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NBFC License

Overview of NBFC License

As per the Non-Banking Finance (NBFC) Companies Act, 1955 (NBFC), a company is one which is engaged in the business of loan advances, shares, banks, debentures, securities or other types of business.

  1. Loans and advances
  2. Acquisition of shares, stocks, bonds, debentures and securities or other related marketable securities issued by the Government or local authority
  3. Leasing
  4. Hiring-buying
  5. Insurance business
  6. Chit business

Receipt of deposits in any such scheme, arrangement or manner, whether in lump sum, in member installment’s or otherwise, is part of the core business of non-banking finance.

What are the following types of FFMC License

  1. Deposit Accepting NBFC (Type -1)
  2. Non-Deposit accepting NBFC (Type -2)

A non-deposit accepting NBFCs in India can be further categorised into 10 types, as follows

  1. Asset Finance Company, also called as AFC
  2. Loan Company, also called as LC
  3. Infrastructure Finance Company, also called as IFC
  4. Investment Company, also called as IC
  5. Infrastructure Debt Fund: Non- Banking Financial Company also called as IDF-NBFC
  6. Systemically Important Core Investment Company, also called as CIC-ND-SI
  7. Non-Banking Financial Company-Micro Finance Institution, also called as NBFC-MFI
  8. Non-Banking Financial Company – Factors also called as NBFC-Factors
  9. Mortgage Guarantee Companies, also called as MGC
  10. Non-Operative Financial Holding Company, also called as NOFHC

Eligibility criteria for NBFC License in India

All Non-banking financial companies must register with the Reserve Bank of India (RBI) (except the ones mentioned above in the table). Before you proceed with the process of NBFC registration, kindly check the following eligibility criteria for the NBFC Registration Certificate:

  1. The company must be registered as a private or public limited company under the Company Act of 2013 or the Company Act of 1956.
  2. They must have their business financial strategy for at least five years
  3. A company must have a good credit score or the CIBIL score
  4. A company must own funds of a minimum of INR 2 crore or above
  5. A company must have minimum assets worth INR 200 crore or above
  6. A company must comply with the provisions of the FEMA.

Documents required to obtain an NBFC License

The following documents must be provided to obtain an NBFC Registration Certificate

  1. Management-related information
  2. In the case of public limited corporations, certified copies of the Certificate of Incorporation and the Certificate of Commencement of Business.
  3. Certified copies of the company’s most recent Memorandum and Articles of Association.
  4. Details of financial business clauses in the MoU.
  5. A copy of the company’s PAN/CIN.
  6. Each director must fill up and sign their director profile.
  7. A certificate from the NBFC/s where the Directors received NBFC experience.
  8. CIBIL information about the company’s directors
  9. Board Resolution stating that the company has not accepted any public deposits in the past (specify period)/does not hold any public deposits as of the date and will not accept any public deposits in the future without the prior written consent of the Reserve Bank of India.
  10. An authenticated copy of the board resolution establishing the “Fair Practices Code.”
  11. Statutory Auditors Certificate attesting to the fact that the company accepts/does not accept/does not hold Public Deposit.
  12. Statutory Auditors Certificate attesting that the company is not engaged in NBFC activity.
  13. Statutory Auditors Certificate attesting to the net owned fund as of the application date.
  14. Details of the company’s authorised share capital and the most recent shareholding pattern, including percentages.
  15. A copy of the Fixed Deposit receipt and a banker’s certificate of no lien indicating the balances in support of the Net Owned Funds.
  16. Details of bank balances/accounts/full postal address of the branch/bank, loan/credit facilities, and so on.
  17. The three years prior Directors’ and auditors’ reports, an audited balance sheet and profit and loss account, or for the smallest time frame possible (for companies already in existence).
  18. Business plan for the next three years detailing the company’s (a) business drive, (b) market sector, and (c) anticipated balance sheets, cash flow statement, and asset/income pattern statement, without any element of public deposits.
  19. Documentary documentation supporting the source of the company’s initial cash.
  20. Self-attestation of bank statements/IT returns, etc.

FAQs About NBFC License?

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