NBFC Annual Compliance

NBFC Annual Compliance

Non-Banking Financial Companies prominently called as NBFCs play a crucial role in the financial system of India. However, do you know the number of compliances that they need to undertake. Once NBFCs are set up, they must regularly comply with various compliance requirements laid down by the regulatory authority. Considering NBFC Compliances are vast and extensive, as a business owner it may be a complex task to keep up with compliance requirements. We at Enterslice can help you fulfil NBFC compliance requirements.

Package inclusions:
  • Annual compliance tracker;
  • Drafting of policies and Loan documents.
  • Statutory Return filing.
  • Mandatory Registration
  • Training to Report to various Agencies ( CIC, CKYC, CERSAI,NESL, FIUIND)
  • Review of Financials;
  • Drafting of Replies for queries received from RBI
  • Liaising with RBI;
  • Advisory on Maintenance of PBC Criteria.
  • Advisory on Maintenance and achieving Net Owned Fund.
  • Advisory on Income Recognition, Asset classification and Provisioning.
NBFC Annual Compliance

Complete Overview of NBFC Compliances and Returns

NBFCs are one of the most popular financial institutions which are engaged in business of loans and advances, acquisition of stocks, debt, equities etc. issued by a government or local authority or other marketable securities. NBFCs are entities that are not banks, but they perform lending activities almost at par with banks. Similarly, just as banks have various set of regulations and compliances to follow, NBFCs also need to meet certain set of compliances and file returns periodically. Adherence to NBFC Compliances is essential for the smooth functioning of any NBFC and in case of non-compliance there can be severe consequences, including monetary penalties and even cancellation of Certificate of registration.

The Non-Banking Financial Companies (NBFCs) must submit various returns to the Reserve Bank of India with respect to their deposit acceptance, prudential norms compliance, ALM etc. in accordance with Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016. The master directions provide the foundation for an RBI compliant and safe NBFC operational practices. NBFC Compliances and Returns are comprehensive and complex therefore, it must be read carefully in order to avoid penalty.

Major Requirements in complying with NBFC Compliances

The Reserve Bank of India has migrated the existing supervisory return online filing process from COSMOS platform to the XBRL system. Therefore, NBFCs are required to have the following in order to file returns on the all new XBRL portal:

  • Get the User ID and Password from RBI;
  • Installation of XBRL RBI Ifile required
  • Update profile on the XBRL portal on regular basis.

NBFC Compliance and Returns: Types of NBFCs

The expansion and the growth of NBFCs have caused categorization of NBFCs, to focus on specific sectors/classes. All these NBFCs need to ensure strict compliance with regulations prescribed by the regulatory authority. We have discussed each of NBFC category below.

NBFCs can be categorised -

  • On the basis of their activity;
  • On the basis of liabilities.

NBFCs based on their activity-

  • Investment and Credit Company-

It is a company that does its principal business-asset finance by providing finance. The category of investment and credit company was formed after the RBI decided to merge 3 NBFCs, namely- Asset Company, Investment Company and Loan Company into one.

  • Mortgage Guarantee Company-

A mortgage guarantee company is an NBFC whose at least 90% of the business turnover of the Micro Finance Company (MFC)  is from mortgage guarantee business or whose at least 90% of the gross income of the micro finance company is from mortgage guarantee business and the net owned fund of the MFC is 100 crore rupees. 

  • Infrastructure Finance Company-

It is a company that uses minimum 75% of its total assets in the infrastructure loans. It has a minimum net owned funds of 300 crore and a CRAR of 15%.

  • Non-Operative Financial Holding Company (NOFHC)-

Through NOFHC, any promoter or a group of sponsor shall be authorised to set up new bank. It is a type of NBFC that holds bank and other financial companies controlled by RBI or other financial sector regulators to an extent permissible under the applicable regulatory recommendation.

  • Micro Finance Company-

These are corporations that perform functions just as banks do. They provide loans to small businesses that are underserved or are underqualified to avail loans. 

  • NBFC factors

This is a type of NBFC that is engaged in the business of factoring. These are called NBFC factor and the financial assets in the NBFC factor must be minimum 50% of its total assets.

  • Infrastructure debt fund NBFC

This is a type of NBFC that deals in simplifying the long term debt. It can only be funded by the infrastructure finance company.

