{"id":2818,"date":"2020-02-03T07:10:34","date_gmt":"2020-02-03T07:10:34","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=2818"},"modified":"2021-10-22T16:38:40","modified_gmt":"2021-10-22T11:08:40","slug":"nbfc-license-from-rbi","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/","title":{"rendered":"Need for Financial Businesses to Obtain an NBFC License from RBI"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The\nanswer is yes; in general, every company engaged in financial activities as a\nprincipal business must obtain an NBFC license. Before going in-depth on how to\nobtain an NBFC license with Reserve Bank of India, we will discuss the concept\nof NBFC, Types of NBFC and Criteria to obtain an NBFC License.<\/p>\n\n\n\n<p>Getting an NBFC License is a lengthy procedure, and the applicant is required to comply with the rules and regulations of RBI. NBFC provides long term and specialized credit facilities and attracts foreign grants. NBFCs facilitate all the banking related financial facilities. NBFC keep their services flexible to keep the services of the client updated and to meet the needs of the specific client.<\/p>\n\n\n\n<p>NBFCs performs various functions like <strong>accepting\ndeposits, delivering credit and plays a vital role in channelizing the\ninadequate financial resources to capital formation<\/strong>. The working of the\nNBFC is similar to the banking sector. They work with the aim to deliver the\nfinancial needs of the corporate sector as well as the weaker section of the\nsociety. Further, it also delivers credit to the unorganized sector and small\nlocal borrowers. In spite of being different from banks and their functions,\nNBFC is bound by the Indian banking industry rules and regulations. <\/p>\n\n\n\n<p>NBFC is\nplaying a vital role in economic development as well as in the rapid growth of\nthe Indian economy. NBFCs are registered under the Companies Act 2013, before\napplying to the RBI for COR. The Companies dealing in financial activities must\nobtain an NBFC license with the Reserve Bank of India, as RBI has been\ncontrolling the financial activities of the Finance Companies (Non-Banking\nFinancial Companies)<\/p>\n\n\n\n<p><strong>Exception <\/strong>&#8211; NBFC does not include services related to &#8211; <\/p>\n\n\n\n<ul><li>Agriculture activity,<\/li><li>Industrial activity,<\/li><li>Selling, buying or erection of\nthe immovable property.<\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/#What_are_the_criteria_for_getting_an_NBFC_license\" >What are the criteria for getting an NBFC license?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/#What_are_the_mandates_for_the_companies_to_obtain_an_NBFC_license_with_RBI\" >What are the mandates for the companies to obtain an NBFC license with RBI?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/#Financial_Companies_not_requiring_NBFC_License\" >Financial Companies not requiring NBFC License<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/#Companies_exempted_from_NBFC_License_and_RBI_Regulation\" >Companies exempted from NBFC License and RBI Regulation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/#Types_of_NBFCs_in_India\" >Types of NBFCs in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/#How_to_obtain_NBFC_license\" >How to obtain NBFC license?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/#Compliances_to_be_done_Post_COR\" >Compliances to be done Post COR<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/#What_are_the_areas_covered_by_NBFC\" >What are the areas covered by NBFC?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/corpbiz.io\/learning\/nbfc-license-from-rbi\/#Summary_at_a_Glance\" >Summary at a Glance<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_criteria_for_getting_an_NBFC_license\"><\/span>What are the criteria for getting an NBFC license?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Before <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NBFC Registration<\/strong><\/a>, a company must be registered under the Companies Act 2013. The company should be passionate enough to commence the business in Non-banking financial institutions.<\/p>\n\n\n\n<p><strong><em>Before\nregistering, it should comply with the following conditions:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Commencement of business of non-banking financial institution should be defined under <strong>section 45I (a) of the RBI Act, 1934<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Reserve_Bank_of_India_Act,_1934\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">[1]<\/a><\/sup><strong>.<\/strong><\/li><li>It should be registered one as per the <strong>Companies Act 2013 of the Companies Act 1956.<\/strong><\/li><li>Minimum fund of Rs <strong>2 crore<\/strong>.