What are the steps to establish your own NBFC organisation?

What are the steps to establish your own NBFC organisation?

Non-Banking Financial Companies (NBFCs) are financial institution which are engaged in providing banking services. A non-banking institution whose principal business is to receive deposits under any scheme is also a non-banking financial company. They provide banking services but do not possess banking license.

NBFCs are engaged in the business of loans & advances, acquisition of shares/ stocks or other securities issued by government or local authority, leasing, hire-purchase, insurance business, but do not include those financial institution whose principal business is related to agricultural activity, industrial activity, sale or purchase of any goods or services other than securities and sale/purchase/construction of immovable property.

Under Indian Financial System, NBFCs Raise Fund from public and then lend them to ultimate spenders. They are also engaged in advancing loans to wholesale traders & retail traders, small scale industries and to self-employed persons. They are considered as complementary to banking sector as they are engaged in providing customer oriented services, attractive rate of return on deposits and provide the flexibility in meeting the credit needs.

NBFCs are regulated by Reserve Bank of India and issue directions under the framework of Reserve Bank of India Act, 1934.

· It is a financial institution, which is company;

· A non-banking institution whose principal business is to receive deposits under any scheme or in any manner;

Other Requirements for NBFCs

· It is important to get registered itself with the RBI.

· Company, desirous of commencing business as NBFC should have a minimum net owned funds of Rs. 200 lakhs.

(Net Owned Funds = Paid up share capital + Free Reserves – Accumulated losses, deferred revenue expenditure and other intangible assets.)

· For the purpose of registration, one must have to submit the application in the prescribed format along with the documents required by the RBI.

· After satisfaction RBI issues the certificate of registration to the company.

· NBFCs holding valid certificate of registration can accept public deposits.

NBFCs need to comply with the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. Here are some of the important regulations are:

· They can accept public deposits for a minimum period of 12 months and for a maximum period of 60 months.

· They cannot offer interest rates higher than the ceiling rates prescribed by the RBI.

· They must possess investment grade credit rating.

· Repayment of deposits cannot be guaranteed by RBI.

· They cannot offer any addition benefit or gifts to the depositors.

· They cannot accept deposits repayable on demand.

NBFC Registration Procedure with Reserve Bank of India

Company desirous of commencing the business as NBFC shall apply to RBI for the license.

· Company should be incorporated under Companies Act, 2013.

· Company should have minimum net owned funds of Rs. 2 crores.

· The online application is available on RBI's website (COSMOS).

· Submission of hard copy of the application along with attached documents shall be submitted RBI Office.

· The license will be granted only after vigilant inspection of the application and documents attached with it.


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