  • NBFC Account Aggregator

An account aggregator refers to a non-banking financial company (NBFC), which is licensed by the Reserve Bank and is involved in providing services like retrieval or collection of financial information pertaining to the financial assets of its customers.

  • NBFC P2P

NBFC P2P lending platform brings together lenders and borrowers by using a digital platform. NBFC P2P has eliminated the tedious process of loan and has eased the processing of loans to some extent.

  • HFCs

HFCs are NBFCs with the principal business of financing of acquisition or construction of houses.

NBFCs based on their Liabilities-

  • Deposit taking NBFCs;
  • Non-Deposit Taking NBFCs.

Non-deposit taking NBFCs are further classified into-

  • Systematically important NBFCs;
  • Others

Different NBFC Compliances and Returns (Annual, Monthly and Quarterly)

MONTHLY COMPLIANCES

S.No

Form

Type of NBFC

Description

Due Date

1

 

DNBS-04B Return Structural Liquidity & Interest Rate Sensitivity

 

 

 

 

NBFCs-D and NBFCs-NDSI

To capture-

 

 (i) The details of mismatch in the projected future cash inflows & outflows based on maturity pattern of assets & liabilities at the end of reporting period for NBFCs-NDSI;

 

(ii) The details of interest rate risk.

 

 

 

 

Within 10 days from the end of every month

2

 

CIC Reporting

All NBFCs

Every NBFC shall require to report its loans to all four CICs

On and before 10th day of succeeding month

3.

NESL

ALL NBFCs

All are required to report its financial debt to NESL

Within a week from the date of succeeding month

QUARTERLY COMPLIANCES

S.No

Form

Type of NBFC

Description

Due Date

 

 

 

1

 

 

DNBS-01 Return

NBFCs-D and NBFCs-NDSI

The return captures financial details, viz. components of Assets as well as Liabilities, Profit & Loss account, Exposure to sensitive sectors etc. for NBFC-D & NBFC-NDSI

15th April;

15th July;

15th October;

15th January;

 

 

 

 

 

2

 

DNBS-03 Return

NBFCs-D and NBFCs-NDSI and Non-NDSI NBFCs having asset size more than 100 cr.

The return captures compliance with prudential norms, e.g. Capital Adequacy, Asset Classification, Provisioning, NOF etc. for NBFC-Deposit taking & NBFC-NDSI

15th April

15th July

15th October

15th January

 

 

 

3

 

DNBS-04A Return Short Term Dynamic Liquidity (STDL)

NBFCs-D and NBFCs-NDSI and Non-NDSI NBFCs having asset size more than 100 cr.

To capture details of mismatch in projected future cash inflows as well as outflows based on the business projections

15th April

15th July

15th October

15th January

 

 

 

 

4

DNBS-06

RNBCs

The return captures financial details like components of assets and liabilities as well as compliance with various prudential norms for RNBCs

15th April

15th July

15th October

15th January

 

 

 

 

 

5

DNBS-07

ARCs

To capture financial parameters and different operational details e.g. assets (NPA) acquired, acquisition cost, their recovery status etc. for ARCs

15th April

15th July

15th October

15th January

 

 

6

DNBS08-CRILC Main Return

NBFCs-D and NBFCs-NDSI and

NBFC-Factors

To capture the credit information on aggregate exposure of > 5 Crore to single borrower.

 

21th April

21th July

21th October

21th January

7

DNBS-11

NBFC-CICs

The return captures financial details, viz. components of Assets as well as Liabilities, Profit & Loss account, Exposure to sensitive sectors etc., for CIC-ND-Sis.

15th April

15th July

15th October

15th January

8

DNBS-12

NBFC-CICs

The return captures compliance with prudential norms, for e.g. Capital Adequacy, Asset Classification, Provisioning, NOF etc. for CIC-ND-Sis.

15th April

15th July

15th October

15th January

9

DNBS-13

All NBFCs

To capture details of foreign investment for all NBFCs having overseas investment.

15th April

15th July

15th October

15th January

10

DNBS-14

NBFC P2Ps

The return captures financial details like components of assets and liabilities as well as compliance with various prudential norms for NBFCs-P2P.

