Understanding the NBFC License Renewal Process - A Step-by-Step Guide

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Understanding the NBFC License Renewal Process - A Step-by-Step Guide

A Non-Banking Financial Corporation or NBFC refers to a business entity that is set up under the Companies Act 2013 or 1956. In a country like India, NBFCs play a pivotal role along with the banking institutions by enabling affordable credit to borrowers. The process to secure funds through NBFCs is much easier than encountering the complexities associated with banks. At a time, when small borrowers look for faster and easier ways to secure funds, NBFCs have become extremely popular among all types of borrowers in India. You will get to know more about NBFC registration and NBFC license renewal in this post.

Which services are offered by NBFC?

The major services offered by an NBFC are short and long-term loans, cash advances, hire-purchase, debt, equity, currency exchange, P2P lending, and y more. NBFCs function as per procedures delineated by the Reserve Bank of India (RBI).

What are the major roles and responsibilities of NBFCs?

• Providing support in wealth augmentation;
• Arrange finances for economically feebler portions of society;
• Promotion of particular sectors such as infrastructure;
• Enabling Substantial Employment;
• Offer specific credit to borrowers;
• Support the economic growth of the nation;
• Play a part in financial market growth;
• Contribution to the State exchequer.

What are the different types of NBFCs?

An NBFC can be categorized in two ways:

1) Basis of Liability

2) Basis of Activity

• The classification of NBFCs regarding liability is defined below:
• Deposit Accepting NBFCs (NBFCs-D) (Deposit Receiving)
• Non-Deposit Accepting NBFCs (NBFCs-ND) (Non-Deposit Receiving)

The Non-Deposit Accepting NBFCs are additionally separated in terms of size. The types of NBFCs based on size are given below:

• Systematically Important NBFCs [NBFCs-ND-SI]
• Non-Deposit Holding NBFCs [NBFCs-ND]

Given the nature of the activity, NBFCs can be categorized lie:

• Investment Company (IC)
• Housing Company
• Micro Finance Company (MFI)
• Asset Finance Company (AFC)
• Mortgage Guarantee Company (MGC)
• Loan Company (LC)
• Infrastructure Finance Company (IFC)
• Core Investment Company (CIC)

Basic Requirement To Get an NBFC License from RBI

NBFCs set up under the Companies Act, 2013, or the Companies Act, 1956, vying to kick off a non-banking finance corporate are needed to adhere to some essential requirements for getting NBFC license registration and renewal. The essential necessities to get an NBFC License from RBI are as follows:

• It should be a registered business entity under the Companies Act, 2013;
• It must have a minimum net secured fund of 2 crore Rupees (apart from NBFC-Factors, NBFC-MFIs, CIC).

The net owned money can be derived from the recently audited balance sheet of the company.  Several elements like Capital Reserve, Share Premium Account Balance, Paid-up Equity Capital Free Reserves become a part of the overall owned funds of a business.

Documents Needed For NBFC License Registration and Renewal

• The certificate of Business Incorporation or the Certificate of Commencement of business;
• Management details of the Company along with the available brochure;
• A copy of the PAN card of the business;
• A copy of the Corporate Identity Number (CIN) of the Company;
• All papers verifying the location and address of the business;
• A certified copy of the Memorandum of Association (MoA) of the Company;
• A certified copy of the Articles of Association (AoA) of the Company;
• The credit reports of the Directors of the Company;
• A comprehensive list of Directors' profile, individually filled and attested by each Director;
• A copy of the Board Resolution confirming that the Company has stopped or performed any NBFC activity and will not continue any NBFC activity until Registration from RBI is issues or renewed;
• A copy of self-attested income tax returns and bank statements;
• The Detailed information on the bank accounts, loans, credits, balances, etc.;
• A true certified copy of the Board Resolution passed on “Fair Practices Code”;
• A certificate by Statutory Auditor stating that the Company does not have any public deposit and does not accept such deposits;
• A certificate from the Statutory Auditor mentioning the owned funds of the Company as of the date of application;
• CIBIL record of Directors of Company;
• A copy of the document with details of the exact source of capital for the business;
• The balance sheet audited and profit and loss statement along with the Auditors and Director’s report of the 3 preceding years of the Company;
• The details of the next 3 years’ upcoming plan of the Company along with the forecast of the cash flow statement, income statement, and balance sheet.

NBFC License Registration and Renewal Process

Here is a step-by-step procedure of how to register or renew a NBFC license from RBI.

1. Start with a business setup application

The applicant needs to register the said business under the Companies Act, 2013, as a Public Company or a Private Company. The business should be recorded with the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013.

2. Submit the application on COSMOS

The application should be submitted on the RBI website termed COSMOS (Cluster of Systems of Metadata for Official Statistics).

Apart from the online application submission, a physical copy of the license renewal application with all the necessary documents should be submitted by the applicant to the Regional Office of the Reserve Bank of India (RBI).

3. Opt for Company Registration

The login section of the COSMOS (Cluster of Systems of Metadata for Official Statistics) application, will prompt the application to click on the Company Registration tab.

The applicant can click on the Company Registration of COSMOS (Cluster of Systems of Metadata for Official Statistics) application to move to the next stage.

4. Download the form

A new window will come up showcasing an Excel application form that can be downloaded. Download the application form from the COSMOS website.

5. Fill up the form

Now, fill up the form and furnish the required information. Don’t forget to fill in the right name of the local office in the given “C-8” of “Annex-I Identification Particulars.”

6. CARN Number allocation

Once the form is submitted successfully, a Company Application Reference Number (CARN) will be issued for the Certificate of Recognition (CoR).

7. Submit the application to the regional office

After the receipt of the CARN number, the application form along with all the required documents should be submitted to the Regional Office of the Reserve Bank of India (RBI).

8. Application evaluation by RBI

Now, the RBI (Reserve Bank of India) will thoroughly examine the application and forward it to the head office.

9. NBFC license issuance

If the application form is error-free, and all necessary documents are submitted, the Head Office will issue the NBFC license. In general, an NBFC license is issued within 90 days of the application submission at the head office.

One can track the application status by entering the acknowledgment number.

The Conclusion

So, now you have complete knowledge about NBFC license renewal and registration. For professional support regarding NBFC license renewal, you can consult our skilled and experienced consultants at Registrationwala. Call us today to know more.

Also read:  Benefits of registering a Nidhi Company with the Ministry of Corporate Affairs

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