How to start a NBFC in India

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NBFC is most popular and common terms who wish to start finance / lending business . For startup there some substitutes like Nidhi company Section, Section 8 Micro finance, credit cooperative society. NBFC license provided access of CIBIL Score.

We have written earlier also,

Non-banking financial incorporation (NBFC) are fast emerging as an important segment of Indian economy. NBFC offers almost everything as banks do, performing financial intermediation in a variety of ways, making loans, accepting deposits, and advances, leasing, hire purchase, etc. NBFC can raise funds from the public, directly or indirectly, and can freely lend them to ultimate spenders. The minimum tenure to accept deposits is 12 months and the maximum period of 60 months. NBFC advance loans to the various small wholesale and retail traders and self-employed persons. NBFC is very popular due to attractive interest rates on deposits.

The working and operations of NBFCs are regulated by the Reserve Bank of India (RBI) within the framework of the Reserve Bank of India Act. Section 45-IA provides that no NBFC shall commence or carry on the business of Non- Banking Financial Institution without obtaining a Certificate of Registration issued by the Reserve Bank of India.

A Non-Banking Financial Company (NBFC) Similar To That Of A Bank, Except For The Following Differences:

  • It cannot accept demand deposits
  • It cannot issue cheque drawn on itself
  • Non-banking financial incorporation (NBFC) in India is classified under three types: *Asset finance companies (AFC)*investment company (IC)*Loan company (LC)

Non-Banking Finance Companies (NBFC) Is Classified Into The Following Categories:

  • Development finance institutions
  • Investment companies
  • Discount & guarantee houses
  • Corporate development companies
  • Venture capital companies
  • Leasing companies
  • House finance companies
READ  How to start a micro-finance firm in India

Advantages Of An NBFC

  • Provides loans and credit facilities to Public
  • Trading money market instruments
  • Funding private education & Business
  • Wealth management
  • Discounting services e.g. discounting of instruments
  • Underwrite stock and shares, TFCs and other obligations

Procedure For NBFC Registration :

  1. Company Registration

The first step is to form a new Company (Private Limited or Public Limited) under the Companies Act

2. Minimum Net Owned Fund

NOF should be Rs. 200 Lac After the incorporation of a new Company in the form of Equity share capital. The Capital to be raised after incorporation of a company here should be Equity Share Capital and not Preference Share Capital.

3. The Opening Of A Bank Account

The amount which is received post incorporation of the company shall be deposited in a bank account as Fixed Deposit and its must be free from all aliens.

4. Application to RBI for Business Operations.

5. RBI will conduct due diligence and will issue certificate of commencement of business.

Documents Required

From All Directors And Shareholder.

  • Certified copy of up-to-date Memorandum and Articles of Association of the Company.
  • Banker’s Report in a sealed envelope.
  • Auditors report about receipt of minimum net owned fund.
  • A certificate of Chartered Accountant regarding details of group/associate/subsidiary/holding companies along with details of investments in other NBFCs as shown in the Proforma Balance Sheet

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