Appeal Against the NBFC License Cancellation in High Court

  • June 29, 2023
  • Dushyant Sharma
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For the financial year 2023, the RBI has canceled the Certification of Registration of 17 non-banking financial companies. On the basis of the power of RBI under section 45-IA of the RBI Act 1934. 


Also, the number of NBFCs is decreasing year by year because of the increase in Net Owned Funds (NOF). In the single financial year 2019, the RBI canceled the 1701 certification of registration and licenses of NBFCs.


In this article check what are the reasons behind canceling the NBFC license and how companies can file an appeal for the petition regarding the cancellation.

What is NBFC License?

An Non-banking Financial Company is involved in the business of financial activities, it can include secured & unsecured loans, lending investments, or any other business which is specified in the Section 45-IA of the RBI Act, 1934 or Companies Act 2013.

However, NBFC doesn’t require a banking license to set up a business and provide financial services. But they must follow the rules and regulations of the Reserve Bank of India (RBI). 

If at any point RBI found that the NBFC activities are not as per the RBI Act, 1934 or not working in the favor of the public interest then RBI has the autonomy to cancel the CoR or NBFC license.

Procedure Followed by RBI for the Cancellation of NBFC License

  • If RBI found that the business is not running as per the rules and provisions specified in the RBI Act, 1934, or not working in the interest of the public, then RBI has the power to cancel a certificate of registration of NBFC.
  • The RBI has to communicate the reason or ground behind the cancelation of the license with the company whose license is being canceled.
  • As per Section 45-IA, the RBI must give an opportunity to the NBFC to meet the prescribed requirements.
  • The RBI can send a show-cause notice to the company by stating why action doesn’t take against that breaking of the law.
  • Before canceling the license, the RBI must give a chance to the company to be heard and change their action. Any delay in canceling the certificate or license will back the public interest, the interest of the depositor, or the NBFC.


Here’s something important, RBI can ask for the penalty in the monetary form in case of failure or default in compliance with the requirements specifies in the RBI act, rules, and regulations. Hence, the cancellation of CoR can’t be ordered by RBI if the law provides other preventive measures.

The Circumstances in Which Written Petition can be File in a High Court

The following are the circumstances in which a written petition can be filed in a high court after the cancellation of the NBFC license:

  1. If the requirement of net owned fund will be fulfilled by the company by the 31st March 2027.
  2. If the opportunity to be heard is not provided to the company the RBI.
  3. The reply of the show cause notice issued by RBI has been sent within the given time period.

How To File Appeal Against NBFC License Cancellation?

An NBFC can file an appeal in the high court as per the RBI Act, 1934, under sub-section (7) of Section 45-IA. And, the NBFC can submit the appeal to the Department of Financial Services. 

However, from the date of cancellation, the NBFC must file the petition within 30 days. Under Article 226 of the constitution, the company can file a writ petition in High Court.

The following are the steps to file an appeal:

  1. Carefully check your compliance with the ROC (Registrar of Companies)
  2. Check your RBI Returns (NBS-9)
  3. Tax Audit Reports
  4. Quality test of Assets and Liability
  5. Minimum Net Owned Fund of Rs. 10 crores.
  6. Right reasons for filing an appeal


As the NBFC has become an important part of the financial system, the RBI has become more strict in following the rules and regulations. If any suspicious activity can lead to the cancellation of CoR and license. 


At Registrationwala, we assist NBFCs to maintain all the set requirements of RBI. Also, we help them to obtain a license with end-to-end support. If you want to register for NBFC then reach out to us.



Also read:  Reasons Behind NBFC License Cancellation

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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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