Direct Tax
Consulting
ESG Advisory
Indirect Tax
Growth Advisory
Internal Audit
BFSI Audit
Industry Audit
Valuation
RBI Services
SEBI Services
IRDA Registration
AML Advisory
IBC Services
NBFC Compliance
IRDA Compliance
Finance & Accounts
Payroll Compliance Services
HR Outsourcing
LPO
Fractional CFO
General Legal
Corporate Law
Debt Recovery
Select Your Location
NBFC can have the power to raise funds from the public, directly or indirectly. NBFC’s incorporation process in India has provided a free hand in lending to their ultimate spender, which assists in market participation. The body that regulates the NBFC registration process in India is ultimately the Reserve Bank of India in compliance with provisions of Chapter 3B of the RBI Act, 1934, and also through any directions issued under the RBI Act for the NBFC incorporation process in India. The NBFC information process in India has expanded popularly in the financial market in recent years of financial developments.
If any individual wants to acquire the NBFC incorporation process certificate in India, you first have to ensure the necessary documentation procedure for the NBFC registration. The next steps to climb for the NBFC incorporation process in India are all that you consider the assistance of an excellent NBFC consultant.
Table of Contents
The major difference between an NBFC incorporation process and a Bank incorporation is that a bank is an authorized financial government institution that carries out financial activities by having a registration certificate only. On the other side, NBFC also carries out financial operations without any baking registration certificate.
The major variations are-
The non-banking Financial Company registration process requires being registered as a company under the Companies Act of 2013, whereas the Banks must be registered under the Banking Regulation Act of 1949.
The NBFC registration process in India only requires the certification of registration (CoR) of the company issued by the RBI, whereas the Banks hold their registrations.
The NBFC incorporation process in India can have 100% ownership of the FDIs, whereas the private banks that are not government-owned are allowed to have FDIs up to 74%.
The NBFC incorporation process in India can allow the NBFCs to provide enormous solutions and credit facilities to their customers and also the businesses who want to avail themselves of personal vehicles, housing, and other loans.
The NBFC registration also provides loans and other financial services to low-income groups and microenterprises, whereas traditional banks allow their customers to make payments, transfer funds, and make financial transactions very easy and secure.
The NBFC registration also provides foreign exchange services accommodating the exchange of currency and transaction of remittances via the NBFC. Meanwhile, banks only allow the exchange of currency via wire transfer, and foreign accounts hold the currency.
The NBFC incorporation process in India takes part in the purchase-hire activities, leasing, and businesses to hold the assets without full payment, whereas the banks acquire deposits from the customers and businesses and then only move these funds towards investment and lending activities.
The NBFC has been classified into various categories according to the holding capacity of the liquids. Each one of them falls in the bracket of different financial subsets and services. They are classified in the following ways such as:
They are as follows:
Above, we see the broad category of the types of NBFC that can be further classified into Systematically Important and Non-Systematically Important. But later on, the RBI, as an apex financial body, came up with the master direction, i.e., master direction (NNBFC- Scale Based Regulations) in the year 2023. It is further mentioned by the RBI that the newly introduced direction will be applicable for the date of October 2022. This will lead to the further classification of the NBFC based on the layers, i.e., base, middle, top, and upper layers. Moreover, the SBR framework has introduced a different set of eligibility criteria for the NBFC incorporation process, in which the NBFC with net assets of less than 1000 crores INR has been categorized as the base layer entity. At the same time, the other NBFCs with more than 1000 crores INR are categorized as middle-layer entities.
The SBR master direction issued by the RBI has segregated the regulation passed on the different layers separately, which makes sure that all the NBFC incorporation processes in India comply with this statutory master direction of the RBI consistently and transparently. So, the SBR master direction is segregated into different categories as follows-
Certain guiding principles of the RBI have to be followed to file the NBFC incorporation process in India and obtain the certificate. The applicant NBFC should always check the following prerequisites before going for it so:
The brief under the provision of Section-45 1A of the RBI Act, 1934 specifically mentions that the NBFC incorporation process in India goes with the trade and commerce only after
At the same time, there are a few other categories of NBFC that are regulated by other regulators and are precluded from the requirements of the RBI as they govern other specific departments. Those NBFCs are the following:
As has been already mentioned, the steps involving the guiding principles laid down under the RBI Act of 1935. There are also other tasks involved to start the NBFC incorporation process in India.
