NBFC Registration in India

The RBI (Reserve Bank of India) is the regulatory authority that regulates the entire process of NBFC registration in India.

Given below are the significant conditions to apply for NBFC registration-

• Your business venture must be registered either as private limited company or public limited company.
• Businesses should maintain a positive net worth of INR 10 crore.
• 1/3rd of the directors of NBFCs should have experience in finance-related fields.

Besides this, there are other conditions for NBFC registration as well.

The minimum net owned fund required for NBFC registration in India is INR 10 crores. It is a move taken by the Reserve Bank of India to solidify the financial position of NBFCs in the country.

Given below is the breakdown of NBFC registration cost in India-

• Government Fees- Start from INR 3,50,000
• Travelling and Filing Expenses- Between INR 50,000 to 1,00,000
• Consultation Fees- Start from INR 6,00,000

Director and shareholder KYC, Net worth of directors and shareholders- certified by the CA, Capital structure of the company, Business plan and financial projections are some of the essential documents required to get a NBFC license in India.

Yes, a foreign company apply for NBFC registration in India only it adheres to all the regulatory and legal guidelines set by the Reserve Bank of India and follows all the FDI norms.

NBFC companies in India planning to start business operations must comply with all government rules, legal compliances, and regulatory standards. NBFC registration online 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.

Yes, a foreign company can register as an NBFC in India but there are some regulations and requirements that need to be fulfilled. As governed by the RBI, the following conditions are to be adhered to for NBFC registration in India:

• Must establish a legal entity in India, registered under the Companies Act, 2013
• Must comply with the FDI policy of India
• Must have a minimum Net Owned Funds (NOF) requirement
• Must comply with all the operational guidelines prescribed by the RBI
• Registration with the RBI

NBFC is required to follow the new RBI guidelines for NBFC registration online related to:

• Risk Management
• Liquidity Criteria
• Capital Sufficiency
• Governance Standards
• Compliance with Technology
• Disclosure Conditions

The fit and proper criteria set by the Reserve Bank of India for NBFC registration ensure that individuals appointed to key positions within an NBFC meet specific suitability standards, entailing a clean legal & financial record, relevant experience as well as qualifications, and financial soundness.

Have a look at the financial companies that do not require an NBFC license from RBI-

• Stock Broking Companies
• Insurance Companies
• Venture Capital Companies
• Merchant Banker Companies
• Mutual Funds
• Chit Fund Companies
• Other Companies

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.

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.

Yes, registering as a Non-Banking Financial Company (NBFC) is essential if a business intends to engage in lending or investment activities.

Before initiating such operations, an NBFC must obtain registration with the Reserve Bank of India (RBI). This is crucial for legal compliance and to ensure that the business meets the regulatory standards set for financial operations.

Key Reasons for Registration:

• Regulatory Compliance: Operating without registration can lead to legal consequences as it is mandatory under Indian law.
• Trust and Credibility: Being registered with the RBI enhances credibility with clients and partners, fostering trust.
• Operational Legitimacy: Registration helps in establishing the business as a legitimate entity in the financial sector.

In summary, registration is not only a legal necessity but also a vital step in building a successful and reputable lending business.

When discussing the concept of "finance as a principal business" in the context of a Non-Banking Financial Company (NBFC), it refers to a company's primary involvement in financial activities. To qualify as having finance as a principal business, a company must derive more than 50% of its total revenue from financial services. Additionally, over 50% of its total assets should be financial assets.

This dual threshold must be met to be considered primarily engaged in financial services, which is crucial for determining eligibility to apply for an NBFC license from the Reserve Bank of India (RBI). Essentially, the company should demonstrate that its core operations revolve around financial transactions, such as lending or investing, rather than other types of business activities.

Absolutely! If you're currently operating a finance business and are considering applying for a Non-Banking Financial Company (NBFC) license, you can certainly do so.

However, there are important steps to follow to ensure compliance and avoid conflicts of interest. One key requirement is to give up your existing local lending business license. This step is crucial since holding both licenses simultaneously could lead to regulatory conflicts.

