NBFC Business Plan

An NBFC business plan is not valid for an indefinite period. It must be evaluated and revised as per regulatory requirements by the RBI and the economic situation of the country. A business plan also depends on market trends, customer segments, and competitor analysis.

The key financial components of a business plan for NBFC registration:

• Projected balance sheets, cash flow statements, and income accounts.
• Sources of capital and fund infusion as proof of net owned fund (NOF).
• Capital adequacy, return on equity, and return on assets ratios.
• Revenue generation projections, including interest income, processing fees, and late payment fees.
• Cost analysis forecast, namely operational, professional, and compliance costs.
• Liquidity ratios used to demonstrate a company’s financial stability in case of economic downturns.

Although not mandated by the Reserve Bank of India, it is recommended to appoint an outsourcing firm/company that will help you with:

• Budget forecasting
• IT infrastructure setup
• Compliance with the RBI
• Financial projecting
• Organizational structure implementation
• Regulatory and legal consulting

You should upgrade or alter your business plan once a year or as and when there’s a change in the RBI guidelines, market trends, legislative changes, and customer preferences.

An organizational structure highlights the roles & responsibilities of upper management of the entity, governance mechanism, and risk management system.

Financial aspects include projections for five years, budgetary estimates, and capital allocation, expense reports, and spending perquisites, which can help the NBFC provide a clear analysis of the financial overview to investors.

The standard schedule for drafting an NBFC business plan is 2 to 4 weeks. This timeline depends on various factors, such as compliance requirements by the RBI, financial projections, risk management policy drafting, and IT setup.

The key advantages of a business plan for NBFC registration are as follows:

• Mandatory for non-banking financial company registration with the Reserve Bank of India.
• Helps NBFCs in managing cash flow.
• Provides insight into financial projections for effective decision-making and strategic management.
• Ensures legal compliance for net owned fund and risk management framework requirements of the RBI.
• Helps the non-banking financial company in securing and raising capital.
• Serves as a roadmap for directors and promoters to achieve short- and long-term goals.
• Helps upper management allocate resources as per priorities.

With the risk of digitalization in the country and the inclusion of innovative and technological solutions, non-banking financial companies can remain competitive and relevant in the consumer market in India.

The NBFCs conduct market research to find relevant customer segments, industry trends, and competitive advantage in the market through effective business plan development.

By maintaining adequate capital ratios & net owned funds, proper establishment of IT setups, implementation of organizational structure & risk management policies, an NBFC can adapt to the mandatory RBI master directions.

The primary issues for a non-banking financial company's business planning include:

• Accurate projection of market trends and customer preferences.
• Ensuring constant compliance with the Reserve Bank of India (RBI).
• Clear and reliable financial projections to raise funds through investments.