<\/li><\/ul>\n\n\n\n<div class=\"shadow1\"><strong>Keynote<\/strong> &#8211; A Non-banking Financial company cannot commence or carry on the business of a non-banking financial institution without obtaining an NBFC license. A company cannot come into action until it has COR (Certificate of Registration) and minimum fund of Rs 2 crore.<\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Category of NBFCs<\/h3>\n\n\n\n<p><strong><em>NBFCs\nare classified into 2 categories-<\/em><\/strong><\/p>\n\n\n\n<ul><li>(NBFC-D)-Deposit-taking&nbsp;Non-Banking Financial Company<\/li><li>(NBFC-ND)-Non-Deposit taking Non-Banking Financial Company<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_mandates_for_the_companies_to_obtain_an_NBFC_license_with_RBI\"><\/span>What are the mandates for the companies to obtain an NBFC license with RBI?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In the context of compulsory registration of NBFCs with the Reserve Bank, Companies engaged in the financial activity as principal business, i.e. <strong>when the financial assets of the companies comprise of more than 50 % of the total assets and the income from financial assets amounts more than 50 % of the gross income <\/strong>shall obtain NBFC license with RBI. The Reserve Bank has defined the principal word business to check that the companies primarily involved in the financial activity get registered with the RBI and are also regulated and supervised by it. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/step-by-step-nbfc-registration-procedure\/\">NBFC Registration: Step by Step Procedure\n<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Financial_Companies_not_requiring_NBFC_License\"><\/span>Financial Companies not requiring NBFC License <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Below\nmentioned are the financial companies (NBFCs) that do not require registration\nand are not regulated by the RBI, but Reserve Bank issue commands related to\nthe deposit acceptance activity-<\/p>\n\n\n\n<ul><li>Mutual Benefit Finance Company<\/li><li>Mutual Benefit Company<\/li><li>Miscellaneous Non-Banking Companies (Chit-funds)<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Companies_exempted_from_NBFC_License_and_RBI_Regulation\"><\/span>Companies exempted from NBFC License and RBI Regulation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Companies like <strong>Insurance Companies, Stock exchange, Merchant Banking companies, <\/strong><a href=\"https:\/\/corpbiz.io\/housing-finance-company-registration\"><strong>Housing Finance Companies<\/strong><\/a><strong>, and Micro Finance Companies <\/strong>are exempted from RBI regulation which includes NBFC license.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_NBFCs_in_India\"><\/span>Types of NBFCs in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>In\nIndia, NBFCs has resulted in various types to focus and cover the various\nsectors of the society-Types of NBFCs are-<\/em><\/strong><\/p>\n\n\n\n<ul><li>Investment and Credit Company\n<\/li><li>Infrastructure Finance\nCompany <\/li><li>Systemically Important Core\nInvestment Company (CIC-ND-SI)<\/li><li>Infrastructure Debt Fund\n(Non- Banking Financial Company) <\/li><li>Non-Banking Financial\nCompany-Micro Finance Institution (NBFC-MFI)<\/li><li>Non-Banking Financial Company\n\u2013 Factors (NBFC-Factors)<\/li><li>Mortgage Guarantee Companies<\/li><li>NBFC- Non-Operative Financial\nHolding Company.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_obtain_NBFC_license\"><\/span>How to obtain NBFC license?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The Process to obtain NBFC license<\/em><\/strong><strong><em>&#8211;<\/em><\/strong><\/p>\n\n\n\n<p><strong><em>The Applicant company\napplying for NBFC license has to comply with the following conditions for\ngetting the COR (Certificate of registration), i.e. NBFC license-<\/em><\/strong><\/p>\n\n\n\n<ul><li>Incorporation of the company as per the norms prescribed in the Companies Act 2013 or the Companies Act 1956.<\/li><li>After incorporation, the applicant needs to apply online for the NBFC license and submit a physical copy of an application to the Regional Office of the Reserve Bank of India along with the necessary documents. The application is submitted by the applicant online through <strong>COSMOS filing<\/strong> before filing the physical documentation to the RBI.<\/li><li>Once you have a physical copy, the next step is to log in to the COSMOS and to fill the information regarding the application online and upload after filling up all the required details. <\/li><li>Allocation of <strong>CARN number<\/strong> &#8211; When you are done with the submission of your application, the applicant receives Company Application Reference Number for the COR (Certificate of Recognition).