All About NBFC - Loan Company

What is NBFC?

NBFC stands for Non-Banking Financial Company. It is a company registered under Companies Act, 2013 and engaged in the business of loans and advances, acquisition of shares/ stocks/ bonds/ debentures/ securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire- purchase, insurance business, chit business.

However, it does not include any institution whose principal business is that of agriculture or industrial activity, purchase or sale of any goods (other than securities) or providing any services and sales/purchase/construction of immovable property.

A company is also an NBFC who is having principal business of receiving deposits under any scheme or arrangement by way of contributions or in any other manner.  You can read here about different types of NBFC's.
 

What is Loan Company- NBFC?

Loan Company is a type of Non-Banking Financial Company (NBFC) registered under Companies Act, 2013. Loan company means any company which is a financial institution carrying on as its principal business the providing of finance whether by making loans or advances or otherwise for any activity other than its own.

Loan Company raises funds from the public and lends them to ultimate spenders who need financial assistance like small scale industries and various traders. In comparison with banks, these companies usually have attractive rates of return on deposits and simplified procedure in providing credit facility in a transparent, speedy and timely manner.

However, right now RBI is not giving approvals for deposit-taking NBFC, only the funds can be raised from different financial institutions, firms and banks for finance purpose.
 

What is the registration process of Loan Company- NBFC?

• The company needs to be registered under Companies Act, 2013 either as a Private Limited Company or Public Limited Company.
• Minimum paid up capital of Rs 2 Crores (net owned fund) is required.
• Once the company is registered it needs to open a Fixed Deposit of Rs 2 Crores.
• If a foreign company wants to register itself as an NBFC in India then minimum capital shall be Rs 5 Crores.
• After completing company registration and fixed deposit process, the company needs to file an application in prescribed format to the Reserve Bank of India along with all necessary documents.
• Once the RBI is satisfied that the documents are complete and are as per the requirements of Section 45-IA of the RBI Act of 1934, it may grant the license and certificate of registration to the company to function as an NBFC.
• Once the Certificate of Registration is granted by RBI, Loan Company can start providing loans to the public.

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