An NBFC is a company registered under the Companies Act, 1956, that engages in the primary business of lending, investments in stocks/bonds/debentures, leasing, hire purchase, insurance, or receiving deposits under any scheme or arrangement. The Reserve Bank of India (RBI) oversees NBFC, and in this article, we’ll look at the NBFC registration process and some of the regulations that apply to the organization’s operations. NBFC Registration Process with RBI in India.
What is NBFC (Non-Banking Financial Company)?
A Non-Banking Financial Company (NBFC) is a company incorporated under the Companies Act of 1956 that does business in a manner similar to a bank, with the following exceptions:
- Demand deposits are not accepted by NBFCs.
- NBFCs are unable to issue checks drawn on themselves.
- The Deposit Insurance and Credit Guarantee Corporation insures bank deposits. Deposits in NBFCs, on the other hand, are not insured.
NBFCs, like banks, are in the business of making loans and advances, acquiring and trading shares/stocks/bonds/debentures/securities, leasing, hire-purchase, insurance, and chit business; however, they do not include any institution whose primary business is agriculture, industrial activity, the purchase or sale of any goods (other than securities), or the sale/purchase/construction of immovable property.
Principal Business Requirement For NBFC
Lending, investments in shares, stocks, bonds, debentures, leasing, hire-purchase, P2P Market Place lending business, financial information service provider (NBFC-AA) insurance business, chit business, or involved in the receiving of deposits under any scheme or arrangement are the main activities of NBFCs.
Restricted Activities
- Agricultural Production
- Industrial Production
- Purchase and sale of goods and services
- Construction of immovable property for sale or purchase
Types of NBFCs
Systemically Important NBFCs include all NBFCs – ND with assets of Rs. 500 crore or more as of the most recent audited balance sheet (NBFC-ND-SI).
The combined asset size of the group companies.
NBFC-ND-SI is exempt from the Credit Concentration Norms and is required to follow RBI rules.
Prudential Norms, 2015 are not applicable to NBFC-ND-Non SI (except Annual Certificate)
Based on the activities
NBFC stands for Non-Banking Financial Corporation (NBFC-ICC)
It is a type of non-bank financial company that engages in lending and investment activities. There were three categories previously, but they were later consolidated into one to allow more operational flexibility.
Infrastructure Finance Company (NBFC) (NBFC-IFC)
Infrastructure loans are the primary business of this sort of financial company.
NBFC-Systemically Important Core Investment Company (CIC-ND-SI)
Its main activities include investing in group companies’ equity, preference shares, debt, and loans.
NBFC Infrastructure Debt Fund (IDF-NBFC)
The main focus of NBFC-activities IDF’s is to facilitate the flow of long-term loans into infrastructure projects.
Microfinance institution (NBFC) (NBFC-MFI)
The fundamental purpose of an NBFC-MFI is to provide credit to economically disadvantaged people.
NBFC-Factor
Their principal business is acquiring an assignor’s receivables or extending discounted loans against the receivables’ security interest.
NBFC-Non-Operative Financial Holding Company (NOFHC) NBFC-Non-Operative Financial Holding Company (NOFHC) NBFC-Non-Operative Financial Holding Company (NOFHC) NBFC-Non-Operative Financial Holding Company (NOFHC
How NBFCs are different from Banks?
On the basis of the following characteristics, we may distinguish NBFCs from banks:
NBFCs are financial institutions that provide banking services to customers who do not have a bank licence. A bank is a government-licensed financial institution that offers banking services to the general population. In the case of NBFCs, there is a regulated authority.
A person who want to conduct finance business in India must first register with an NBFC. NBFCs serve a wide spectrum of consumers and give loans to the poorest members of society, including both urban and rural areas, contributing to the country’s progress. Furthermore, an NBFC can set its own interest rate while advancing a loan, as long as it follows RBI criteria.
NBFC’s Purposes are as follows:
- Offering individualised loan solutions
- Using innovative technology, a digital platform will be used to give loans.
- Loans are processed more quickly.
- the creation of jobs
- Creating wealth
- Development of infrastructure
- As a result of financial aid to the financially weaker members of society, economic progress is achieved. NBFC Registration Process with RBI in India.
