Essentials regarding NBFC registration

NBFCs play a vital part in the GDP of this country. So, the registration process has been made easier. In this write up we will deliberate upon the essentials regarding NBFC Registration.

What do you mean by NBFC?

Non-Banking Financial Company happens to be a company registered under Companies Act. It is involved in the trade of loans and advances, take over of stocks/shares/debentures/securities issued by government or local authority. NBFCs has the power to lend and invest. So, their tasks are akin to that of banks but there are some differences as well.

Prerequisites for NBFC Registration: Conditions

• The organisation has to be a registered entity under the Companies Act of 2013.

• It must comply fully with the Registrar of Companies.

• The net owned funds of the company cannot be less than 2 Crore rupees.

• At least 1 director has to have work experience with NBFC/Bank.

• The CIBIL records has to be clear.

• The company must possess basic awareness regarding NBFC business, RBI regulations, etc.

Documents needed

• Certificate of Company Incorporation;

• Information regarding the management in detail with a brochure of the company;

• Copy of PAN/CIN of the Company;

• Documents verifying the location of the office;

• Certified copy of the Memorandum of Association and of Article of Association;

• Profile list of directors duly signed by every director;

• CIBIL or credit reports of the directors;

• Copy of the board resolution which validate that the company hasn’t performed or barred NBFC activity and shall specify that it will not perform such tasks till registration from RBI is received;

• Board resolution on fair practices code to be passed and copy of the same should be submitted;

• Validate by statutory auditor that the company is not having public deposit and doesn’t receive the same;

• Certificate mentioning owned funds during the date of application from statutory auditor;

• Information regarding bank account, balances;

• Audited balance sheet and profit and loss statement with directors and auditor’s report of the preceding 3 years, if applicable;

• Self attested copy of the bank statement and Income tax return; and

• Information regarding the future course of action of the company for the next three years with balance sheet projection, cash flow statement and income statement.

Registration Fees

• Fee composition is categorised as follows:

• While registering the company, a fee is paid on the allowed capital of the company. It is given to the MCA.

• The company will pay fee as per authorised capital and other factors for MOA and AOA of the company.

• Filing of Simplified Proforma for Incorporating Company electronically needs company to pay fees;

• An earlier fixed fee has to be paid for Reserve Unique Number and Directors Identification Number;

• For DSC issuance, payment of periodic fees is very essential; and

• An extra fee is needed while furnishing the application.

Other Compliances regarding NBFC Registration

• The middle name of the company must comprise words such as finance, investment, leasing, Fintech etc.

• Documents validating the highest qualification of directors of the company.

• The total value certificate of the shareholders and directors must be verified by a CA.

• The company has to be registered as a Public Limited or Private Limited Company.

• In the Memorandum of Association, there must be an clear-cut clause detailing the fiscal investment of the company.

• It is essential to get the credit report of the directors and the shareholders validated which keeps them from loan repayment.

• The 2 crore initial capital cannot be a borrowed capital.

• There needs to be a superior business plan to pull through the process.

• An in depth action plan pertaining to loan products and Credit and Risk Assessment Policy must be in place.

• With regard to the FDI, all essential compliances according to the FEMA Act has to be followed.

Way to Register NBFC

To begin with, register the Company under the Companies Act;

As said before the least net owned funds of such company has to be at least 2 crore rupees or more;

Go to the official website of the Reserve Bank and fill the application form precisely;

Following this, give all the above-mentioned documents with the application form;

Upon the submission of application for registration, a CARN (Company Application Reference Number) number is generated;

Send the hard copy of application to the regional branch of the Reserve Bank; and

Once the application gets verified upon scrutiny, the NBFC License is provided to them.

Compliances obligations post registration

It has to be kept in mind that there are some after compliances for an NBFC post registration. There are some guidelines provided by the RBI in this respect. Income tax returns must be submitted, ROC returns,Tax audits and several NBS returns for deposit accepting and non-accepting companies are some of the critical statutory compliances to be adhered to by an NBFC.

Finally

NBFC plays a huge part in Indian economy. They are considered critical in the banking system. As RBI norms evolve and cutting edge technologies are implemented, NBFCs serve customers in a better way. Corporates and entrepreneurs have to be fully aware of the prerequisites for NBFC registration. If you want to register your NBFC, think of us.