NBFC Registration: Your Complete RBI License Guide
Non-Banking Financial Companies (NBFCs) play a crucial role in India's financial ecosystem by providing credit and financial services to segments often underserved by traditional banks. Unlike banks, NBFCs can offer loans, advances, and investments without holding a banking license, making them more flexible in their operations.
The Reserve Bank of India (RBI) regulates NBFCs to ensure financial stability and protect depositor interests. This comprehensive guide covers everything you need to know about obtaining an NBFC license, from eligibility criteria to compliance requirements.
What is an NBFC?
An NBFC is a company registered under the Companies Act, 1956/2013, engaged in the business of:
- • Loans and advances
- • Acquisition of shares, stocks, bonds, debentures
- • Insurance business
- • Chit business
- • Leasing and hire-purchase
Key Distinction from Banks
While NBFCs provide financial services similar to banks, they cannot accept demand deposits (savings/current accounts), issue cheques drawn on themselves, or be part of the payment and settlement systems. NBFC deposits are also not insured by DICGC.
Types of NBFCs Regulated by RBI
Asset Finance Company (AFC)
Finances physical assets supporting economic activity such as automobiles, tractors, lathe machines, generator sets, earth moving equipment, etc.
Investment Company (IC)
Acquires securities as its principal business. Focuses on investment activities rather than lending.
Loan Company (LC)
Provides loans and advances for various purposes including personal loans, business loans, and other credit facilities.
Infrastructure Finance Company (IFC)
Deploys at least 75% of total assets in infrastructure loans. Minimum NOF of ₹300 crore required.
Systemically Important Core Investment Company (CIC-ND-SI)
Acquires shares and securities with asset size of ₹100 crore or more. Cannot trade in investments.
Microfinance Institution (MFI)
Provides micro-loans to low-income households. Loan amounts typically range from ₹10,000 to ₹1,00,000.
Eligibility Criteria for NBFC Registration
1. Net Owned Fund (NOF)
Minimum NOF of ₹2 crore is mandatory. This must be in the form of equity share capital and free reserves. The amount should be deposited in a fixed deposit with a scheduled commercial bank before applying.
2. Company Registration
Must be registered as a company under the Companies Act, 1956/2013. Only company form of organization is eligible; LLPs and partnerships cannot register as NBFCs.
3. Financial Assets Threshold
Financial assets must constitute at least 50% of total assets, and income from financial assets must be at least 50% of gross income.
4. Fit and Proper Criteria
Directors and promoters must satisfy RBI's fit and proper criteria. Background verification includes credit history, criminal record check, and professional qualifications.
Step-by-Step Registration Process
Incorporate the Company
Register a Private Limited or Public Limited Company with minimum authorized capital of ₹2 crore. Ensure the Memorandum of Association (MOA) includes financial/loan business as a main objective.
Deploy Capital
Deposit ₹2 crore in a fixed deposit with a scheduled commercial bank. Obtain a Fixed Deposit Receipt (FDR) and Banker's Report confirming the deposit.
Register on COSMOS Portal
Create an account on RBI's COSMOS (Convergence of Statistical, Supervisory, and Monitoring Systems) portal. Complete the Know Your Customer (KYC) process.
File Online Application
Fill the CoR (Certificate of Registration) application form online. Select the appropriate NBFC category based on your business model and provide detailed information about the company, directors, and shareholders.
Submit Documents
Upload all required documents including incorporation certificate, FDR, business plan, KYC documents, net worth certificates, and IT infrastructure details.
RBI Review Process
RBI conducts due diligence including document verification, background checks on promoters/directors, and assessment of the business plan. This process typically takes 3-6 months.
Certificate of Registration
Upon satisfaction, RBI issues the Certificate of Registration (CoR) with a unique NBFC registration number. You can now commence operations as an NBFC.
Net Owned Fund (NOF) Calculation
NOF is calculated as:
NOF = Paid-up Equity Capital + Free Reserves + Share Premium - Accumulated Losses - Intangible Assets - Investments in Shares of Other NBFCs
- • Must be maintained at all times during operations
- • Cannot be withdrawn without RBI approval
- • Should be invested in approved securities
- • Regular monitoring by RBI for compliance
Post-Registration Compliance
Periodic Returns
- • NBS-1: Deposit returns (quarterly)
- • NBS-2: Prudential returns (quarterly)
- • NBS-3: Liquid asset returns (quarterly)
- • NBS-4: Capital adequacy returns (quarterly)
- • Annual Financial Statements
Operational Requirements
- • Maintain Capital Adequacy Ratio (15% minimum)
- • KYC and AML compliance
- • Fair Practices Code adherence
- • Credit information bureau reporting
- • Statutory audit by RBI-approved auditors
Accepting Public Deposits
NBFCs must meet additional requirements to accept public deposits:
- • Minimum investment grade credit rating required
- • Maximum deposit period of 60 months
- • Interest rates not to exceed RBI prescribed limits
- • Maintain liquid assets as per regulations
- • Issue proper deposit receipts to depositors
- • Credit rating must be updated annually
Important: Public deposits in NBFCs are NOT insured by DICGC unlike bank deposits.
Penalties for Non-Compliance
| Violation | Penalty |
|---|---|
| Operating without registration | Up to ₹5 lakh + imprisonment |
| Accepting deposits illegally | Up to ₹10,000 per day |
| Delayed return filing | ₹100 - ₹1,000 per day |
| Non-maintenance of NOF | Restriction on operations |
Key Success Factors
Before Application
- ✓ Ensure clean background of promoters
- ✓ Prepare detailed 5-year business plan
- ✓ Set up proper IT infrastructure
- ✓ Arrange ₹2 crore capital deployment
After Registration
- ✓ Maintain NOF at all times
- ✓ File returns on time
- ✓ Follow fair practices code
- ✓ Keep proper documentation