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NBFC

NBFC

Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 involved 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. NBFC are under the purview of the Reserve Bank of India (RBI)


DIFFERENCES BETWEEN NBFC AND BANK

A Non-Banking Financial Company though carries on functions which are similar to that of a bank, 


1. A Non-Banking Financial Company, , is not a part of payment and settlement system. It cannot issue cheques to its customers.

2. Unlike Banks, not all NBFCs can accept demand deposits. NBFC can only accept demand deposits if it makes a specific application and it is approved by the Reserve bank of India.

3. Unlike in case of banks, Deposit Insurance facility is unavailable for NBFC depositors.

According to the provisions of Reserve bank of India Act, 1934, no NBFC can carry on or commence the activities of a non-banking financial institution without-

  • 1. Having Net Owned Funds of Rs. 2 crores and

  • 2. Having a valid Certificate of NBFC License issued by the Reserve Bank of India.


On the Basis of the Deposits NBFC can be classified into two categories:

  • Deposit Accepting NBFC 

  • Non Deposit Accepting NBFC

HOW TO INCORPORATE AN NBFC?

The procedure to incorporate an NBFC is:

  • A company should first be registered under the Companies Act 2013 or under Companies Act 1956.

  • The minimum net owned funds of the Company should be Rs. 2 Crore.

  • There should be a atleast one third of the Directors that have a Finance Background

  • The CIBIL records of the Company should be clean

  • The online application on the website of RBI should be filled and submitted along with the requisite documents.

  • A CARN Number will be generated.

  • A Hard copy of the application also has to be sent to the regional branch of the Reserve Bank of India.

  • After the application is properly scrutinized, the License will be given to the Company

  • The application may be rejected due to incomplete or incorrect information or documents. Thus due care has to be taken while making the application for NBFC License.

  • The procedure from filling up of the documents till the NBFC license is obtained takes about 90-120 days time

Documents Required for a Non-Banking Finance Company Registration

1. Incorporation Certificate of the Company

2. Documents related to the Management and administration of the Company.

3. The documents stating the Article of Association and Memorandum of Association of the form or company.

4. Documents verifying the location of the company.

5. Company Account which has been well audited for last three years.

6. Elaborate Information regarding the Director and the Partners associated with the Company.

7. Resolution from the board favoring the formation of NBFC.

8. A bank account with a minimum equity share of INR 2Cr.

9. PAN Card of the Company

10. Additional documents which can be asked at the time of verification.

NBFC COMPLIANCES

  • They cannot receive deposits which are payable on demand

  • The Company has to submit its audited balance sheet every year.

  • A statutory return on the deposits taken by the company has to be furnished in the form NBS – 1 every year.

  • A Quarterly Return on the liquid assets of the company has to be furnished.

  • A certificate from the auditors had to be taken stating that the company is in a position to pay back all the deposits or money taken from the Public.

  • A half-yearly ALM return has to be given by the company which has a Public Deposit of Rs. 20 Crore and above or has assets worth Rs. 100 Crore and above.

  • The credit rating has to be taken every 6 months and submitted to the RBI.

  • A minimum level of 15% of the Public Deposits has to be maintained by the Company in Liquid Assets


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