NBFC Company Registration procedure

1. NON BANKING FINANCE COMPANY

2. WHAT IS NBFC? A NBFC is a company registered under the Companies Act, 2013 which is engaged in the business of loans and advances, receiving deposits acquisition of stock or shares, leasing, insurance business, investment business, micro financing etc. (some NBFC only), According to Section 45-IA NBFC have to make application for registration with RBI and shall not commence or carry on the business of a non-banking financial institution without obtaining registration from RBI and maintaining NOF.

3. HOW IS NBFC DIFFERENT FROM BANK? NBFC Bank Definition NBFC carrying business, who cannot accept the demand deposits are engaged the in Banks are financial institutions which receive deposits and make loans. Banks provide financial services. on financial Incorporated under The Companies Act, 2013 The Banking Regulation Act, 1949 Maintenance of reserve ratio’s Not required Compulsory Deposit Insurance Facility Not available available Payments and settlement system NBFC’s do not form part of payments and system Banks payments system. comply with settlement the settlement and

4. IMPORTANCE OF NBFC’S Growth The financial and economic growth of the economy can be achieved with a well-developed market based financialsystem which is achieved by NBFC’s. Financial Intermediation NBFC’s functioning involves transfer of funds from the savers to investors. Thus, financial intermediation is economical and less expensive to both small businesses and small savers. Inducement to save NBFC’s play an important role in promotion of savings in the country. NBFC’s provide a wide range of financial assets as store of value and provide with the expert financial services to its customers.

5. Types of NBFC’S NBFCs are categorized as Liability based Asset Based Asset Based Size Based Ø Asset Finance Company Ø Having Public Deposits NBFCs with assets of Rs. 100 crore and above (NBFCs-ND-SI) Ø Investment Company Ø Not having Public Deposits Ø Loan Company Ø Core Investment Companies Ø Infrastructure Finance Companies Ø Micro Finance Institutions Ø Infrastructure Debt Funds

6. NBFC (ND CATEGORY) NBFC –ND NO PUBLIC FUND NO CUSTOMER INTERFACE • • NBFC –ND WITH PUBLIC FUND NO CUSTOMER INTERFACE • • NBFC –ND NO PUBLIC FUND WITH CUSTOMER INTERFACE • • NBFC –ND WITH PUBLIC FUND WITH CUSTOMER INTERFACE • • No customer Interface- not subject to any prudential norms and thus have Complete regulatory freedom to conduct their business activity.

7. PROCESS OF REGISTRATION Step 1: Formation of a company: the first step is formation of a company under companies Act, 2013.The name of the company must reflect the character of the NBFC. For example, investment, finance etc. may be used. Step 2: after the incorporation, Net owned fund the paid up share capital should suitably arise either at par or premium so as to attain a minimum net owned fund of Rs. 2 crore. The capital to be raised should be equity share capital and not preference share capital. Step 3: opening of a bank account: the entire sum of Rs. 2 Crore should be kept in a bank account in a deposit account free from all liens. Normally funds are kept in fixed deposit. The RBI at the time of considering the application verifies the deposit held by the company with the bankers. Step 4: application for certificate of Registration to RBI along with required documents. (the complete list of documents are provided in official site that is www.rbi.org.in).

8. COMPLIANCES Annual compliances S.No. Particulars 1Unaudited March Monthly return/NBS7 2Audited March Monthly return/NBS7 3Statutory Auditors certificate on Income & Assets Time limit on or before 30th June Upon completion on or before 30th June 4Information about Cos having FDI/Foreign Funds on or before 30th June before commencement of new Financial year One month from the date of signoff 5Resolution of Non-acceptance of Public Deposit 6File Audited Annual Balance Sheet and P&L Account 7Declaration of Auditors to Act as Auditors of the Company annual basis 8 Monthly return By 7thof every month 9.Periodical compliance Appointment of Director within 30 days of appointment Resignation of Director Adoption of any notification in the ensuing Board Meeting & filing the certified copy with RBI within 30 days of resignation

9. How NBFC’s contribute in the Society Substantial growth in the economy Helps in increasing wealth creation Financing weaker sections of economy Mobilization of resources (savings to investments) Long term credit and specialized credit provided Helps in attracting foreign grants

10. Raising of Funds Raising of Funds Private Placement (for private company) Equity/ preference instruments Public issue Foreign Direct investment Bonds Commercial papers Debentures Bank finance to NBFC’s

