the concerned Regional Office of RBI. • The Regional Office will verify the accuracy of all submitted documents and on satisfaction, it will forward the application for NBFC registration to the central office. • The central office of RBI grants the NBFC registration only after the applicant fulfils all prescribed requirements in section 45-IA, of its act of 1934.

7. “NBFCs have become the driving force of the Indian economy, their USP being versatility and flexibility which helps them to penetrate all corners of the country!”-Shweta Gupta, Founder, and CEO, MUDS For more information visit: https://www.muds.co.in/nbfc-registration/

8. Thank You!