Here’s a quick breakdown of the process:

1. Surrender Local License: First, officially relinquish your current local lending license to prevent any overlapping jurisdiction or regulatory issues.
2. Understand NBFC Requirements: Familiarize yourself with the specific criteria and obligations associated with an NBFC license. This often includes capital stipulations, management guidelines, and operational standards.
3. Prepare Necessary Documentation: Gather all the required documents, such as financial records and company structure details, which will support your NBFC application.
4. Apply for NBFC Registration: Submit your application to the Reserve Bank of India or relevant regulatory authority, ensuring you've addressed all guidelines and included the necessary information.
5. Await Approval: Once submitted, your application will be reviewed, and you'll need to wait for approval before operating as an NBFC.

By following these steps and ensuring full compliance with regulatory requirements, you can transition from a local finance business to a recognized NBFC, opening new avenues for growth and expansion.

A loan cannot be used to fulfill the 10 Crore capital requirement for an NBFC. The capital must be derived from owned funds, ensuring that taxes are already settled. However, funds received as gifts from your spouse or relatives can be considered personal capital and are acceptable for this requirement. It's critical to verify that any funds you plan to use are properly sourced and documented to comply with regulatory guidelines.

Deciding between establishing a new Non-Banking Financial Company (NBFC) or acquiring an existing one depends on your business goals, timeline, and resources. Both options come with their own set of advantages and challenges.

Starting a New NBFC

Opting to create a new NBFC allows you to build your company from the ground up. This could be ideal for those who wish to design their business processes, culture, and identity to suit their vision.

• Pros:
  • Customizable Structure: You have the freedom to establish operations, strategies, and processes tailored specifically to your goals.
  • Brand Identity: A fresh start means creating a brand that is uniquely yours without any existing baggage.
  • Regulatory Compliance: By forming a new NBFC, you ensure that all regulatory requirements are met from the outset, avoiding any legacy issues.


• Cons:
  • Time-Intensive: Setting up an NBFC from scratch can be time-consuming, often involving extensive paperwork and approvals.
  • Resource-Heavy: Initial costs and resources needed for a startup can be significant, requiring a solid financial plan.

Acquiring an Existing NBFC

Taking over an existing NBFC can be a quicker route to entering the market, albeit with its complexities.

• Pros:
  • Speed to Market: Skip the initial setup stages and start operating sooner.
  • Established Client Base: Gain access to an existing customer network and brand recognition.
  • Operational Framework: Inherit systems and processes that may only need minor adjustments.


• Cons:
  • Due Diligence Required: Ensure a thorough review of the existing company’s liabilities, legal issues, and compliance history.
  • Integration Challenges: Merging an acquired NBFC into your existing organization can present operational hurdles.
  • Legacy Issues: You might inherit outdated practices or reputational issues.

Making the Decision

Ultimately, the decision comes down to your strategic priorities and resources. For those prioritizing tailored operations and brand creation, forming a new NBFC might be the way to go. For those looking to gain quick market access with existing goodwill, acquiring an existing NBFC could be favorable.
Evaluate your long-term business goals and current capabilities to decide which route aligns best with your vision.

Engaging an NBFC (Non-Banking Financial Company) consultant is not a strict requirement. However, navigating the complexities of setting up an NBFC can be a daunting task. Here's why you might consider professional help:

• Complex Processes: Establishing an NBFC involves intricate procedures, including regulatory compliances and securing various approvals. Without assistance, the risk of errors increases, which could lead to significant financial loss.
• Financial Implications: The costs can add up quickly—think stamp duties, ROC fees, and other miscellaneous expenses that can easily exceed 3.5 lakh INR. Proper guidance might prevent unnecessary spending.
• Time Investment: The entire process can take anywhere from 4 to 6 months. Expertise in NBFC operations can streamline these timelines, helping you avoid unnecessary delays.
• Domain Expertise: If you lack experience in this sector, the support of a consultant can be invaluable. They bring specialized knowledge that can be crucial in successfully establishing your NBFC.

In summary, while hiring an NBFC consultant isn't mandatory, their expertise could be a worthwhile investment to ensure the process is efficient and cost-effective.