Overview of NBFC Registration

Having a robust financial sector in a company can be a massive benefit for the country in the economic prosperity of the country. The Economic progress of a country depends on the financial strength of the country. A government should always have the priority of monetary expansion by allowing the growth and diversity of the companies. Therefore, India has the top goal of giving financial assistance to people who are investing in business so that there can be massive opportunities for the country, which is diverse. The Indian Financial system allows for the setup of services that are provided by Non-Banking Financial Corporations also known as NBFC. The NBFC Registration helps offer the services provided by the NBFC, which include managing and giving facilities management retirement plans, underwriting, etc. A solid banking and financial industry are significant for the economy and employment for the youth. Addressing the financial demands of the clients, which the banks will not be able to meet, can be done by the NBFC, which fosters the inclusive growth of the nation.

Requirements of NBFC Registration

The requirements of a Non-Banking Financial Company in India are as follows:

The requirements of a Non-Banking Financial Company in India are as follows:

• The Company must be registered under the Companies Act 2013 or any other previous Companies Act.
• The net worth of the Company must be of 10 crore or more, as per the RBI 2021 Guidelines.
• The Company must have one director from the same field.
• Must have the required CIBIL score.
• There must be a certified copy of the incorporation certificate of the Company.
• The Company must have its memorandum of association, and the main object clause must be extracted in the memorandum of association, which depicts the exact financial business that the Company will be conducting.
• There must be a director's certificate of experience in the banking and financial services sectors.

Eligibility of NBFC Registration

The eligibility criteria of an NBFC registration for the Company who wish to register with the Reserve Bank of India must proceed with the registration process. They must have the following eligibility as their primary criteria. The Company must be registered under the Companies Act of 2013, whether a private or a public limited company; the Company can also be registered under any previous company act.

• The Company must have the financial strategies of 5 years for the business operation.
• There must be a good CIBIL score, also known as Credit Information Bureau India Limited.
• If it is a public limited company incorporated under the Companies Act, 2013 then it will register as a non-banking finance company.
• For registration as an NBFC, a company must have minimum net owned fund of Rs. 2 Crores.
• The company must exhibit positive history of financial stability as well as operational proficiency.
• Such financial services include lending, investment, leasing and hire purchase.
• Every company should be careful and not continue to operate in a different type of business unless it would be previously accepted by RBI.
• Therefore, the company should have a knowledgeable team of directors, with at least one possessing some level of expertise in finance.
• The company should also adhere to the directives and requirements issued periodically by the RBI.
• First, the company should establish its registered office in India and mainly operate therein.
• However, according to the RBI requirements on fit and proper criteria the company ought to be compliant to.
• Primary business can involve agricultural, industrial, purchase or sale of goods, etc., and this is why the company should not carry it out.
• A risk management framework, suitable systems and controls should be implemented in the company.
• Any time, the RBI should not allow a company accept public deposits unless they are strictly authorized by it.
• It must then register with RBI as an NBFC and receive a certificate of registration for it to commence its operations.
• In its memorandum and articles of association, there should be no restriction to the transfers of shares by the applicant company.

This includes application for NBFC registration together with necessary documents and information as per RBI instructions.

Role of NBFC Registration

There are several roles that are needed to be fulfilled by the Non-Banking Financial Company. The primary function of this Non-Banking Financial Company is to regulate and supervise the businesses that provide any financial services without holding a bank license. The most crucial role of an NBFC is to offer a wide range of financial services, asset financing, and investment loans, which are similar to a bank's services.

The primary roles of the NBFC registration are stated as follows:

• Regulatory compliance - the NBFC ensures that all financial institutions without a banking license comply with all the regulatory frameworks declared by the Reserve Bank of India and other governing authorities. These regulatory Frameworks include the corporate governance standards, prudential norms, and capital adequacy.
• Protection of the consumer - The registration of the NBFC helps protect the interest of the consumer engaging with the NBFC. The regulators set the rules and guidelines to safeguard consumer rights and ensure that the practices are conducted fairly and transparently.
• Financial stability - the regulation of the NBFC helps the authority maintain the overall stability in the financial system across the country, monitoring the activities that the NBFC helps prevent risk and economic crisis.
• Credit access - NBFC gives credit to individuals and businesses, which in some instances are not provided by the banks; the registration ensures that the NBFC follows responsible lending practices to even offer financial services to the undercut segments of the citizens.
• Helps in economic growth - the registration of the NBFC plays an essential role in promoting the country's economic development by providing financial assistance to various businesses, housing, and agriculture, as well as small and medium-sized Enterprises SMEs. The registration helps to contribute to the economic development of the country.
• Market integrity - the regulation of the NBFC helps in the integrity and stability of the financial market by ensuring that these intermediaries are operating fairly and are not engaged in any fraudulent or unethical practices.
• Risk mitigation helps regulate management practices with monetary and financial help, and it helps to ensure that the NBFC is prevented from taking excessive risks, which could harm the financial system.
• Gains investor confidence - it helps the investor gain confidence in the NBFC when registered and regulated. It also helps attract investment from certain ventures and individuals; it helps in the overall growth of these NBFCs.

