Documents and Procedure for NBFC Registration in India

Documents and Procedure for NBFC Registration in India. NBFC registration is the process through which a company is allowed to engage in financial services such as loans, advances, and investments without being a full-fledged bank. A Non-Banking Financial Company (NBFC) must register under the Companies Act, 2013, and seek a license from the Reserve Bank of India (RBI) to legally function as a financial entity. While these entities perform functions similar to traditional banks, they cannot accept demand deposits or issue cheques drawn on themselves. Their importance lies in their ability to cater to financial needs that regular banks may not always fulfill, especially in underserved sectors.
What is NBFC Registration?
NBFC Registration in India is a formal approval granted by the Reserve Bank of India to a company to operate as a Non-Banking Financial Company. Once registered, the company is authorized to provide banking-like services such as granting loans, making investments in securities, and other financial services, but without holding a full banking license.
This registration is governed by Section 45-IA of the Reserve Bank of India Act, 1934. According to this section, it is mandatory for any company that wants to conduct NBFC business to obtain a Certificate of Registration from RBI. No company is allowed to operate an NBFC business without prior approval from RBI.
Why is NBFC Registration Important?
NBFCs play an important role in financial inclusion by offering credit and financial products to segments not served by traditional banks. With NBFC registration, companies gain credibility, legal authority to operate in the financial sector, and access to formal financial networks. Registered NBFCs must comply with RBI's circulars and guidelines, which brings transparency and reliability to their services.
Eligibility Criteria for NBFC Registration
To register as an NBFC in India, a company must fulfill specific eligibility conditions laid out by the Reserve Bank of India. These include:

Company Incorporation: The applicant must first incorporate as a Private Limited Company or Public Limited Company under the Companies Act, 2013.

Director Qualification: At least one-third of the total directors of the applicant company should have a minimum of 10 years of experience in finance or banking. These directors must be appointed in full-time roles.

Business Plan: The company must prepare a detailed and well-documented business plan that projects the operation of NBFC-related activities for at least five years.

Net Owned Fund (NOF): The minimum NOF requirement is now Rs. 10 crore. This amount should consist only of paid-up equity share capital and free reserves. Preference share capital is not included in this calculation.

Creditworthiness: The company and its directors should not be willful defaulters. They must have a good credit history and satisfactory CIBIL scores.

FEMA Compliance (for Foreign Investments): If the company has foreign investors, it must comply with the Foreign Exchange Management Act (FEMA) and other applicable regulations.

Documents Required for NBFC Registration
To register with the RBI as an NBFC, the following documents are required:

Certificate of Incorporation: A copy of the company registration certificate under the Companies Act.

Company PAN and CIN: Copies of the company’s PAN card and Corporate Identification Number (CIN).

MOA and AOA: Certified copies of the company’s Memorandum and Articles of Association reflecting the objective to undertake financial services.

Registered Office Proof: Documents such as utility bills, rent agreement, or ownership proof showing the registered address of the company.

Director List and KYC: A list of directors along with their PAN, Aadhaar, DIN, and proof of address. Each director must sign this list.

CIBIL Reports: The credit report of each director and the company must be submitted.

Board Resolution: A certified copy of the resolution passed by the Board stating the company will not undertake NBFC business without RBI approval.

Declaration by Auditor: A certificate from a statutory auditor stating the company does not accept or hold any public deposits.

Fair Practice Code Declaration: Board resolution stating that the company will follow the Fair Practices Code as prescribed by RBI.

Net Owned Fund Certificate: A certificate from a statutory auditor confirming the company's NOF as on the application date.

Financial Statements: Audited financial statements including balance sheets, P&L account, cash flow statements, and director and auditor reports for the past three years (if applicable).

IT Returns and Bank Statements: Self-certified income tax return filings and recent bank statements of the company.

Future Business Projections: Financial projections for at least the next three years, including expected income, expenditure, balance sheet, and cash flow.

Company Brochure and Organization Chart: Details of the company’s management and promotional materials.