11. FDI IN NBFC’S Currently, an NBFC having FDI under automatic route is permitted to engage in only the following 18 financial activities and FDI in financial activities other than those mentioned below require prior approval of the Government. Merchant banking Custodian services Rural credit Factoring Underwriting Investment advisory Leasing and Finance Portfolio Management Services Financial consultancy Housing Finance Stock broking Credit rating agencies Credit card business Asset management Forex broking Micro credit Venture capital Money changing business Any foreign investment in the entities falling within the above sub sectors have minimum capitalization norms, as follows: USD 5,00,000 for foreign capital up to 51% USD 5,00,000 for foreign capital more than 51% and up to 75% USD 5, 00,000 for foreign capital more than 75%.

12. FDI IN NBFC Clearly after the technical reading of the notification issued by RBI on 9thSeptember 2016, requirement of entity in the NBFC activities should be regulated by a financial sector regulator. The notification does not specify the requirement of entity being registered or licensed by a financial sector regulator and hence it is believed that emphasis has to be on the entity being regulated rather than licensed. Further there is lack of clarity as to whether the above conditions can be seen as FDI linked performance conditions, thereby making LLP’s engaged in financial services ineligible for receiving FDI. Accordingly it appears that there should be no prohibition on LLP’s engaged in Non- banking financial services sector from accepting foreign investment. Although the ownership and control of the LLP would need to be determined in case of such an LLP in accordance with general principles and conditions laid down under FDI policy. Furthermore, the rate of interest in many companies in terms of FDI is low.

13. Option of doing business apart from NBFC’s OPTION OPPORTUNITIES LIMITATIONS NIDHI COMPANY It is recommended for commercial banking business, and the initial capital required is less. The funding and transactions can be done between the members only MULTI STATE CREDIT CO. SOCIETY Deposits can freely be obtained from public (with certain limitations) Government aid provided is low and less credibility. NBFC (MFI) Bank support is high. Initial capital required is high.

14. Why to go for NBFC in present scenario? How it shall be helpful? After demonetization the Indian customers are increasingly adopting Digital ways in daily life. NBFC’s therefore develop strategies such as product portfolio’s, end to end Customer experience. NBFC’S with strong understanding in the market can help in positioning themselves as A better alternative to traditional ways of banking NBFC’s ensure substantial growth over a long run, and introduction of such specified Players and systems will truly transform the banking value chains Usually the rate of Interest derived by the NBFC’s are high as compared to banks. Therefore high rate of Interest is received, adding on to the benefits of the NBFC.

15. CREDIT GROWTH OF NBFC’S

16. Why you Need NBFC software NBFC’S inevitably require a software to work on databases. Thus, a loan software like loan servicing software, loan management, and loan finance software needs to be developed for this. These are specially designed and developed for small operations to grow up to large operations. What a NBFC software should contain? • Loan scheme • EMI calculation • Due date alert • Loan Management • Account access • Regular updates

17. WHAT SHOULD BE CUSTOM FEATURES ON NBFC SOFTWARE Loan Scheme Management: Loan is the most demanding product for a bank and through loan scheme management system you can easily calculate ROI and create/ update schemes as per business need. 100% online Application for checking eligibility. EMI Calculation. Credit analysis. Document management system (Customer Master data, document, file I,e). CIBIL Api Integration. Business Policies Management. Approval System. End to end disbursement management. Automated EMI collection (ESC, Recovery & Follow-ups). Due Date Alert (automatic SMS / CALL). Customer Dashboard to check loan status, EMI Schedule, re-pay loan I.e. Defaulter List. PDC Detail. Enrollment Fee Report. Application Fee Report. Late Fee Report. Commission Pay Report. Spot Booking Expenditure. • • • • • • • • • • • • • • • • • • •

18. Conclusion NBFC’S are highly diverse in nature, and continue to offer wide range of financial Services. After demonetization NBFC’s will find ways to serve the customers through digital means. Also for a diverse and large country like India, ensuring financial Access to growth and entrepreneurship can be achieved by upbringing of NBFC’s. NBFC’s have gained substantial success and has ensured growth over a long Run, and introduction of such specified players and system will truly transfer the Banking value chains in times to come. NBFC’s play an important role in promotion of savings in the country. NBFC’s provide a wide range of financial assets as store of value and provide with the expert financial services to its customers.

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