NBFC Registration in India

Become a part of a 20% Annually Growing NBFC Ecosystem

• With over 9,000 registered NBFCs in India, this sector is witnessing a massive growth of 20% across asset finance, microfinance, and loan companies.
• Contributing 12% to India’s GDP, NBFCs have demonstrated their importance in India’s economy.

NBFC Registration in India – An Overview

A Non-Banking Financial Company (NBFC) is registered under the Companies Act 2013 and regulated by the RBI within the framework of the RBI Act, 1934. As per section 45-I (c) of the RBI Act, any non-banking company functioning as a financial institute will be termed a Non-Banking Financial Company.

Businesses with an NBFC license deal with personal loans, business loans, hire-purchase, leasing, insurance business, digital lending apps, etc. NBFCs also acquire shares, stocks, bonds, debentures, securities, etc. issued by the government or local authority or other marketable securities.  

NBFC companies in India do not include the following businesses:

• Agricultural activity
• Industrial activity
• Purchase or sale of any goods, excluding securities
• Sale/purchase/construction of any immovable property (providing of any services).

NBFC compliances are flexible compared to the rigorous compliances mandated for traditional banks. NBFCs are legal entities permitted to engage in financial activities except for issuing cheques, opening bank accounts and accepting deposits.

NBFC registration is a must for these business entities to get the registration certificate from the RBI to function legally in India. They must maintain a positive net worth of INR 10 crores (effective 1^st October 2022). Even foreign entities planning to venture into the NBFC business in India must get an NBFC license to be eligible to operate legally in India.

Market Share of NBFCs in India

The NBFC finance market is back with an expected credit growth rate of 13 - 14% during 2024. Also, the industrial size of the NBFC market is expected to grow at a CAGR of 13 - 15% by the financial year 2023 to 2025.

As of September 2023, the share of micro-financial institutions in India stands at 41%. Banks follow closely with 30%. The share of NBFCs in India's financial sector has been growing consistently since 2020.

Five Star Business Finance, InCred Finance, and OfBusiness are NBFCs that have achieved unicorn status in India.

Why is Online NBFC Registration Important?

NBFC companies in India planning to start business operations must comply with all government rules, legal compliances, and regulatory standards. Online NBFC registration is essential as it streamlines the registration process for NBFC. It is more efficient, time-saving, and hassle-free. One of the most significant benefits of online registration is that it reduces the burden of heavy paperwork, which makes the process more comfortable and convenient.

Another critical aspect of online NBFC registration is that it allows the applicants to manage compliances and regulations with the most minor errors. This process is more transparent and flexible and quickly helps the applicants track their application status.

Online registration supports the Government of India’s digital initiative, a mission to facilitate ease of doing business and to attract investment from domestic and foreign sources.The role of NBFCs in India’s economic growth is noteworthy, and strengthening this sector through policies has been a priority for the government.

NBFC and Bank Difference

While both banks and NBFCs share similarities, such as offering various financial services, including loans and credits, they differ in many ways. Let us explore NBFC and bank differences as follows:

S. No	Differentiation Criteria	NBFC	Bank
1.	Regulation	Regulated by RBI Act and regulatory framework issued by the RBI	Regulated by the RBI under Banking Regulation Act, 1949
2.	Deposits	Not eligible to accept demand deposits	Eligible to accept demand deposits
3.	Payment Services	Not entitled to issue cheques	Entitled to issue cheques to its customers
4.	CRR and SLR	Not subjected to cash reserve ratio (CRR) and statutory liquidity ratio (SLR)	Mandatory to maintain cash reserve ratio (CRR) and statutory liquidity ratio (SLR)
5.	Insurance	Need RBI and IRDAI approval to enter the insurance sector	Offer insurance (sometimes complimentary) as per the policy of the bank
6.	Foreign Exchange	Can not deal in forex	Authorized banks can deal in forex and issue International Debit Cards (IDCs)
7.	Credit Cards	Need prior approval from RBI to issue credit cards	Banks can issue credit cards to their customers
8.	Fixed Deposit Insurance Cover	NBFC Fixed Deposits not insured by Deposit Insurance and Credit Guarantee Corporation (DICGC)	Fixed Deposits are insured by Deposit Insurance and Credit Guarantee Corporation (DICGC)
9.	Interest Rates	Offer flexible interest rates	Interest rates are regulated
10.	Foreign Investment	Allowed up to 100%	Allowed up to 74% for private sector banks

Types of NBFCs Registered in India

NBFCs in India are classified on the basis of the authorization to accept deposits. These include:

1. Type 1 – Deposit Taking NBFCs (NBFC-D)
2. Type 2 – Non-Deposit Taking NBFCs (NBFC-ND)

These are further classified as:

Type 1 – Deposit Taking NBFCs (NBFC-D)

1. Asset Finance Company (AFC) – An Asset Finance Company is the one which finances for assets (physical) such as automobiles, generators and tractors.   