Procedure for NBFC Registration
The process of obtaining an NBFC registration certificate from RBI involves multiple stages:
1. Company Incorporation: The first step is to incorporate the entity as a Private Limited or Public Limited Company. The company name should reflect financial services, using words like Finance, Investment, FinServ, or Capital.
2. Arranging Net Owned Fund (NOF): Once incorporated, the company needs to arrange for the minimum required NOF of Rs. 10 crores. This amount should be deposited into a fixed deposit account and kept lien-free. RBI checks this deposit during the verification stage.
3. Application Submission: The applicant must fill out the online application form available on the RBI COSMOS portal. After online submission, a Company Application Reference Number (CoR) is generated. This is needed to track the application.
4. Physical Submission: Along with the online application, a physical set of documents must be submitted to the regional RBI office. These include all the documents listed earlier, as well as:

E-Form SPICe 32 copy

Director's experience certificate in financial services

Shareholder details and declarations

5. RBI Scrutiny: RBI thoroughly examines the submitted application and documents. If discrepancies are found, clarification or additional documents may be requested.
6. Certificate of Registration (CoR): Once the RBI is satisfied with all aspects of the application and confirms compliance with Section 45-IA of the RBI Act, 1934, it grants a Certificate of Registration. Only then can the company legally start NBFC operations. 
Conclusion
NBFC registration is an important step for any company intending to enter India’s non-banking financial sector. While the procedure involves detailed documentation and regulatory compliance, it opens the door to several financial business opportunities. The company must ensure that all eligibility criteria are met and that all documents are accurate and complete. Once registered, the NBFC can contribute to financial inclusion and economic growth by serving various segments of society that remain underbanked or unbanked. Therefore, understanding the documents and procedure for NBFC registration is essential for any entrepreneur or business entity looking to operate in India’s financial sector.
If you need any support in NBFC Registration, then you can book a consultation with Compliance Calendar LLP experts through email at info@ccoffice.in or Call/Whatsapp at +91 9988424211.
FAQs on NBFC Registration
Q1. Can foreign investment be made in NBFCs?
Ans. Yes, 100% FDI is permitted under the automatic route for NBFCs engaged in permitted activities, subject to minimum capitalization norms and compliance with FEMA guidelines.
Q2. How long does the NBFC registration process take?
 Ans. On average, it takes 3-6 months, depending on the completeness of documentation and response time during the RBI scrutiny process.
Q3. Is prior experience in finance mandatory for NBFC registration?
 Ans. Yes, at least one director should have experience in financial services, banking, or related areas to qualify as a fit and proper person.
Q4. Can NBFCs accept public deposits?
 Ans. Only deposit-taking NBFCs registered and specifically authorized by the RBI can accept public deposits. Most newly registered NBFCs are non-deposit taking.

NBFC registration is the process through which a company is allowed to engage in financial services such as loans, advances, and investments without being a full-fledged bank. A Non-Banking Financial Company (NBFC) must register under the Companies Act, 2013, and seek a license from the Reserve Bank of India (RBI) to legally function as a financial entity. While these entities perform functions similar to traditional banks, they cannot accept demand deposits or issue cheques drawn on themselves. Their importance lies in their ability to cater to financial needs that regular banks may not always fulfill, especially in underserved sectors.

What is NBFC Registration?

NBFC Registration in India is a formal approval granted by the Reserve Bank of India to a company to operate as a Non-Banking Financial Company. Once registered, the company is authorized to provide banking-like services such as granting loans, making investments in securities, and other financial services, but without holding a full banking license.

This registration is governed by Section 45-IA of the Reserve Bank of India Act, 1934. According to this section, it is mandatory for any company that wants to conduct NBFC business to obtain a Certificate of Registration from RBI. No company is allowed to operate an NBFC business without prior approval from RBI.

Why is NBFC Registration Important?

NBFCs play an important role in financial inclusion by offering credit and financial products to segments not served by traditional banks. With NBFC registration, companies gain credibility, legal authority to operate in the financial sector, and access to formal financial networks. Registered NBFCs must comply with RBI's circulars and guidelines, which brings transparency and reliability to their services.

Eligibility Criteria for NBFC Registration

To register as an NBFC in India, a company must fulfill specific eligibility conditions laid out by the Reserve Bank of India. These include:

Company Incorporation: The applicant must first incorporate as a Private Limited Company or Public Limited Company under the Companies Act, 2013.
Director Qualification: At least one-third of the total directors of the applicant company should have a minimum of 10 years of experience in finance or banking. These directors must be appointed in full-time roles.
Business Plan: The company must prepare a detailed and well-documented business plan that projects the operation of NBFC-related activities for at least five years.
Net Owned Fund (NOF): The minimum NOF requirement is now Rs. 10 crore. This amount should consist only of paid-up equity share capital and free reserves. Preference share capital is not included in this calculation.
Creditworthiness: The company and its directors should not be willful defaulters. They must have a good credit history and satisfactory CIBIL scores.
FEMA Compliance (for Foreign Investments): If the company has foreign investors, it must comply with the Foreign Exchange Management Act (FEMA) and other applicable regulations.

