Incorporation Procedure of NBFC Registration in India

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What is NBFC in India?

A Non – Banking Financial Corporation is a company incorporated under the Companies Act 2013 or 1956 which is engaged in the business of Loans and Advances, Acquisition of stocks, equities, debt etc issued by the government or any local authority. The main objective of this type of a company is to accept deposits under any scheme or manner.

According to section 45-I (c) of the RBI Act, a Non – Banking Company carrying on the business of a financial institution will be an NBFC. It is governed by the Ministry of Corporate Affairs as well as the Reserve Bank of India.

What is the Procedure for NBFC License in India?

The Reserve Bank of India controls and directs Non-Banking Financial Companies which are into the important business of loaning or obtaining of offers, stocks, bonds, and so forth. or money related to renting or contract buy or tolerating stores. The primary business of budgetary action is the point at which an organization's money related resources comprise more than 50 per cent of the absolute resources and pay from monetary resources establishes in excess of 50 per cent of the gross pay. An organization which satisfies both these criteria must have NBFC License. This test for NBFC License Procedure in India is prevalently known as the 50-50 test. In this way, organizations occupied with rural tasks, mechanical action, buy and closeout of merchandise, giving administrations or buy, deal or development of the undaunted property as their primary business and are doing some money-related action in a little manner, won't require NBFC Registration.

The Procedure of Registration of NBFCs

It shall be beneficial for you to know in brief about the procedure of Registration of NBFC:

  • First formality is an incorporation of the applicant company under the Companies Act, 1956 or 2013, with Minimum
  • Net Owned Fund of INR 2 crore (Equity Share Capital & not Preference Share Capital).
  • Thereafter the applicant company needs to open a Bank Account and keep the entire sum of INR 2 crores in the bank’s deposit account, which should be free from all liens.
  • The applicant is then required to apply for registration online on RBI’s official COSMOS website.
  • Post submission of the form, CARN (Company Application Reference Number) is generated that is helpful in future references.
  • Subsequently, the hard copies of all the documents are required to be submitted to the concerned Regional Office of RBI.
  • The Regional Office shall scrutinize the authenticity of the documents and on being satisfied, shall forward it to the Central Office.
  • The Central Office of RBI grants the NBFC registration only after the fulfilment of all prescribed requirements by the company under section 45-IA, of its act of 1934.

Also, read: NBFC: Things to know before Incorporating this Financial Institution