Objectives of NBFC Registration

The objectives of a NBFC registration are as follows

• The NBFC business plan search is a method to provide information to various stakeholder investors, financial institutions, and tuition by outlining the goals and objectives of the Company to secure loans as well as investments.
• The business plan also helps outline the goals and objectives of the NBFC, thereby providing a road map to achieve those goals.
• It ensures That the employees are well informed about the company plan and objective to align their efforts with the mission and vision of the Company.
• In times of crisis, a well-drafted plan for dealing with sin challenges helps the Company to navigate the adversity effectively.

Advantages Of NBFC Registration

There are several advantages of NBFC registration, which are stated as follows.

• NBFC provides loan and credit facilities to the person who is not eligible under the bank provisions
• NBFC offers wealth Management Services such as managing portfolios, which include shares and stocks
• NBFC also provide service relating to underwriting and share related liability
• NBFCs are the last resort for borrowing when banks are not offering, and they are more profitable because they give out loans at a much lower cost, which the Bank provides.
• NBFC also benefits in terms of trading from the money market
• They perform the task more efficiently and in a quicker manner than that Bank; they do not have any strict regulations or paperwork to that of a bank
• Because of certain technological advantages, NBFC can offer multiple choice options to reach a larger audience in a quicker way
• They have solid regulations and compliances with the best authenticity in the market
• Foreign direct investment also applies in NBFC, thereby allowing 100% FDI. , Also the financing process is easier and faster as compared to that of the banks
• Due to the specific building of low-cost business models, NBFC can have a low operation cost, thereby allowing room for growth
• For debt recovery instruments, the NBFC has protection from SARFAESI Law
• Provides loans to people who have poor credit scores, thereby helping the people whom the Bank rejects

Documents Required for NBFC Registration

The documents required for an NBFC license are as follows:

• Information relating to the management
• Certified copies of the certificate of incorporation as well as the certificate of commencement of business
• Certified copies of the memorandum of association and article of association
• Memorandum of understanding, which contains the details of the business's financial
• The Company's PAN/CIN copy must be provided
• The director must fill up the profile, and the attestation must be done
• The certificate from the NBFC for the experience of the directors must be provided
• The information about the company director regarding the CIBIL score should be mentioned
• The resolution stating that the Company has accepted no public deposits without written consent from the Reserve Bank of India must be given by the board
• The authentic copy provided by the board for establishing fair practices must also be submitted
• The auditor certificate must be issued to authenticate that the Company accepts no public deposit.
• The details regarding the authorized share capital of the company shareholding pattern should be mentioned.
• The business plan for the coming three years should be mentioned, stating the business drive, the balance sheet, the cash flow, the market sector, and the income pattern.
• The document supporting the initial cash of the Company should be presented.
• The bank statements and the IT returns should be self-attested

Process of Acquiring NBFC Registration

The registration process for acquiring NBFC registration is as follows:

• The first step is to register the Company under the Companies Act 2013
• The second step is maintaining the essential requirement for the fund mentioned in the regulation.
• The Company must appoint one director from the same background, and evidence should also be given.
• The Company must have a good credit score or CIBIL score.
• The applicant mentioned in the prior ‘documents’ section must also fill out the application form.
• After successfully applying, a CARN number will be generated for the applicant.
• Successful verification of the application along with the documents that had been filed. If everything is satisfied as authenticated, then the authority will give the license to the Company for the operation.

Why Adviso?

The process of NBFC Registration involves a wide range of requirements, document preparation, and pre-and post-compliance obligations. It is essential to comply with the specific terms of the NBFC Registration. The incorporation of a NBFC Registration can be a tedious process without professional support. That’s where Adviso comes in. At Adviso, we provide expert services for society registration online approval under the RBI. Our Lawyers, CA, and CS experts guide you through every step of the journey to ensure your Company lists smoothly and efficiently. With Adviso's expertise and assistance, you can easily navigate the complexities of NBFC registration, saving time and ensuring compliance with all necessary regulations.