2. Core Investment Company (CIC) – A core investment company invests mainly in group companies.

3. Housing Finance Company (HFC) – A housing finance company offers loans to purchase, construct, or renovate residential properties that the National Housing Bank regulates.

4. Micro Finance Institution (MFI) – Micro Finance Institution deals with offering micro-loans to groups and individuals with low incomes.

5. Mutual Benefit Finance Company (MBFC) – A mutual benefit finance company that offers loans and accepts deposits. Their operational model is similar to that of a cooperative society.  

Type 2 – Non-Deposit Taking NBFC (NBFC-ND)

1. Infrastructure Debt Fund (IDF-NBFC) – Infrastructure Debt Fund NBFC invests in infra debt.

2. Infrastructure Finance Company (IFC) – Investment and Finance Company is involved in investments in infrastructure projects.

3. Investment Company (IC) – An investment company offers various financial services to individuals and businesses, such as loans, credits, and investments.

4. Loan Company– Loan Company grants loans and advances. However, these loans should not be used for asset acquisition but other activities such as working capital finance.  

5. Systematic Important Core Investment Company (CIS-ND-SI)—A systematic Important Core Investment Company owns assets worth INR 100 crore or more. Such companies are required to deploy 90% of their assets towards debt instruments or loans in group companies.

Types of NBFCs by Regulatory Norms of RBI

The layers of the NBFC are categorized as per the scale-based regulatory framework (based on their size, activity, and perceived riskiness). The following is the regulatory structure of the NBFCs divided into four different layers:

1. Base Layer NBFC (NBFC-BL)

The base layer NBFCs comprise non-deposit-taking NBFCs below an asset size of Rs.1000 Crores. NBFC Peer-to-Peer lending platforms (NBFC-P2P), NBFC account Aggregators (NBFC-AA), and Non-Operative Financial Holding Companies (NOFHC) are some of the examples of Base layer NBFCs.

2. Middle Layer (NBFC-ML)

The middle layer of NBFCs comprises all deposit-accepting NBFCs (NBFC-D) and non-deposit-accepting NBFCs indulged in carrying out specific business activities.

3. Upper Layer (NBFC-UL)

The upper layer of NBFCs includes the top 10 eligible NBFCs, eligibility identified in terms of assets by the Reserve Bank of India.

4. Top Layer (NBFC-TL)

The top layer of NBFCs usually remains empty. The RBI transfers specific NBFCs from the upper layer to the top layer when potential systematic risk in the upper layer substantially rises.

Eligibility Criteria to Apply for NBFC Registration

The eligibility criteria that applicants seeking NBFC registration must fulfil include the following:

• As per RBI mandate, NBFCs, including Investment and Credit Companies (NBFC-ICC), Micro Finance Institutions (NBFC-MFI), and Factor (NBFC-Factor), must maintain a minimum net owned fund (NOF) of INR 10 crore.
• One-third of the management must have at least 10+ years of banking experience in credit, risk or retail operations.
• A strong business plan outlining its objective to benefit the public at large.
• The applicant company, its directors, shareholders or associate companies should have a clear credit history with no record of loan defaults.
• The applicant should be registered either as a private or public limited company under the Companies Act, 2013.

Documents Required for NBFC Registration in India

Entities applying to obtain NBFC registration in India are required to submit the following documents:

• PAN Card
• Bank account with a minimum paid-up equity share capital of INR 10 crores.
• Director and Shareholder KYC
• Details of the professional backgrounds of directors and shareholders
• Net worth of directors and shareholders – certified by the CA
• Confidential reports from bankers regarding shareholders and directors
• Duly attested highest education certificate copy
• Shareholders' and directors’ credit reports
• Capital Structure of the Company – Certified by the CA
• MOA & AOA of the applicant company – Duly certified
• Business plan and financial projections – Approved by the Board
• Employment certificates and business experience certificates for all entities, including directorial employment history
• Banker report that confirms INR 10 crores Fixed deposit in the bank account of the NBFC company
• Credit policy approved by the Board, Business SOP and software plan for business operations

Besides, submitting the necessary documents, NBFCs must meet NBFC Compliance needs to streamline their business operations in an effective manner.

NBFC Registration Benefits

Business entities that meet the required NBFC compliances, leverage NBFC registration benefits including the following:

• They are legally eligible to provide loans to their customers including NBFC business loans.
• NBFC companies trade in money market instruments, short-term financial institutions and corporations to manage short-term funding needs and liquidity.
• They can participate in wealth management activities such as stock and share portfolios.
• NBFC companies invest vast amounts of money in different projects across the country.
• NBFC companies in India are more technically advanced and offer more digital services than many traditional banking institutions.
• Their digital landscape makes their services available to more comprehensive customers as they have a wider reach.
• By offering various benefits to customers, such as flexible rates, easy repayment schemes, easy & quick property collateral processing, and NBFC business loans, they establish their goodwill and market authority.
• Most NBFCs have established partnerships with the government, which makes it easy for them to identify customer worthiness when granting loans.
• They can leverage government partnerships to reduce their risks and maximize profits.

