NBFC Registration; Everything You Need To Know

This article is all about the NBFC Registration or License process as per Section 45 I (a) of the RBI Act.

An NBFC or a Non-Banking Financial Company is basically an organization that providing banking services along with other lending services to the public, without the legal label of a bank. Usually, such NBFCs are not allowed to accept deposits from the public and the services they provide include credit facilities like secured loans, money market services, retirement plans, underwriting for businesses and promoters, merger activities etc.

As per Section 45 I(a) of the RBI Act, every NBFC has to obtain the Certificate of Commencement of Business as well as the Certificate of Registration from the RBI in order to start functioning.

However, processes have been simplified recently and an NBFC Registration can be under the Companies Act of 2013 by the MCA without prior approval from the RBI. After registration, the NBFC is required to obtain license from the RBI for lending activities.

Process of NBFC Registration

Any organization that intends to commence business activities pertaining to an NBFC is required to apply to the RBI for the CoR.

The following are the norms:

• First and foremost, the organization must be registered under the Companies Act of 2013
• The company should have a minimum of INR 2 Crore as net owned funds
• The Company should apply using the online application available in the RBI website – COSMOS
• Thereafter, a certain CARN number will be issued using which the status of the application can be checked
• The application should also be submitted to the RBI in hard copy along with the requisite additional documents
• The license will be approved and granted after careful inspection of the application and the documents submitted by the RBI.
• The NBFC registration certificate will be issued

It should be noted that for a company to be eligible for the NBFC license issued by the RBI, it should have clean CIBIL records. It should also have at least one director in its board that already has an NBFC background or a senior bank-officer appointed as the full-time director of the company.

NBFC Registration; Regulations

Once the institution gets registered under the Companies Act of 2013, and obtains license from the RBI, there are certain rules regarding the activities and services offered, that the company has to follow. Some of them are:

• Public Deposits for a minimum period of 12 months and a maximum period of 60 months can only be accepted or renewed when required.
• NBFCs are not allowed to accept deposits that are payable on demand
• There would be a ceiling rate for deposits prescribed by the RBI, beyond which the company cannot increase its deposit interest rates
• The deposits accepted by the institutions are not insured and their repayment is not guaranteed by the RBI.
• NBFCs are allowed to issue cheques to its customers for the purpose of settlement or payments
• NBFCs are not allowed to accept conditional deposits from the public in general. However MIGC rated companies can do so.

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