Eligibility Criteria for NBFC Registration in India

The Reserve Bank of India (RBI) is the central bank of our nation and it regulates the functioning of NBFCs in India. As per the RBI, an NBFC is a financial institution that provides banking services but doesn’t have a banking license. In simple words, it is a company that carries out certain banking activities such as providing loans and credit facilities but doesn’t have the authority to accept deposits. Some of the common examples of NBFCs are finance companies, housing finance companies, venture capitalists, etc.

In India, the registration of an NBFC is governed by the Reserve Bank of India Act, 1934. As per this Act, any company that wants to carry out the business of an NBFC has to take a registration certificate from the RBI.

What is non-banking financial company (NBFC)?

A non-banking financial company (NBFC) is a firm that has been registered under the Companies Act of 2013 and is engaged in lending money, making advances, buying stocks, bonds, and other marketable securities, leasing, hire-purchase agreements, insurance, chit trading, etc.

The process of registration is as follows:

1. The company has to make an application in Form NBFC-1 to the RBI for registration.

2. The RBI will then grant or reject the registration within 60 days of receiving the application.

3. If the RBI grants the registration, it will issue a certificate of registration in Form NBFC-2.

The minimum net owned funds (NOF) required for registration as an NBFC is Rs. 2 crores. The NOF is the total of paid-up equity capital, preference share capital, reserves and surplus, and long-term borrowings.

Apart from the minimum NOF criterion, the RBI has laid down certain other eligibility criteria for registration as an NBFC.

Eligibility Criteria for NBFC Registration in India

The business of an NBFC includes receiving deposits under any scheme or arrangement in one lump sum or in instalments, by way of contribution or in any other manner.

As per Section 45-I of the Reserve Bank of India Act, 1934, any company which carries on as its business or part of business, the business of loans and advances, acquisition of shares and securities, hiring and purchasing of machinery on hire purchase or selling and supplying goods on hire purchase or providing any services on credit is required to obtain a certificate of registration from the Reserve Bank of India.

The following are the key points regarding the eligibility criteria for NBFC registration in India:

1. The company should be a public limited company or a private limited company.

2. The company should have a minimum net owned fund (NOF) of INR 2 Crores.

3. The company should not be carrying on the business of agriculture activity, industrial activity, purchase

4. Under the Companies Act, 2013, the minimum paid-up equity capital for registered NBFC is Rs 2 crores.

In nutshell:

In case your primary business is associated to financial activities, then you need to determine whether you comply the above criteria and the applicability of NBFC registration on companies. For more details about the NBFC registration process or any related query, feel free to contact the ASC Group.