Your Guide to Setting Up an NBFC in India

RBI NBFC Registration in India

Today, banking has reached the palms of millions of users, regardless of their location. It is now more inclusive, widespread, and technologically-driven. Yet, it is not able to reach the potential where the unbanked section can be served to the fullest. That's where NBFCs come in. They are now playing a game-changing role in facilitating fiscal aid to those who need it most.

An NBFC can be understood as a private version of a bank that operates like a financial institution but cannot accept deposits. It is easy to grasp how much potential the NBFC sector has in terms of profitability and longevity. If you want to join this bandwagon as an NBFC, now is the right time. However, the path to RBI NBFC Registration can be overwhelming due to strict regulations. The good news is that this write-up can ease the blow for you. Let's see exactly what it takes to secure RBI NBFC company registration in India.

What is an NBFC?

Legally speaking, a Non-Banking Financial Company (NBFC) is a company that falls under the Companies Act, 1956 or 2013. It engages in the business of:

  • Loans
  • Advances
  • Acquisition of shares, stocks, and bonds
  • Other financial activities

While NBFCs resemble traditional banks, they are prohibited from accepting demand deposits or issuing cheques drawn on themselves.

Why Does the "Principal Business" Test (50-50 Rule) Matter to Emerging NBFCs?

There is something your business needs to abide by in order to qualify as an NBFC in India. It essentially means meeting the RBI 50-50 test that says:

  • Your company's financial assets must form over 50% of total assets.
  • Your company's financial income must form over 50% of gross income.

Understanding Legal Requirements to Form an NBFC in India

Passing the 50-50 test is just the initial hurdle; there are more requirements you must meet to fit into the NBFC domain. These include:

  • Your company must be registered as a Private Limited Company or Public Limited Company.
  • Make sure the founding document, such as the MOA, reflects the nature of the business under the Object Clause.
  • The bank account linked to your company (the one proposed to be an NBFC) must have a minimum Net Owned Fund (NOF) of ₹10 Crore. This capital infusion should be lien-free, meaning it should be fully owned by the company.
  • If there are multiple directors, ensure that at least one-third of them have a minimum of 10 years of experience in the banking or finance sector.
  • All directors must have a clean legal and credit background, with a healthy CIBIL score.

Step-by-Step RBI NBFC Company Registration Process

Now comes the hardest part—the application process, which combines digital submission and physical verification. Here's what exactly you should do:

  1. Form a company, either as a Private Limited Company or a Public Limited Company.
  2. Inject the required Net Owned Fund (NOF) into the company, not less than ₹10 Crore, and keep it untouched until the license is granted. Also, obtain the Statutory Auditor's Certificate (SAC).
  3. Fill out the application on the COSMOS Portal, either yourself or through a professional consultant.
  4. Once the portal accepts the application, it will generate a Company Application Reference Number (CARN). Keep it safe for future reference.
  5. Submit physical copies of all online documents, including supporting dossiers, to the nearest RBI regional office.
  6. Allow the Reserve Bank of India to review and verify your paperwork. The approval process may take considerable time.
  7. Once approved, you will receive the Certificate of Registration (CoR), which authorizes you to commence NBFC operations.

Required Documentation for RBI NBFC Registration

Preparation is the most time-consuming part of RBI NBFC company registration. You will need:

  • Certified copies of the Certificate of Incorporation, MOA, and AOA.
  • A copy of the Fixed Deposit receipt and a banker's certificate of no lien.
  • A detailed five-year business plan, including financial projections.
  • Educational and professional qualification certificates of directors.
  • Credit reports (CIBIL) of all directors and shareholders.
  • Board Resolution approving the NBFC business activity.

Why Choose Advice for RBI NBFC Registration?

Does this licensing process seem overwhelming? Well, it is more complicated than it appears. That's why the rejection rate is frustratingly high. But you are not alone.

At Advisou, we understand that RBI licensing can be a tough ride, especially for new applicants. That's why we are committed to offering services that actually deliver, making the process easier for emerging startups and budding entrepreneurs. We specialize in RBI regulations and have a strong track record of securing approvals efficiently.

So, whether you are seeking to become a private lender or want to diversify into a complex financial domain, Advisou has your back. Contact us today and let our professionals lay the groundwork for your NBFC journey.