Documents Required for NBFC Registration

To register with the RBI as an NBFC, the following documents are required:

Certificate of Incorporation: A copy of the company registration certificate under the Companies Act.
Company PAN and CIN: Copies of the company’s PAN card and Corporate Identification Number (CIN).
MOA and AOA: Certified copies of the company’s Memorandum and Articles of Association reflecting the objective to undertake financial services.
Registered Office Proof: Documents such as utility bills, rent agreement, or ownership proof showing the registered address of the company.
Director List and KYC: A list of directors along with their PAN, Aadhaar, DIN, and proof of address. Each director must sign this list.
CIBIL Reports: The credit report of each director and the company must be submitted.
Board Resolution: A certified copy of the resolution passed by the Board stating the company will not undertake NBFC business without RBI approval.
Declaration by Auditor: A certificate from a statutory auditor stating the company does not accept or hold any public deposits.
Fair Practice Code Declaration: Board resolution stating that the company will follow the Fair Practices Code as prescribed by RBI.
Net Owned Fund Certificate: A certificate from a statutory auditor confirming the company's NOF as on the application date.
Financial Statements: Audited financial statements including balance sheets, P&L account, cash flow statements, and director and auditor reports for the past three years (if applicable).
IT Returns and Bank Statements: Self-certified income tax return filings and recent bank statements of the company.
Future Business Projections: Financial projections for at least the next three years, including expected income, expenditure, balance sheet, and cash flow.
Company Brochure and Organization Chart: Details of the company’s management and promotional materials.

Procedure for NBFC Registration

The process of obtaining an NBFC registration certificate from RBI involves multiple stages:

1. Company Incorporation: The first step is to incorporate the entity as a Private Limited or Public Limited Company. The company name should reflect financial services, using words like Finance, Investment, FinServ, or Capital.

2. Arranging Net Owned Fund (NOF): Once incorporated, the company needs to arrange for the minimum required NOF of Rs. 10 crores. This amount should be deposited into a fixed deposit account and kept lien-free. RBI checks this deposit during the verification stage.

3. Application Submission: The applicant must fill out the online application form available on the RBI COSMOS portal. After online submission, a Company Application Reference Number (CoR) is generated. This is needed to track the application.

4. Physical Submission: Along with the online application, a physical set of documents must be submitted to the regional RBI office. These include all the documents listed earlier, as well as:

E-Form SPICe 32 copy
Director's experience certificate in financial services
Shareholder details and declarations

5. RBI Scrutiny: RBI thoroughly examines the submitted application and documents. If discrepancies are found, clarification or additional documents may be requested.

6. Certificate of Registration (CoR): Once the RBI is satisfied with all aspects of the application and confirms compliance with Section 45-IA of the RBI Act, 1934, it grants a Certificate of Registration. Only then can the company legally start NBFC operations.

Conclusion

NBFC registration is an important step for any company intending to enter India’s non-banking financial sector. While the procedure involves detailed documentation and regulatory compliance, it opens the door to several financial business opportunities. The company must ensure that all eligibility criteria are met and that all documents are accurate and complete. Once registered, the NBFC can contribute to financial inclusion and economic growth by serving various segments of society that remain underbanked or unbanked. Therefore, understanding the documents and procedure for NBFC registration is essential for any entrepreneur or business entity looking to operate in India’s financial sector.

If you need any support in NBFC Registration, then you can book a consultation with Compliance Calendar LLP experts through email at info@ccoffice.in or Call/Whatsapp at +91 9988424211.

FAQs on NBFC Registration

Q1. Can foreign investment be made in NBFCs?

Ans. Yes, 100% FDI is permitted under the automatic route for NBFCs engaged in permitted activities, subject to minimum capitalization norms and compliance with FEMA guidelines.

Q2. How long does the NBFC registration process take?

Ans. On average, it takes 3-6 months, depending on the completeness of documentation and response time during the RBI scrutiny process.

Q3. Is prior experience in finance mandatory for NBFC registration?

Ans. Yes, at least one director should have experience in financial services, banking, or related areas to qualify as a fit and proper person.

Q4. Can NBFCs accept public deposits?

Ans. Only deposit-taking NBFCs registered and specifically authorized by the RBI can accept public deposits. Most newly registered NBFCs are non-deposit taking.