NBFC or non-banking financial corporation is a specific type of company that deals with finance and offers shadow banking services to their clients without having a banking license. This is the fundamental difference from the financial institutions in the banking sector of the country. NBFCs are under the purview of the Reserve Bank of India (RBI). NBFC registration is required when a company involves in the principal business of lending, investments in shares/stocks/bonds/debentures, leasing, hire-purchase, insurance business, chit business or involved in the receiving of deposits under any scheme or arrangement.
Different Types of NBFC Registration in India
In India, NBFC companies are strictly registered as per the rules, provision and regulations of the Section 45-IA of the RBI Act of 1934. NBFC registration can be categorized under following different types:
1. Asset Finance Company (AFC)
An Asset Finance Company is a company which is a financial institution carrying on as its principal business the financing of physical assets such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipment, moving on own power and general purpose industrial machines.
2. Investment Company
An Investment Company is any company which is a financial institution carrying on as its principal business the acquisition of securities (shares / stocks / bonds / other financial securities).
3. Loan Company
Loan Company is 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 but does not include an Asset Finance Company.
4. Infrastructure Finance Company
Infrastructure Finance Company is a non-banking finance company that deploys at least 75 per cent of its total assets in infrastructure loans, has a minimum Net Owned Funds of Rs. 300 crore maintains a minimum credit rating of ‘A ‘or equivalent with a Capital to Risk Assets Ratio of 15%.
5. Systemically Important Core Investment Company
Systemically Important Core Investment Company is an NBFC with an asset size of over Rs.100 crores and accepts deposits, involved in the business of acquisition of shares and securities which satisfies certain conditions.
6. Infrastructure Debt Fund
Infrastructure Debt Fund is a company registered as NBFC to facilitate the flow of long term debt into infrastructure projects. Infrastructure Debt Funds raise resources through issue of Rupee or Dollar-denominated bonds of minimum 5-year maturity.
7. Non-Banking Financial Company – Micro Finance Institution
Micro Finance Institution is a non-deposit taking NBFC that is engaged in micro finance activities. This is one of the most popular forms of NBFC Registration in India.
8. NBFC Factor
NBFC Factor is a non-deposit taking NBFC engaged in the principal business of factoring.
Financial Institution not Requiring NBFC Registration
- Housing Finance Companies: Regulated by the National Housing Bank
- Insurance Companies: Regulated by Insurance Regulatory and Development Authority of India (IRDA)
- Stock Broking: Regulated by Securities and Exchange Board of India
- Merchant Banking Companies: Regulated by Securities and Exchange Board of India
- Venture Capital Companies: Regulated by Securities and Exchange Board of India
- Companies with Collective Investment Schemes: Regulated by Securities and Exchange Board of India
- Mutual Funds: Regulated by Securities and Exchange Board of India
- Nidhi Companies: Regulated by the Ministry of Corporate Affairs.
Criteria for NBFC Registration in India
Basic criteria are to obtain NBFC registration are as follow:
- The company must be registered in India as Pvt. Ltd. or Ltd. Company.
- The company must have a minimum Net Owned Fund of Rs.200 lakhs. The Net Owned Funds would be calculated based on the last audited balance sheet of the Company.
- Hard copies of the list of documents must be furnished to the Regional Officer of RBI.
Procedure for NBFC Registration
- Applicant company has to file an online application with the RBI’s website www.rbi.org.in. After the submission, the applicant will get a reference number to facilitate inquiry in future.
- Then, the company requires to submit the duplicate hard copies to the concerned regional office of RBI.
- The regional office will check the accuracy of all submitted documents. And after getting satisfied, the regional office will send the application for NBFC registration to the central office.
- The central office of RBI grants the NBFC registration only when applicant company fulfill the all prescribed things in the section 45-IA, of its act of 1934.
The Reserve Bank of India regulates and supervises NBFC Registration in India. If any unincorporated entity or an NBFC without authorization to take deposit is found accepting public deposits, it is liable for criminal action.