There is the following process for applying for the NBFC registration:
The Non-banking Financial Companies (NBFC) registration process offers so many benefits for all the financial service-based entities to operate in the financial arena. It is paramount to take note that specific advantages should be based on the regulatory framework of the NBFC incorporation registration process. These are the following benefits of the NBFC registration:
The NBFC has been very flexible in facilitating a variety of financial services like loans, advances, shares, stocks, bonds, debentures, securities, hire-purchase, etc. NBFC has done a very decent job in reaching rural places to make their presence. The NBFC is usually more flexible in operation than the traditional banks.
The NBFC can also extend credit to other various sectors of the economy, which facilitates and feeds to the other segments that might not served by the traditional banking system.
The NBFC can be very innovative in launching new financial products and services in the market. As per the requirements of the customers in the market, they can come up with new tailored products to meet the target.
The NBFC always has the liberty to choose its interest rate as per RBI regulatory compliance. The NBFC should never cross the interest limit set by the RBI.
Whenever it comes to the daily operation of NBFC, the company always prefers a properly planned structure, especially in the lending procedure for the loans to their customers. They frequently follow the effective mechanism for the identification of bad loans to avoid the increase in Non-performing Assets and give them balanced growth.
In today’s fast-paced world, digital lending provides financial convenience, speed, and accessibility to borrowers.
For any registration process, the document always plays a paramount role in conferring the necessary compliance. These are the following documents for the NBFC registration process to go on smoothly:
There are benefits in the way of the NBFC incorporation process in India, but it also paved the way for the challenges involved in it. There are the following challenges faced by the NBFC in its journey:
The major sources of funding for the NBFC are banks and the capital market industry. There is no other way for the NBFC to refinance its resources. As it can be analyzed, refinancing the NBFC in its course of business and public dealing is a very important element for any financial sector.
This is another major challenge with the NBFC is that there are no necessary tools for the recovery of the debts that will hamper the smooth functioning of the NBFC.
The NBFC also helps people who are not well educated and unaware of the rules and regulations of the NBFC. It has been surveyed that the people hesitate at the first instance to take loans and advances from the NBFCs. The NBFC should come up with campaigns like awareness programs about these company’s rules and regulations.
The NBFC has been permitted to make tax deductions for non-performing assets (NPAs). Another major problem with the NBFC is that they do not have a structured taxation system, unlike traditional banks.
It can analyzed from the above-mentioned information about the NBFC incorporation process in India. It has advantages along with various challenges involved if you compare it with the traditional banking system in India. It can be a great opportunity for new entrepreneurs and business houses with basic knowledge about the NBFC functioning so that they can also start their company as NBFC. The incorporation procedure of the NBFC is more or less the same for all the NBFCs registered under the Companies Act 2013, but they differ in a few ways in their operations and functions.
A company should first start the registration process under the Companies Act of 2013 or have already registered under the Companies Act of 1956. It can either be a private limited company or a public limited company.
Generally, NBFC offers loans and advances to its customers easily when compared with traditional banks. NBFC has more flexibility than the traditional banks in India.
There is a minimum requirement of two directors and two shareholders. It can accepted if the director or shareholder is the same person.
As per the provision laid down under Chapter 3 of the RBI Act, 1934, the RBI, as the supreme body, can supervise the functioning of the NBFC. It can also interpreted that RBI has mandated to get the certificate registration for the NBFC to function legally.
The Reserve Bank of India regulates the NBFC incorporation process in India.
It can cost up to 15 lakh INR, including the government charges and professional fees.
The NBFCs are not permitted to accept demand deposits from the customers, cannot issue cheques on their own, etc.
Yes, they are subject to approval from the RBI if they meet the eligibility criteria from the Reserve Bank of India.
Yes, there can be a high chance of the NBFC regulating across multiple states if they take complaints of the relevant regulation and approval from the RBI.
It has been divided into four layers: the top layer, upper layer, middle layer, and base layer.
A joint venture is a strategic business arrangement in which two or more companies collaborate...
With the rising inflation rates and various other economic factors, wealthy Americans are incre...
Before approaching the new suppliers or any other third parties, you should always go for the v...
With the increasing landscape of Fintech Companies, it is increasingly vital that fintech compl...
This blog gives a detailed description through an audit report for industrial waste by examinin...
Are you human?: 9 + 8 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
Non-Banking Financial Company in India, banks have certain limitations as they are not able to open branches in rem...
28 Sep, 2020
Non-Banking Financial Companies (NBFCs) play an important role in financial inclusion and nation-building by joinin...
12 Oct, 2020
Chat on Whatsapp
Hey I'm Suman. Let's Talk!
9870310368 
8860712800