<\/li><li>Once the applicant gets his\/her CARN, the applicant needs to submit the physical application form along with the requisite documents to the regional office. The ROC will send the documents to the head office after scrutinizing the form and documents.<\/li><li>When the applicant is done with the submission of the supporting document and everything is found correct and approved by the regional office, the Head Office of RBI will then issue the COR-Certificate of Registration (NBFC license).<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Compliances_to_be_done_Post_COR\"><\/span>Compliances to be done Post COR<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Once the NBFC license (COR)\nis granted by the RBI, the applicant company needs to follow the instruction\nissued by the RBI i.e. <\/em><\/strong><\/p>\n\n\n\n<ul>\n<li>Membership from the Credit rating agencies (CIBIL, Equifax, Experian and CRIF Highmark), if the company is willing to get credit scoring from API, use Equifax.<\/li>\n<li>Electronic KYC Registration &amp; Regular reporting of the borrowers.<\/li>\n<li>Financial Intelligence Unit Registration.<\/li>\n<li>CERSAI Registration<\/li>\n<li>Submission of financial information to information utility<\/li>\n<li>Income tax Returns.<\/li>\n<li>ROC Returns.<\/li>\n<li>Secretarial compliances.<\/li>\n<li>Statutory Audit and Tax Audit.<\/li>\n<li>File NBS-9 using Online Platform of RB<strong>I<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_areas_covered_by_NBFC\"><\/span>What are the areas covered by NBFC?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>NBFCs are playing an important part in the expansion of the infrastructure, employment generation, in the creation of wealth, economic growth, and especially considering the weaker sections of the society.<\/p>\n\n\n\n<ul><li>NBFC helps in the growth of sectors like transport and infrastructure.<\/li><li>Employment generation.<\/li><li>Creation of wealth and economic development.<\/li><li>Strengthening the weaker section of the society.<\/li><li>Allowing foreign funding accepting the funding of financial markets  <\/li><\/ul>\n\n\n\n<p>Systematic Important NBFCs &#8211; As per last audited balance sheet, NBFCs having asset size is of \u20b9 500 crores or more are reviewed as systemically important as NBFCs. The systematic definition is that the activities of such NBFCs will have a bearing on the financial stability of the overall economy.&nbsp; <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Summary_at_a_Glance\"><\/span>Summary at a Glance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The NBFC sector has grown well in the last few\nyears and playing a critical role in a country which, as a result, will boost\nthe economy in the right direction. The objective of NBFC is mainly to focus on\nthe needs of the customer to build a strong connection. It is necessary for the\nNBFCs dealing with the financial activities as a principal business to get an\nNBFC license from the Reserve Bank of India. NBFC\u2019s are termed as a\ngame-changer for India\u2019s economy, as it offers a wide range of financial\nservices such as loans, chit funds etc.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/online-nbfc-annual-compliances-prescribed-by-the-rbi\/\">Are you running an NBFC? Get updated about the list of Annual Compliances Prescribed by the RBI<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The answer is yes; in general, every company engaged in financial activities as a principal business must obtain an NBFC license. Before going in-depth on how to obtain an NBFC license with Reserve Bank of India, we will discuss the concept of NBFC, Types of NBFC and Criteria to obtain an NBFC License. Getting an [&hellip;]<\/p>\n","protected":false},"author":12,"featured_media":2820,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[91],"tags":[293],"acf":{"service_id":"8"},"authorName":"Priyanka Bajpayee","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/03\/IMG-20220303-WA0005.jpg","authorDescription":"A Company Secretary together with PG in international Business, she has gained significant experience as legal content writer. She has keen interest in doing research and writing on legal and financial subject matters. She also holds work experience in legal compliances.","postViews":13488,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/2818"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=2818"}],"version-history":[{"count":40,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/2818\/revisions"}],"predecessor-version":[{"id":36968,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/2818\/revisions\/36968"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/2820"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=2818"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=2818"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=2818"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}