Select Your Location
Non-Banking Financial Companies (NBFCs) play an important role in financial inclusion and nation-building by joining hands with the banking sector for providing credit to the unbanked segment of the society, especially the Micro, Small and Medium Enterprises (MSMEs) which form the training ground for innovation and entrepreneurship.
NBFCs ability to innovate and customize products as per the needs of the customers gives them an edge over the banking systems. Get details about how to obtain NBFC license by best NBFC Consultants in India.
The government is focusing on promoting entrepreneurship to transform the status of the country from a pool of job seekers to a pool of job creators. This can help NBFCs to exploit their full potential and work with greater efficiency. On the other hand, the banking system is facing many constraints in terms of expansion which further paves the way for NBFCs to play a pivotal role in the Indian Financial System.
NBFCs have turned out to be the growth engines for small-scale and retail sectors, in the areas which are still outside the reach of the banking system. The regulatory framework of NBFCs have undergone a wide array of changes ranging from simplified regulations to extensive regulations and finally towards rationalization as part of the recently revised NBFC regulatory framework in 2014.
Generally, NBFCs are required to be registered under Section 45 IA of the RBI Act, 1934, but before applying for the license with the RBI, the following conditions shall be satisfied to start operations as an NBFC:
After complying with the above basic requirements, an online application available on the RBI website www.rbi.org.in should be submitted along with the necessary documents. After the successful filing of the online application, a Company Application Reference Number (CARN) will be generated, which can be used to inquire about the status of applied registration. In the meantime, the hard copy of the application along with the required documents shall be submitted to the regional office of RBI.
The application, whether online or offline, should be complete in every aspect. The license is granted after proper scrutiny of the application and attached documents and on being satisfied that the desirous entity has complied with all the rules and regulations applicable.
NBFC registration can be obtained only after following the prescribed procedures and arranging all the required documents for NBFC registration.
In order to promote NBFCs as a crucial section of the Indian Financial Market, the government has simplified its regulatory framework. Accordingly, NBFCs with no public funds and no customer interface are not subject to any prudential norms and are free to carry out their business activities.
Earlier, all NBFCs were subject to governance requirements, such as the Fair Practices Code (FPC), anti-money laundering, etc., thereby increasing the compliance burden. Under the new framework, only NBFCs having a customer interface are required to comply with such governance requirements. However, in order to ensure that these leverages do not spoil the true motives for which the NBFCs have been established, they are required to maintain a leverage ratio of 7 which means the total outside liabilities is not to exceed seven times their owned funds.
To make the registration process of new NBFCs smoother and hassle-free, former RBI Governor, Dr. Raghuram Rajan, announced in the policy for 2015–16, that the process for registration of new NBFCs will be simplified and rationalized. The new application forms are to be made simpler and the number of documents required to be attached along with the application will also be reduced to a minimum.
RBI is continuously working in the area of NBFCs by setting up of the various committees to seek recommendations on the role of NBFCs in the growth of the financial sector. NBFCs have evolved as the catalyst for meeting the financial needs of various sectors emerging as better alternatives to the banking system.
The forthcoming changes in the sector will encourage robustness and also allow the NBFCs to operate in an enabling regulatory environment. As per the report, NBFCs have been the largest receiver of funds from the rest of the financial system.
Do you wish to obtain NBFC License? Or are you looking for an NBFC Takeover advisory? Would you wish to know about the NBFC/ Fintech Consulting or know more about peer to peer lending? Please feel free to contact Enterslice, India’s leading NBFC Consultants, legal and tax advisory firm.
Read our article:Applicability and Effects of GST on NBFCs in India
Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.
The objective of the enactment of the Prevention of Money-laundering Act, 2002, i.e. PMLA (the...
Tax planning is a continuing effort and a management strategy for ensuring the minimization of...
On 18th May 2023, the Securities Exchange Board of India (SEBI) released a Consultation Paper o...
Infrastructure and real estate have been regarded as India's "sunshine sector" since the turn o...
On 22nd May 2023, the Central Board of Direct Taxes (CBDT) issued a new circular under secti...
Anyone can have different sources of income. With globalization and the opening up of economies...
The Reserve Bank of India (RBI) is crucial in regulating NBFC, including branch openings and cl...
In India, Non-Banking Financial Companies are subject to certain restrictions from taking publi...
It's usually a good idea to diversify the assets in your financial portfolio, especially during...
A nation is being built by the non-banking finance company through the development of wealth, t...
Are you human?: 2 + 6 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
NBFCs have emerged as one of the systemically important components of the financial system showing consistent year-...
22 Jun, 2017
This blog focuses on understanding the role of the DSA of NBFC. When an individual applies for a loan from a bank o...
26 Jul, 2022
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!