Opening an NBFC is not an easy thing to do; it is tiresome, requires hefty investment and efforts. After investing so much time and money, you cannot afford to make any mistakes while incorporating one. So, here we are with what are the steps to get your NBFC incorporated.
Non-Banking Financial company is a financial institution which sums up banking and non-banking facilities like hire purchase, leasing, investment funds, insurance business, bonds, etc. NBFC is a bridge between investors and borrowers, and their main task is to raise capital funds from the investors and depositors and lend them to the borrowers.
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How to Get Your NBFC Incorporated?
In today’s time, they are becoming a common choice among people and banks as they provide a great support system. They have slowly made important contributions in India, leading to immense popularity among people. So, the common people need to know the document checklist for the incorporation of NBFC.
NBFC and RBI
RBI has made some regulation in the functioning of the NBFC in accordance with the Reserve Bank of India Act of 1934, Section 45-IA of which says that NBFC cannot commence nor do business with a non-banking financial institution without getting registered and should have a net owned fund of Rs. 2 crores. However, there are some NBFCs which are regulated by other regulators and are exempted from registration with RBI. Such as venture capital fund or merchant banking companies, stock broking companies that are registered with SEBI. Some insurance companies have registration under IRDA, Nidhi companies, chit companies, housing finance companies, stock exchange, or mutual benefit companies.
The documents required for the NBFCs registration in type II – NBFC-ND includes:
- Certificate of Registration, which you can obtain from the ROC office.
- Certified copy of the extract of main object clause in MOA, related to the financial business.
- The Board Resolution should confirm that the company will not commence any NBFC related operations preceding registration.
- The company must ensure fair practices code in accordance with the RBI guidelines. With that, they do not accept any public funds and will not do the same in the future after getting registered without the approval of the RBI.
- Customer Interface will not be possible without the prior approval of the RBI.
- If it is an already existed company, then an audited balance sheet and P&L account along with directors and auditor’s reports are required. The report must be of the past three years or the entire existence period of the company.
- A copy of all the fixed deposits receipts and banker’s certificate, which shows the balance in support of the Net Owned Funds (NOF). These FD post-RBI approvals can be utilized only for NBFC registration.
- Educational certificates and Professional qualifications of Directors.
- Copy of documents including experience certificate of directors in financial service sectors.
Apart from the other documents mentioned, the Board resolution should state the company to be a member of all the credit information companies, and it will also acquire membership of at least one self-regulatory organization. With this, the Board Resolution should also state that the company has a fixed internal exposure limit. Also, the company will follow the rules and regulations, taking into consideration the dealing with the pricing of credit, fair practice, and non-coercive method of recovery. Another important requirement is that it should mention that the company is not registered under section 8 of the Companies Act, 2013. Following are the additional documents required for the registration along with the applications:
- The RBI must issue a non-objection certificate to the NBFC-IFC granting sponsorship to the NBFC-IDF.
- Another most important document is a copy of the tri-party agreement between the concessionaire, the Project Authority, and NBFC-IDF.
- The Board Resolutions should mention the key details of the registration, including the company, will have minimum financial assets in the factoring business, which will constitute 50% of its total assets and revenue from the factoring business, which will not be less 50% of the total income.
- All details, including change in management of the sponsor company in the last financial year, and it must also include the reasons for the change.
- A major important document needed for the registration is, the applicant should have to provide the source of the start-up capital of the company, including necessary tax returns of the shareholders.
NBFC Registration Process in India
Steps of getting NBFC incorporated in India:
The first step is to apply online by accessing RBI’s secured website.
Next, a login page of the COSMOS application will appear on the window. The applicant has to click on the company registration on the login page. An excel page of the application form will be displayed on the screen available for download. Now, the applicant company can download this excel application form and fill all the required details in the form and upload it. After this, a company application reference number will be generated.
This is an important step where the company has to note down the correct name of the regional office in the field C-8 of the “Annex-Identification Particular” mentioned in the application form. After filing the online application, the applicant has to submit the hard copy of the application form along with the required documents mention in the NBFC incorporation checklist to the regional office of RBI.
After submitting all the documents along with the hard copy of the application, the applicant can check the online status of the application with the help of the company application reference number generated in step 1.
Important Points for NBFC Registration
- It is an important criterion that NBFC has to get registered itself as a company under section 3 of The Companies Act, 2013.
- The applicant company must have a minimum Net Owned Fund (NOF) of Rs. 2 crores at the time of applying for registration.
- The company must have at least one senior banker or director.
- The applicant company must be having a clean CIBIL score, to increase the credibility and get registered.
- Another important factor for registration includes that the applicant company must be engaged in financial activity. If the financial outcome of such business increases more than 50% of the total company’s assets, then the company shall get NBFC registration.
- If a foreign company or foreign investor is in the mood to set an NBFC, then they should hold a paid-up equity capital of Rs. 5crores.
NBFC plays a very prominent role in the development of the country in terms of infrastructure, wealth, transport, and employment. Apart from the development, NBFC empowers the economically weaker sections of the society through financing them. This continuous effort of the NBFC is changing the face of the Indian economy.
Also Read: Get Instant Cash Loan Online In India
Looking into the registration part, starting an NBFC requires lots of documentation and is a long process. For getting registered, you need to comply with the document mentioned in the checklist for getting your NBFC Incorporated. Acquiring the NBFC license is a hard process as it requires approval from RBI. So, before you apply for the incorporation of NBFC, you should seek an expert opinion.