Documents Required for Registration of NBFC

A Non-Banking Financial Institution (NBFC) is a financial institution that offers consumers a variety of banking and non-banking services. The Reserve Bank of India (RBI) supervises and regulates NBFCs in India. Any company cannot start a Non-Banking Financial Company without first obtaining a Certificate of Registration from the RBI. The entire NBFC Registration procedure, from firm incorporation to get the Certificate of Registration, necessitates correct documentation. 

We will examine the documents required for NBFC registration in this article, but first we will define NBFC, the types of NBFCs, and the actions required for NBFC registration.

What is Non-Banking Financial Institution?

Non-Banking Financial Company (NBFC) is a financial firm that offers services like banks but does not have a banking license. NBFCs provide a wide range of financial services, including loans, credit facilities, investment, risk pooling, and market trading. 

They provide credit to various sectors of the economy and provide a diverse range of financial products and services. NBFCs are not officially recognized as banks with full banking licenses, but they play an important role in meeting loan demand that traditional banks are unable to meet.

Types of NBFC

NBFCs are widely classified as:

• In terms of Liability Deposit and Non-Deposit taking NBFC.
• Size and systematically important and other Non-Depositing Holding Companies
• Kind of Activity of Company.

As a result, there are 10 different types of NBFC companies.

• Asset Financing Firm: It is a financial institution that makes it possible for people and businesses to get finance for a variety of assets, including huge power generators, heavy industrial machines, and farm and production equipment.
• Investment Company: It is a financial organization whose main activity is buying securities. These businesses, to put it simply, extract money from the general population that was invested in different securities and financial goods.
• Loan Company: As implied by the name, this financial company provides loans for a variety of reasons aside from those of the AMC, which also includes housing finance companies.
• Infrastructure finance company: It is a non-banking financial institution that invests three-quarters of its total assets in loans for infrastructure, has a Rs. 300-crore minimum Net Owned Fund and has a credit rating of at least “A” and 15% of CRAR.

• • Systematically Important Core Investment Company: It is a non-banking finance firm that invests 90% of its total assets in the form of debt or loan group companies, shares, or other types of investments,60% out of 90% should be invested in equity shares or shares that will eventually be forcedly converted into equity shares. It carries out none of the activities listed in sections 45(c) or 45(f) of the RBI Act, 1934 and that takes government funding.
  • Infrastructure Debt Fund: IDFs raise funds for lengthy infrastructure projects using bonds. In order to give investors a five-year maturity period, the bonds are issued in a variety of currencies.  
  • Microfinance Company: The microfinance company now steps forward to help these disadvantaged individuals financially. Examples include Bandhan Financial Service Ltd. and Ujjivan Financial Service.
  • NBFC: There aren’t many of these NBFCs in India. These businesses typically purchase loans from lenders at a significant discount and then modify the debtor’s repayment schedule to facilitate an easy settlement while earning a little profit.

• Mortgage Firm: It is a financial organization where: Mortgage guarantees account for at least 90% of firm revenue and at least 90% of the total revenue is derived from the mortgage guarantee industry, or Net Owned Funds of Rs.100 crores.

• Non-operative Financial Holding Company: It is a distinct category of NBFCs that are fully owned non-operative financial holding companies that are authorized by the RBI to establish or hold a bank as well as another financial service.

Steps required in NBFC Registration

There are several requirements to follow before obtaining NBFC registration. The actions that must be taken before NBFC Registration:

• Company Incorporation under the Companies Act, 2013. 
• 2 crores should be the net owned fund.
• The company’s director must be an independent director operating in a professional capacity.
• A high CIBIL score of the director or subscriber is necessary for registration as an NBFC.
• Filing COSMOS or submitting the paperwork electronically on the RBI.
• Once the applicant submits the form online along with the required documents, CARN will be generated.
• Submitting a hard copy of the documents to the RBI regional branch.
• The application is evaluated and validated by the RBI after the submission of the necessary paperwork, and if no additional checks or questions are needed, the department will award COR to the applicant company.

Documents required 

Documents are the vital step to obtain a registration and there are various documents required for NBFC registration, registration from directors, and from shareholders. These are as:

For NBFC Registration: Every document needed for NBFC registration is needed in both physical and electronic form. In addition to the points stated below, the Department or NBFC Consultants may also request any pertinent documents. The directors and subscribers must self-attest all documents.

The following are the documents required for NBFC Registration:

• Certificate of Registration (precise copies are available at the relevant ROC office)
• Certified copies of an excerpt from the Memorandum of Association (MOA) and Articles of Association’s (AOA) financial business-specific main object clause.
• Board Resolution.
• A copy of the receipts for fixed deposits and the banker’s certificate of no lien attesting to the balances supporting the Net Owned Fund (NOF). Fixed deposits can only be used for NBFC registration after RBI approval.
• For businesses that are already up and running, the most recent three years’ worth of financial information, along with the directors’ and auditors’ reports, must be presented.
• The application must be accompanied by a banker’s report for each applicant group, subsidiary, affiliate, holding company, and related party director who has a significant financial stake in another company, according to recent RBI guidelines.
• A copy of the certificate attesting to each director’s highest level of academic and professional certification (CA, CS, CWA).
• A copy of each director’s experience certificate, if any, in the banking and financial services industries.
• List of directors’ bios that have been duly signed by the director.
• Information on loans, balances, bank accounts, etc.
• Credit histories of the company’s directors, such as CIBIL.

Documents required for NBFC Registration from Directors: The following are the documents required from the director for NBFC Registration:

• Certificate of highest qualification.
• Certificate of Identification and Address Proof.
• Experience certificate.
• Net Worth certificate.
• Details of Directorship in other companies.
• Business Profile.
• Banker’s Report
• CIBIL.

Documents required from Shareholder for NBFC Registration

The following are the documents required from shareholders for NBFC Registration:

• Identification and address verification for the subscriber.
• Banker’s Report.
• Net Worth Certificate.
• CIBIL.

Takeaway

Documentation is necessary for NBFC registration, since it provides better management and norm compliance. The Companies Act, 2013, and the Reserve Bank of India’s conditions must be met for an NBFC to register. Transparency and public confidence are the results of proper documentation and compliance. The major goal of NBFC is to concentrate on the demands of the customer and fulfil all relevant compliances to forge a strong connection.

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