Select Your Location
NBFC have to comply with the domestic laws to operate in the financial sector. While borrowing foreign loans, an NBFC has to be compliant with the regulations of the Foreign Exchange Management Act (FEMA).
NBFC compliance under FEMA is mandatory for the following purposes:
There are two routes under Foreign Investment- Automatic Route and Approval/ Government Route. Foreign investment in the NBFC sector is permitted under the automatic route. For NBFC compliance under FEMA, the activities are regulated under the automatic route; therefore, no approval is required by the RBI. Investments under the automatic route can be up to 100 per cent without any form of approval from the Government.
Table of Contents
Without obtaining prior permission from the RBI, an NBFC cannot be formed. For the formation of an NBFC, there is a requirement to start a private company which has minimum capital requirements. The formation of the company has to be compliant with the laws related to company law. Similarly, the NBFC also have to be compliant with FEMA laws. NBFC compliance, therefore, is mandatory as per the RBI and FEMA. RBI amended the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulation, 2000 in 2016 which allowed foreign investors to invest in NBFC.
Minimum capitalisation norms for Foreign Investment in NBFC (Before 2016 amendment)
Before the amendment in 2016, the following minimum capitalization norms were followed for any foreign investment in an NBFC. The following are the norms previously under the regulatory authority:
The Reserve Bank of India mainly regulates NBFC Compliance. NBFCs have to get registered with the RBI. Apart from this The Foreign Exchange Management Act, 1999 and Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulation, 2000 regulate NBFCs.
Also, Read: Types of Foreign Investment in India.
For an NBFC, Foreign investment is permitted under automatic route only in the following 18 prescribed NBFC activities. In the following sectors, Foreign Investment is allowed through the automatic route:
Non-fund based activities
After the Non-Banking Financial Company is registered with Reserve Bank of India, the following process has to be followed:
Read, Also: FEMA/ RBI Compliances Checklist: Foreign Direct Investment.
Varun Hariharan has completed the Legal Practice Course from BPP Law School, Manchester. He has a Masters in Commercial and Corporate Law from the Queen Mary University of London and LLB Honours from Bangor University, UK. He specialises in law related to corporate, artificial intelligence and technology law.
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
The Securities and Exchange Board of India (SEBI), the capital markets regulator, has recommend...
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...
Are you human?: 9 + 8 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
The scheme of export oriented units was introduced at the beginning of the 1980s. It is complementary to the SEZ sc...
21 May, 2020
FEMA Compliance which Must be Followed by the Indian Entities Making Foreign Investment For the purpose of promotin...
18 Jul, 2018
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!