How to Get a Certificate of Registration (CoR) for an NBFC?

Abhishek Kumar

17 Jul, 2024

To obtain a Certificate of Registration (CoR) for an NBFC in India, an applicant must meet the requirements set by the RBI guidelines. The process includes fulfilling the minimum net-owned fund criteria, submitting a detailed application form, providing supporting documents, and undergoing a rigorous verification process by the RBI for NBFC registration to ensure compliance with regulatory norms. So, successful applicants will receive the Certificate of Registration for an NBFC to get permission to operate legally as an NBFC in India.        

Where to Apply for a Certificate of Registration for an NBFC?

The application for CoR for an NBFC is made under Sub-section (2) of Section 45-IA of the Reserve Bank of India Act, 1934. This section outlines the regulatory framework under which NBFCs must operate and obtain official recognition from the RBI.

The applicants must submit a detailed application form along with necessary supporting documents per the RBI’s guidelines. These documents typically include information about the company’s financial health, business model, management structure, and compliance with the norms of regulatory bodies. The RBI scrutinized each application to ensure adherence to financial stability, customer protection and overall regulatory standards.

Required Documents for Certificate of Registration for an NBFC Application

The application must be submitted with the required documents because RBI conducts a thorough review process to assess the applicant’s information, including its financial standing, governance framework and ability to conduct non-banking financial activities responsibly. Below are the required documents to be enclosed in an application form for a Certificate of Registration for an NBFC:

1. Identification details
2. Statement of the Prudential Norms for income recognition, accounting standards, asset classifications, capital adequacy, provisioning for bad and doubtful debts, etc.
3. Management’s information
4. Certified copies of the Certificate of Incorporation.
5. Certified copy of the MoA and AoA.
6. Board Resolution for approving the application submission and details.
7. Copies of the balance sheet and profit and loss account for the last three years.
8. Business Plan for the next three years, such as market segments, financial projection, etc.
9. For existing companies not meeting specified financial ratios, a plan outlining how they intend to comply is needed.
10. For companies aiming to become Core Investment Companies- Non-deposit-taking systematic improvements but falling short of the 90% net assets under the investment crisis, additional details are required to be submitted.

What are the Benefits of obtaining a Certificate of Registration for NBFCs?

The applicants obtaining a Certificate of Registration for an NBFC gets various benefits such as:

· Legal Recognition

The applicant with a CoR is officially recognized by the RBI, which allows NBFCs to operate legally in the financial sector.

· Trust and Credibility

It enhances the NBFC’s credibility and trustworthiness in the eyes of customers, investors and stakeholders. 

· Access to Funding

Applicants with CoR will be able to attract funding from banks, financial institutions, and investors who prefer to deal with registered entities.

· Business Expansion

It opens the door to new business opportunities and potential partnerships, facilitating expansion into new markets or financial products for applicants.

· Customer Confidence

Customers feel more secure dealing with a registered NBFC, knowing that it operates under a regulatory framework, which can lead to an increased customer base and attract more investors.

RBI’s Power for NBFCs that Meet 50-50 Criteria

Under the RBI Act, 1934, the RBI is entrusted with important authority concerning NBFCs that meet the 50-50 criteria for principal business activities. The RBI’s powers include registering NBFCs, preparing policies, issuing directives, inspections, regulation, supervision, and monitoring of NBFCs that meet the 50-50 principal business requirements.

Under these provisions, NBFCs are subject to strict compliance requirements. Any violation of RBI regulation can result in penalties, including the possibility of revoking the Certificate of Registration issued to the NBFCs. Such action would prohibit the NBFCs from accepting deposits and could have other regulatory consequences.

These measures are designed to ensure that NBFCs operate in a financially sound, transparent, and aligned manner with regulatory standards, thereby safeguarding depositors’ interests and maintaining the financial system’s stability.

Conclusion

In conclusion, obtaining a Certificate of Registration for an NBFC is important for gaining legal recognition in the market, enhancing credibility, accessing funding, and expanding business horizons. It signifies compliance with RBI regulations, builds customer trust, and facilitates growth opportunities for NBFCs.

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