NBFC Registration - Non-Banking Financial Company
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 and regulated by the Reserve Bank of India (RBI) under the RBI Act, 1934. NBFCs are engaged in the business of loans and advances, acquisition of shares, stocks, bonds, debentures and securities, leasing, hire-purchase, insurance business, chit-fund activities and other financial services. Although they provide banking-like financial services, NBFCs cannot accept demand deposits, do not form part of the payment and settlement system, and cannot issue cheques drawn on themselves. NBFCs play a vital role in financial inclusion by extending credit to individuals, MSMEs and businesses that are often underserved by traditional banks.
Why Choose an NBFC?
- Flexible Lending: Simpler, faster and more flexible loan approval process than banks
- Financial Inclusion: Serves unbanked and underserved rural, semi-urban and MSME segments
- Quick Disbursement: Faster loan processing and disbursal of funds
- Diverse Products: Offers loans, leasing, hire-purchase, microfinance and investment products
- RBI Regulated: RBI registration provides strong credibility and customer trust
- Foreign Investment: Up to 100% FDI permitted under the automatic route (subject to conditions)
- Lower Operating Cost: Leaner structure compared to scheduled commercial banks
- No CRR/SLR Burden: Non-deposit taking NBFCs are not required to maintain CRR/SLR like banks
- High Growth Potential: Rapidly growing sector driven by retail and MSME credit demand
- Customised Solutions: Ability to design tailor-made financial products for niche markets
Importance of NBFCs in the Economy
- Financial Inclusion: Extends credit to rural, semi-urban and low-income segments
- MSME Financing: Major source of funding for micro, small and medium enterprises
- Complements Banks: Bridges the credit gap left by the formal banking sector
- Infrastructure Funding: Specialised NBFCs finance roads, power and infrastructure projects
- Employment Generation: Supports entrepreneurship, businesses and job creation
- Resource Mobilisation: Channels savings into productive investments
- Economic Growth: Boosts consumption, investment and overall economic activity
- Innovation: Drives fintech-led digital lending and innovative credit models
Types of NBFCs
- Asset Finance Company (AFC): Finances physical assets such as vehicles, machinery and equipment
- Loan Company (LC): Provides loans and advances for various purposes
- Investment Company (IC): Primarily engaged in the acquisition of securities
- Infrastructure Finance Company (IFC): Deploys at least 75% of assets in infrastructure loans
- Microfinance Institution (NBFC-MFI): Provides small-ticket loans to low-income groups
- NBFC-Factor: Engaged in the business of factoring
- Core Investment Company (CIC): Invests in group companies' shares and securities
- Housing Finance Company (HFC): Provides finance for housing and real estate
- Deposit vs Non-Deposit: NBFC-D (accepts deposits) and NBFC-ND (does not accept deposits)
Documents Required for NBFC Registration
- Certificate of Incorporation (COI) of the company
- Memorandum of Association (MOA) and Articles of Association (AOA)
- PAN Card of the company
- Detailed business plan / projected financials for the next 5 years
- Proof of Net Owned Fund (NOF) - minimum ₹2 crore (₹10 crore for certain categories as per latest RBI norms)
- Audited balance sheet and profit & loss account (if applicable)
- KYC documents (PAN, Aadhaar, address proof) of all directors and shareholders
- Credit reports / CIBIL reports of directors and shareholders
- Educational and professional qualification proof of directors
- Banker's report on the company and directors
- Board resolution for NBFC formation and fund infusion
- Auditor's certificate confirming the Net Owned Fund
- Registered office address proof and NOC from the landlord (if rented)
- Shareholding pattern of the company
Our NBFC Registration Process
- Company Incorporation: Register a Private or Public Limited Company under the Companies Act, 2013
- Capital Arrangement: Ensure the minimum Net Owned Fund (NOF) of ₹2 crore is in place
- Bank Account & FD: Open a bank account and deposit the NOF as a fixed deposit
- Document Preparation: Prepare the business plan, financial projections and required documents
- Online Application: File the application on the RBI's COSMOS portal and generate the CARN
- Submission to RBI: Submit the printed application along with documents to the RBI Regional Office
- RBI Scrutiny: RBI verifies the documents, directors, NOF and business plan
- Certificate of Registration: RBI grants the Certificate of Registration (CoR) to operate as an NBFC
Who Should Register as an NBFC?
- Companies whose financial assets are more than 50% of total assets (and income from them more than 50% of gross income - the "50-50 test")
- Loan and finance companies
- Microfinance and small-ticket lenders
- Asset financing and vehicle finance companies
- Leasing and hire-purchase companies
- Investment companies dealing in shares and securities
- Fintech and digital lending platforms
- Infrastructure and housing finance providers
- Companies offering factoring and trade finance services
NBFC Compliance Requirements
- RBI Returns: File periodic returns (NBS returns) with the RBI
- Statutory Audit: Mandatory annual audit by a practising Chartered Accountant
- ROC Filing: File annual returns and financial statements with the Registrar of Companies
- Net Owned Fund: Continuously maintain the prescribed minimum NOF
- KYC & AML: Comply with KYC, Anti-Money Laundering and PMLA norms
- Fair Practices Code: Adopt and follow the RBI's Fair Practices Code
- Auditor's Certificate: Submit the statutory auditor's certificate to the RBI annually
- Compliance Officer: Appoint a compliance officer for regulatory reporting
- Capital Adequacy: Maintain the prescribed Capital to Risk Assets Ratio (CRAR)
Minimum Requirements for an NBFC
- Company Registration: Must be registered as a Private or Public Limited Company under the Companies Act, 2013
- Minimum Directors: At least 2 directors
- Net Owned Fund: Minimum NOF of ₹2 crore (higher for certain categories as per RBI)
- Director Experience: Preferably directors with relevant financial sector experience
- Clean Credit History: Directors and shareholders must have a clean CIBIL record
- Registered Office: Must have a registered office in India
- Business Plan: A viable 5-year business plan for financial activities
Important Points to Note
- No Demand Deposits: NBFCs cannot accept demand deposits like banks
- No Cheque Facility: Cannot issue cheques drawn on themselves
- Not in Payment System: Do not form part of the payment and settlement system
- No Deposit Insurance: Deposit insurance (DICGC) cover is not available to depositors
- CoR Mandatory: Must obtain the Certificate of Registration from RBI before commencing business
- FDI Allowed: Up to 100% FDI is permitted under the automatic route, subject to conditions
- Ongoing Supervision: NBFCs remain under continuous RBI supervision and regulation
Difference Between an NBFC and a Bank
| Aspect |
NBFC |
Bank |
| Governing Law |
Companies Act, 2013 & RBI Act, 1934 |
Banking Regulation Act, 1949 |
| Demand Deposits |
Cannot accept demand deposits |
Can accept demand deposits |
| Cheque Issuance |
Cannot issue cheques on itself |
Can issue cheques |
| Payment System |
Not part of payment & settlement system |
Integral part of payment system |
| Deposit Insurance |
DICGC cover not available |
DICGC deposit insurance available |
| CRR / SLR |
Not required to maintain (non-deposit) |
Must maintain CRR and SLR |
| Foreign Investment |
Up to 100% FDI (automatic route) |
Capped FDI limits with approvals |
| Credit Creation |
Cannot create credit (money multiplier) |
Can create credit |
| Regulator |
RBI (and SEBI/NHB/IRDAI for some) |
Reserve Bank of India (RBI) |
Ready to Register Your NBFC?
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