A Step-by-Step Guide for NBFC Registration

The registration process for NBFC in India is long, and it takes about 180 working days to receive the final approval from the authorities. If all the required steps are followed and there are no inconsistencies in the documentation process, the delays can be avoided. The step-by-step guide to NBFC registration is as follows:

1. Company Registration

Applicants must register their company under the Companies Act, 2013 (or earlier acts). It must have obtained the certificate of incorporation (CoI) from the Registrar of Companies and must have arranged for INR 10 crore as paid-up capital.

2. Prepare & Submit a Valid Business Plan

Applicants seeking NBFC registration must have a detailed business plan ready to run the operations for the next 5 years. This plan should clearly outline the business objectives, executive summary, HR plan, market analysis, financial projections, and risk management.

3. Process of Scrutiny

This process involves consultants collecting documents from shareholders and promoters. This is done to ensure that capital and management requirements comply with the pre-application criteria listed by the RBI.

4. The Application

The applicants can apply for NBFC registration online via the RBI’s official website. The application e-form can be downloaded from this website, which provides an application reference number to the applicants.

5. Prepare & Submit Documents

It is important for an applicant to ensure that all the documents required for applying NBFC registration are in order. Once the documents are examined, they must be physically submitted at the RBI’s Central office for authentication.

6. Registration Certificate

Once the documents are successfully scrutinized and verified by the regional and central offices, the RBI then issues the registration certificate, which is made available to the applicant within 180 days. However, the certificate is issued only if all the requirements provided under Section 45-IA are complete and meet the required conditions and compliances.

Applicants can ensure a smooth NBFC registration process by taking the help of the NBFC registration consultants.

NBFC Registration Fees in India

NBFC is a fast-growing business in India, registering an annual growth of 20%. NBFC registration fees in the dynamic financial ecosystem depends on different factors. NBFC registration fees includes government charges that start from INR 3,50,000. As NBFC registration consultants, our professional consultation fees start from INR 6,00,000.

Sometimes miscellaneous charges such as travelling and other filing expenses ranging between INR 50,000 to INR 1,00,000 also add up to the overall NBFC registration fees. After adding the government fees, professional consultation charges, and miscellaneous charges, NBFC registration starts from INR 15 lakh onwards in India.

Pre-Requisites of NBFC Registration

The role of NBFCs in the Indian financial sector is unprecedented. However, any business that wants to apply for NBFC registration needs to fulfil certain pre-requisite conditions to be eligible to be considered an NBFC. NBFC registration consultants can help your company meet these conditions to avoid delays in the application process. These conditions include:

• The company should be registered per the Companies Act, 2013 guidelines.
• It should own a minimum capital of INR 10 crore (effective 1^st October 2022) which should not be borrowed.
• It should maintain the minimum capital requirement mandated by the RBI.
• 1/3rd number of directors associated with the NBFC must have experience in finance.
• The company should have a detailed plan ready for the next 5 years.

Timeline to Register an NBFC

NBFC registration is a long process that takes between 90 to 180 working days to complete. The overall time taken to obtain the registration is subject to various factors such as application submission, FDI involvement, etc. However, NBFC registration consultants can significantly help you avoid delays by streamlining your documentation for timely application. Summary of time taken by different procedures of the NBFC registration are:

• Company Incorporation – 1 to 2 weeks
• Permanent Account Number (PAN) and Tax Deduction & Collection Account Number (TAN) – 1 week
• Opening the Bank Account– 7 days
• Credit Reports for Directors/Shareholders – 1 to 2 weeks
• Detailed Business Plan – 2 to 4 weeks
• NBFC Application Preparation & Submission – 1 week
• First Stage Clearance from the RBI – 7 days
• RBI’s Due Diligence & Background Checks – Between 3 to 6 months
• Communication to Regional Office about Final Decision – 7 days

Receipt of Certificate of Registration (CoR) – As and when approved

Why Choose Corpbiz for NBFC Registration in India?

The NBFC registration process can be time-consuming. Thus, choosing the right partner will save your time and ensure a seamless registration process. At Corpbiz, we bring extensive industry experience and a proven track record to the table.

Given below are the points that demonstrate us as the best business consulting and compliance management firm for NBFC registration-

• Assisted in Successful Registration of 150+ NBFCs
• Remarkable 98% Success Rate
• Helping Clients across 5000+ Pin Codes in India
• Guaranteed Post-registration Support
• 30% Faster Turnaround Time as Compared to Competitors
• Network of 500+ CAs, CS, Lawyers, and Business Consultants