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How to get NBFC Registration in India?

By Paras Mehra

( 7.11K Views) April 14, 2018

Do you want to start an NBFC in India? Yes! Then you are at the right place. This article explains everything about the NBFC registration in India. NBFC stands for Non-Banking Financial Companies which deals in various financial activities like providing loans, asset finance, microfinance, investment in securities etc.

NBFC’s in India is governed by the Reserve Bank of India (RBI) and would need RBI license to start their operations in India. Hence, the most important thing to start NBFC is the RBI license. So, let us understand the procedure to get the RBI license to complete the NBFC registration procedure in India.

However, here are some key points which one should know before going forward with the NBFC registration:

It is mandatory to register a company to apply for RBI license. No entity other than the company can apply for RBI license in India.
For RBI license, it is mandatory to have a minimum net owned fund of Rs.2 crore (Rs.5 crore for microfinance business).
The success rate of RBI license depends upon the profile of the promoters. Hence, it is recommended to build a strong promoter profile or include a CA in the promoter team to increase the chances of getting the RBI approval.
NBFC can be categorized into various types and hence, one should be clear on the type of NBFC, he wanted to register.
NBFC cannot accept public deposits until and unless it has been specifically authorized by the Reserve bank of India.

Let us now discuss the NBFC registration procedure;

1. Register a Company

The first step in applying for RBI license is to register a company. No other entity can apply for RBI license. Further, the company should either be Private limited Company or Public limited company. One Person Company cannot apply for RBI license. During the process of Company Registration, make sure the MOA and AOA are well drafted in consonance with the objectives of the type of NBFC you choose to make. Initially, the company can be created with Rs.1 lakh capital.

2. Raise Authorised Capital and paid-up capital to match net owned fund of Rs.2 crore

Once the Company is incorporated, the next step is to raise the authorized capital and paid-up capital to such extent that the promoters can invest a minimum of Rs.2 crore into the company. As per RBI norm, no NBFC can be registered with having minimum net owned fund of Rs.2 crore.

Further, it is not necessary to invest Rs.2 crore via capital; the same can also be ingested via a combination of capital and security premium.

3. Deposit Rs.2 crore into the fixed deposit and obtain a certificate

After raising the capital, invest the entire sum into the fixed deposit and obtain no lien certificate from the bank. The deposit amount should be Rs.5 crore, in case you want to apply for microfinance company. Since the minimum net owned fund required for NBFC is 2 crore but for microfinance, it is 5 crore.

4. Get all the required documents as per the checklist for NBFC license

Before filing the application online, it is recommended to go through the requirement list of the NBFC and collect all the required documents in place. Here are some of the documents which may be required:

Certified copies of Certificate of Registration
Certified copies of an extract of only the main object of the MOA.
Copy of Board resolution
Copy of FD receipts and the certificate from the banker about the no lien certificate.
Bankers report for Applicant Company, group companies.
A very strong promoter profile which describes their experience in the finance profile. Promoter background is one of the key points for getting the RBI license.

5. Fill online application on the cosmos.rbi.org.in

Once you are ready with all the required documents, the next step is to file the online application with the RBI for NBFC registration. The application is filed online on cosmos.rbi.org.in. The application contains a lot of technical terms and hence, it is recommended to take the help of professional. Don’t file a wrong application; otherwise, it will be rejected straightway.

6. Submit the hard copy to the regional office of the Reserve bank of India (RBI)

Once the application is filed online, the next step is to prepare a complete set of physical documents and submit the same to the regional office of the Reserve bank of India.

7. Proper follow up with the RBI

After submission of the application, always follow up with the RBI properly for the status of the NBFC Registration application. Also, in case any deficiency is found, try to correct it as soon as possible.

8. Acceptance and rejection of the application

The NBFC registration application completely depends upon the RBI contentions. RBI may reject or accept your application which actually depends upon the various parameters. Hence, prepare all the documents properly so that at least it should not be rejected on the basis of the documents.