15th April

15th July

15th October

15th January

ANNUAL COMPLIANCES

S.No

 

Form

Type of NBFC

Description

Due Date

 

 

 

 

 

1

 

 

 

DNBS-02 Return

Non-NDSI NBFCs

The return captures financials details such as components of assets and liabilities and compliance with various prudential norms for non-deposit taking non-NDSI NBFCs.

On or before 30th May (either provisional or audited basis), if Provisional filled, then file audited within 30 days of finalisation of financials.

 

2

 

DNBS-010

All NBFCs and ARCs

To ensure continous regulatory compliance for all NBFCs.

Within 15 days from the date of finalising the balance sheet but not later than 31 Oct.

ADDITIONAL COMPLIANCES

S.No

 

Form

Type of NBFC

Description

Due Date

 

 

 

1

 

 

DNBS-05 Return

Rejected NBFC's

To capture details in respect of the NBFCs which accepted public deposits & whose CoR was rejected

As when COR is rejected by RBI

 

 

 

2

 

 

DNBS09-CRILC SMA Details

NBFCs-D and NBFCs-NDSI and

NBFC-Factors

All NBFCs-D, NBFCs-NDSI, & NBFCs-Factors with aggregate exposure > 5 Crore to the single borrower reported in SMA-2 for the day

As and when the account is classified (de-classified) as SMA-2

 

 

 

3

 

 

CKYCR

REs

Every regulated entity (including NBFCs) shall do KYC while disbursing loans or creating account relationship.

Within 10 days from the date of account relationship

 

4

CERSAI

All Financials Institutions

While disbursing secured loans

As soon as possible for securing first charge over secured property.

 

 

 

5

FIU-IND

All regulated Entities

Report certain transaction to FIU-IND agency mentioned under rule 3 of PMLA rules 2005

Within 15th day of the succeeding month and within seven working days on being satisfied that the transaction is suspicious.

Prudential Regulation under (Chapter IV) of RBI Master Direction

Apart from the RBI compliances for NBFCs provided above, there are other regulations that non-banking institutes must comply with:

  • Leverage Ratio: NBFCs (except NBFC-IFCs and NBFC-MFIs) are required to maintain leverage ratio of not exceeding 7 at any course of action.
  • Accounting of investments: The Board of Directors of NBFC are required to frame investment policy for the company and implement it also. For instance, the criteria of categorizing investments to current and long term investments.
  • Policy for demand/call loans: The Board of Directors of an applicable NBFC that wishes to demand/call loans should frame a policy that would be implemented by the company.
  • Classification of Assets: Applicable NBFCs should classify their assets in the following classes of:
  1. Standard Assets;
  2. Sub-standard Assets;
  3. Doubtful Assets; and
  4. Loss Assets.
  • Provisioning of Standard asset: Each applicable NBFC should make provision for the standard assets at 0.25% of the outstanding.
  • Multiple NBFCs: All applicable NBFCs would be aggregated jointly for the objective of checking the limit of 500 Crore rupees of asset size.
  • Disclosure in the Balance Sheet: Every NBFC will have a separate disclosure provisions for doubtful/bad debts & depreciation in investments.
  • Loans against the shares of company is prohibited: No applicable NBFC can lend or take credit against its own shares.

It is critical for a management running an NBFC to be well aware of these compliances and stay updated about them. These are some of the most important compliances for NBFCs running across India. In case an NBFC fails to comply with the RBI checklist, they will be subjected to heavy fines and penalties. Hence you can put your trust on Enterslice who offers NBFC advisory, compliances and consultancy services. We have professional experts who have years of experience relating to NBFC services.

Frequently Asked Questions

NBFCs are one of the most popular financial institutions which are engaged in business of loans and advances, acquisition of stocks, debt, equities etc. issued by a government or local authority or other marketable securities.

Once NBFCs are set up, they must regularly comply with various compliance requirements laid down by the regulatory authority. These compliances should be met in a timely manner to avoid paying penalties.

The return captures financial details, viz. components of Assets and Liabilities, Profit and Loss account, Exposure to sensitive sectors etc.

This return captures details in respect of NBFCs which accepted public deposits and whose CoR was rejected.

The return captures compliance with various prudential norms, e.g. Capital Adequacy, Asset Classification, Provisioning, NOF etc. for NBFC-Deposit taking and NBFC-NDSI.

The return captures financials details like components of assets and liabilities as well as compliance with various prudential norms for RNBCs

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