Eligibility Norms to Start a NBFC Business
While Non-Banking Financial Companies (NBFCs) in India are doing well, there is a growing interest in the country to register new companies. It is, therefore, important to know the eligibility norms to start a NBFC business. The following paragraphs intend to highlight such essential norms for different types of NBFCs.
Requirements for Registration of NBFCs with RBI
A company incorporated under the Companies Act, 1956 and desirous of commencing business of NBFI as defined under Section 45 I (a) of the RBI Act, 1934 should comply with the following:
- It should be a company registered under Section 3 of the companies Act, 1956
- It should have a minimum net owned fund of ₹ 200 lakh. (The minimum net owned fund (NOF) required for specialized NBFCs like NBFC-MFIs, NBFC-Factors, CICs is different as it is decided on the kind of NBFC , it is desired to be registered.
NBFCs as Sponsors of IDF-MF
The eligibility criteria for NBFCs as sponsors of IDF-MF is that it must have minimum net owned funds of Rs.300 crore, CRAR of 15% and NPA should not be more than 3% of net advances. It should be in existence for the last 5 years before application, and profitable in last three years.
“Post investment, NBFCs should maintain their minimum CRAR and NOF.”
– Shweta Gupta (Founder and CEO, MUDS Management Pvt Ltd)
Micro Finance Company
Micro Finance Company is a type of NBFC which is in a business of micro (small) credit to a special type of borrowers. It is also known as Micro Finance Institution (MFI). No company other than registered with RBI can do the business of MFC. Even the Nidhi Companies are not allowed to do so.
Procedure to Register the Micro Finance Company (MFI) in India
- #Step 1: Register a Company: This is the first step to register the Micro Finance Company (MFI) in India. It could be a private limited company or a public limited company. Once you have registered a company, you can then proceed for the next step.
- #Step 2: Raise Authorized and Paid up Capital to two Crores: The next step is to raise the share capital both authorized and Paid up to Two Crores Rupees. This is because to register an NBFC in India, the minimum net worth required is Rs.2 crore.
- #Step 3: Deposit Rupees Two Crore in Fixed Deposit and obtain Certificate: After raising the capital amount, the next step is to deposit the sum of Rs.2 crore in Fixed Deposit and obtain a certificate of no lien from the bank. This shall be attached with the application when filed with the Reserve Bank of India (RBI).
The next three steps are as follows:
- #Step 4: Get all the certified Copies and complete the requirement checklist for RBI registration
- #Step 5: Fill online application
- #Step 6: Submit the Hard Copy to the Regional Office of Reserve Bank of India (RBI) office
Documents Required initially to start the Business
If you are willing to register a Private Limited Company for NBFC registration, then you shall need at least two persons to start with. The minimum documents required for registration are as follows:
- Copy of PAN CARD
- ID Proof (Driving License, Passport, Aadhaar Card, Voter ID) – any one
- Address Proof (Bank Statement, electricity bill, Mobile Bill, Telephone Bill) –anyone
- Passport Size photo
The RBI in October 2017 issued guidelines for all NBFC-peer-to-peer lenders, specifying eligibility criteria for such companies and prudential norms they will be required to follow, among others. As per the notification, no NBFC-P2P shall commence or carry on the business of a peer to peer-lending platform without obtaining a certificate of registration (CoR) from it. Existing NBFC-P2Ps will have to apply for CoRs within three months. To be eligible as an NBFC-P2P, a company must have a net owned fund of not less than Rs 2 crore
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