Understanding NBFC License
Non-Banking Financial Companies (NBFCs) play a crucial role in the Indian financial sector. They provide various financial services, including loans, asset management, and investment advisory, without holding a banking license. Obtaining an NBFC license is essential for operating legally in India. This article will guide you through the process of acquiring an NBFC license in India.
What is an NBFC?
An NBFC is a financial institution that provides banking services without meeting the legal definition of a bank. NBFCs are regulated by the Reserve Bank of India (RBI) and are involved in activities such as:
Loans and advances
Acquisition of shares/stocks/bonds/debentures/securities issued by the government or local authority
Leasing, hire-purchase, insurance business, and chit business
NBFCs do not include institutions whose principal business is agriculture, industrial activity, or the purchase or sale of any goods (other than securities).
Steps to Obtain an NBFC License in India
Step 1: Company Registration
Before applying for an NBFC license, you must incorporate your company under the Companies Act, 2013. The company must have a minimum net owned fund (NOF) of ₹2 crores.
Step 2: Drafting of Documents
Prepare the necessary documents required for the NBFC license application. The key documents include:
Certificate of incorporation
Memorandum of Association (MOA) and Articles of Association (AOA)
A detailed business plan for the next five years
KYC documents of directors and shareholders
Audited financial statements of the company
Step 3: Capital Requirement
Ensure that your company meets the capital requirement specified by the RBI. The minimum NOF required is ₹2 crores, which must be maintained throughout the license period.
Step 4: Application Submission
Submit the online application on the RBI’s COSMOS portal. After submission, you will receive a CARN (Company Application Reference Number). Use this number to send the hard copy of the application and the required documents to the RBI’s regional office.
Step 5: RBI Review
The RBI will review your application and the submitted documents. They may request additional information or clarification during the review process.
Step 6: Certificate of Registration
If the RBI is satisfied with the application and documents, they will issue the NBFC license in the form of a Certificate of Registration (CoR).
Compliance After Obtaining the NBFC License
Maintaining Minimum NOF
Once you have obtained the NBFC license, it is crucial to maintain the minimum net owned funds of ₹2 crores at all times.
Regular Audits
Ensure regular audits and submission of audit reports to the RBI. This helps in maintaining transparency and regulatory compliance.
Filing Returns
NBFCs must file periodic returns with the RBI, including annual financial statements, quarterly returns on important financial parameters, and other specific returns as required.
Conclusion
Obtaining an NBFC license in India involves a series of meticulous steps, including company registration, preparation of necessary documents, meeting capital requirements, and complying with RBI regulations. By following these steps, you can successfully acquire an NBFC license and contribute to the growing financial sector in India.
Comments