Non-Banking Financial Companies (NBFCs) are essential to India's quickly expanding financial sector since they offer financial services outside of traditional banking.
With the increasing demand for credit, investments, and fintech innovations, setting up an NBFC has become an attractive business opportunity. At Vijendra & Co, we specialize in facilitating NBFC Registration Online, offering in-depth expertise and seamless assistance.
Overview of the NBFC
An organization formed under the Companies Act of 2013 that offers financial services such as loans, asset financing, investments, leasing, and hire purchase without a complete banking license is known as a Non-Banking Financial Company (NBFC). In contrast to banks, NBFCs are unable to take demand deposits; yet, they might boost economic growth by offering specialized financial services to underserved industries.
The size of the Indian NBFC market
Over the last ten years, the NBFC industry in India has experienced strong expansion. As per the RBI, NBFCs contribute nearly 25% to the total financial assets in India. The sector’s total assets stood at over ?54 lakh crore in 2024 and are projected to grow at a CAGR of 11%-13% over the next five years. Factors like financial inclusion initiatives, the rise of digital lending, and regulatory support have contributed significantly to the expansion of NBFCs.
Types of NBFC
On the Basis of Activities:
Asset Finance Company (AFC): Financing physical assets like automobiles, machinery, etc.
Investment Company (IC): Engaged in acquiring securities.
Loan Company (LC): Providing loans and advances for non-asset-backed financing.
Infrastructure Finance Company (IFC): Focuses on loans to the infrastructure industry.
Micro Finance Institution (NBFC-MFI): Provides financial services to low-income groups.
The primary focus of Housing Finance Company (HFC) is the provision of housing loans. Each category requires a specialized approach for NBFC Registration Online.
NBFC Registration: Benefits
Registering an NBFC offers several advantages:
Access to diversified funding options
Enhanced credibility and trust among investors and customers
A broad array of financial services provided inside a controlled environment
Opportunity to tap into India’s underserved markets
Flexibility in operations compared to traditional banks
Proper NBFC Registration Online ensures the company operates legally while enjoying these benefits.
Checklist: Documents Required to Register an NBFC
To register a Non-Banking Financial Company, you must prepare the following documents:
The company's certificate of incorporation
A thorough business plan
Net owned fund proof (minimum ?2 crores)
Bankers' report on the company's financial standing
Directors' profiles and experience proof
KYC details of directors and shareholders
MOA and AOA highlighting financial services activities
Organizational structure chart
Three years' worth of audited financial statements, if any
Complete documentation is critical for a smooth NBFC Registration Online process.
Procedure for Non-Bank Financial Companies to Register
The following steps are part of the registration process:
1. The incorporation of the company: Register the business in accordance with the Companies Act.
2. Infusion of Capital: Make sure that the Net Owned Fund is at least ?2 crores.
3. Application Filing: Apply online via RBI's portal.
4. Document Submission: Upload all necessary documents.
5. Verification: RBI reviews and may seek additional information.
6. Grant of License: If satisfied, RBI issues the NBFC license.
A professional approach ensures timely and hassle-free NBFC Registration Online.
Clauses Outlining Penalties for Violations of RBI Regulations
There are severe penalties for breaking RBI guidelines:
Monetary fines
Suspension or cancellation of the NBFC license
Prohibition from further financial activities
Legal proceedings under RBI Act, 1934
Therefore, continuous adherence post NBFC Registration Online is critical for sustainability.
FDI in NBFC
For the majority of NBFC operations, India permits 100% FDI under the automated route, including:
Asset financing
Leasing and hire-purchase
Housing finance
Infrastructure finance
However, FDI compliance includes meeting minimum capitalization norms and adherence to sectoral regulations.
Cases of NBFC License Cancellation
An NBFC license may be revoked by RBI in the following situations:
Failure to commence business within six months
Non-maintenance of Net Owned Fund requirements
Insolvency or inability to meet obligations
Non-compliance with RBI directions or guidelines
Hence, continuous compliance post NBFC Registration Online is mandatory to avoid cancellation.
Required Compliances with the RBI's NBFC License Prior to Business Launch
Before commencing business after obtaining the NBFC license:
Open a public website disclosing basic information
Develop a fair practices code
Appoint a Principal Officer for Anti-Money Laundering (AML) measures
Set up a Customer Grievance Redressal Mechanism
Appoint statutory auditors
File necessary returns to RBI
These steps ensure the NBFC operates within the regulatory framework.
NBFC Annual Compliance
Every NBFC must fulfill annual compliances, such as:
Providing the RBI with annual returns and audited financial statements
Ensuring KYC and AML compliance
Reporting on Fair Practices Code
Submission of Statutory Auditors' Certificate on NOF compliance
Adhering to Corporate Governance norms
Penalties or even license revocation may result from noncompliance with requirements. The RBI suggests regulating NBFCs using a scale-based approach (RBI2021).
Scale Based Regulatory Framework (SBR)
In 2021, RBI introduced a Scale Based Regulatory Framework (SBR) for NBFCs to streamline oversight.
NBFCs are separated into four tiers by the framework:
Middle Layer (ML)
Base Layer (BL)
Top Layer (TL)
Upper Layer (UL)
Each layer has specific compliance, governance, and capital adequacy norms.
A Change of Base Level
The Base Layer includes NBFCs like NBFC-Peer-to-Peer Lending Platform (NBFC-P2P), NBFC-Account Aggregator (NBFC-AA), and smaller NBFCs. These entities are subjected to simplified regulations, with emphasis on governance and risk management practices.
The Board Must Have a Minimum of
Under the new regulations, the Board of an NBFC must have a minimum number of independent directors. This enhances accountability and ensures that decision-making is aligned with the best interests of stakeholders.
Risk Management Committee
NBFCs, especially those classified under the Middle and Upper Layers, must set up a dedicated Risk Management Committee. This committee is responsible for:
Identifying and mitigating risks
Developing risk policies
Monitoring risk exposure regularly
Risk management practices help maintain business stability and regulatory compliance.
Fintech-Powered Non-Bank Financial Institutions: An Advantageous Business Model
Fintech-based NBFCs have become more prevalent as a result of the financial sector's adoption of technology. These businesses use mobile platforms, AI, and data analytics to:
Simplify loan disbursement
Lower operating expenses
Improve customer satisfaction
Reach a wider audience
The fintech revolution has opened up new avenues for NBFCs to grow and serve previously untapped markets.
NBFCs Must Register to Use Our Services
It is mandatory for all companies seeking NBFC status to register with RBI before offering financial services. Vijendra & Co provides complete assistance in NBFC Registration Online, ensuring compliance with all applicable norms and guidelines.
Why Choose CS Vijendra & Co.
At Vijendra & Co, our expertise in NBFC Registration Online stands unmatched. We bring:
Years of experience in financial compliance and licensing
A group of certified chartered accountants and company secretaries
End-to-end advisory and documentation support
Timely updates on regulatory changes
Seamless coordination with RBI and other regulators
We help aspiring NBFCs realize their potential through our deep understanding of regulatory frameworks and financial sector dynamics.
