Checklist for Incorporation of NBFC By FCS Shweta Gupta

The procedure for incorporation of NBFC under Companies Act, 2013 has been further made easy. The streamlining being done is as follows:
  • Now an NBFC can be directly registered with MCA.

  • No prior approval is required from RBI.

  • RBI comes into picture only post the incorporation of the NBFC i.e Private/Public Company.

  • Without receiving the NBFC license from RBI, no company can begin the lending business in our country.

  • The registration procedure would only begin once the company is formed and the Net Owned Fund of Company is raised to 200 Lakhs.

    "Establishing an NBFC is neither very difficult nor challenging. The governing body has provided much liberty to boost the NBFC business currently. For an effortless functioning of the entire financial system, control and supervision are required."

     - Kritika Chabbra (Market Analyst, MUDS Management Pvt. Ltd.)

As per section 251(c) of the RBI Act, any organization dealing with the business of any financial institution would be considered as an NBFC. Both the Reserve Bank of India as well as the Ministry of Corporate Affairs govern an NBFC.

A few exceptions that do not need to obtain any registration from the Reserve Bank of India are as follows:
  • The various Core Investment Companies whose assets are valued at less than one hundred crores or in case their public funds are not taken.  

  • Organisations that are involved in the business of Venture Capital and stock-broking.

  • The Merchant Banking Companies

  • Housing Finance Companies and Nidhi Companies

  • The insurance companies having an IRDA certificate of registration.

The NBFC procedure is as follows:
  • The company ought to be registered first either under the Companies Act 2013.

  • The company should have a minimum of two crores net owned funds.

  • The company should at least have a full-time senior banker or one finance director (full-time or other).

  • The company should have clean CIBIL records.

  • Once all the above-mentioned conditions have been fulfilled, the RBI online application needs to be filled from the RBI website along with the requisition documents.

  • Generation of the CARN number takes place next.

  • The company has to send the hard copy of the application to the regional branch of the RBI.

  • The application needs to be examined closely and only on approval the company would receive the license.

"All the deposits of NBFC are unsecured and they cannot offer any incentives or gifts or additional benefits to its depositors."

— Isha Malik (Company Secretary, MUDS Management Pvt. Ltd.)

Guidelines to be followed by an NBFC

Once the company receives the license, it has to comply with the following guidelines:

  • The deposits that are payable on demand cannot be received by them.

  • Public Deposits being accepted by the company should be a minimum of twelve months and a maximum time period of sixty months.

  • The ceiling prescribed by the RBI has to be religiously followed by all the companies and no one can charge more interest than the prescribed limit.

  • The repayment of the amount (in case any), taken up by the company would not be guaranteed by the RBI.

  • The entire information about the company along with details of the change in its composition has to be supplied to the RBI.

  • The public deposits would be unsecured.

  • Every year, the company also has to submit its audited balance sheet.

  • The RBI also requires the report of the credit rating to be taken every six months.      

"In case the NBFC fails in paying any amount that it has taken, the consumers have the right to go to the Consumer Forum or National Company Law Tribunal and file a case against the organization." 

-Shweta Gupta, Founder, and CEO, MUDS

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