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NBFC Consultancy

NBFCs have been playing a constructive role in the economic growth of the country by serving as important lynchpins in the financial system. These companies are the mobilizers of savings of the household sector and the corporate sector has to channelize the same into productive activities of the manufacturing industry and the services sector. Although in India, the NBFCs have been around since many decades, still their growth really started off in the 1990’s and now it is governed with lot of regulations.

Now, Non-Banking Finance Companies (NBFCs) are a constituent of the institutional structure of the organized financial system in India. The Financial System of any country consists of financial markets, financial intermediation and financial instruments or financial products. All these items facilitate transfer of funds and are not always mutually exclusive. Inter-relationships between these are a part of the system Eg Financial Institutions operate in financial markets and are therefore, a part of such markets.

Regulatory Framework For Nbfc:

The NBFC (Non-Banking Financial Company) sector has evolved considerably in terms of its size, operations, technological sophistication and entry into newer areas of financial services and products. NBFCs are now deeply interconnected with the entities in the financial sector, on both sides of their balance sheets. Being financial entities, they are as exposed to risks arising out of counterparty failures, funding and asset concentration, interest rate movement and risks pertaining to liquidity and solvency, as any other financial sector player. At the same time there are segments within the sector that do not pose any significant risks to the system. There is therefore, a felt need to address the risks, without impeding the dynamism displayed by NBFCs in delivering innovation and last mile connectivity for meeting the credit needs of the productive sectors of the economy.

Documents Required of NBFC Consultancy:

Documents required will defer depending on what you are looking forward to. If you have received any communication from Bank being an existing NBFC, you are welcome to connect with us at info@ccoffice.in and we will be more than happy to connect. If you are looking for consultancy in terms of NBFC Registration, below content will be of immense help to you.

For Incorporation of a New Company

Proposed Names & Significance of Names
Kindly inform us about the Main Objects/Activities to be carried out by the company containing financial business activity
Company Details:
- Authorized Share Capital (Both Number & Amount): _________
- Subscribed Capital (Both Number & Amount): _________
  (*Amount to be deposited in Bank Account within 180 days)
- Registered office Address: _________
  - Proof of Registered Office of the Company:
    - Electricity Bill (not older than 2 months & Self-Attested by Owner)
    - Index- II (in case of self-acquired property) or rent agreement/lease agreement.
    - NOC from the Owner of Premises (will be prepared by us)
- E-Mail Id of the Company: _________
- Phone No. of the Company: _________
Directors Details:
- Number of Directors: ____
- Number of Directors having DIN: _____

Details of Subscribers Required: (to be provided for all the directors)

DIN:
Full Name:
Fathers Name:
Place of Birth:
Occupation:
Education Qualification:
Personal Mobile No:
Personal E-mail ID:
Duration of Stay at present Address ______years ______ months.
Number of Shares Subscribed (Both Number & Amount):
DSC (if not having DSC requirements of same are mentioned below)

Documents of Directors Required: (to be provided for all the directors)

KYC of all the directors (self-attested).
Passport Size Photograph/Scanned Copy of Photo of all the directors in JPG format whose size should not exceed 100 KB and photo should be clear.

Additional documents required for Directors not having DIN:

Identity Proof of all directors- any one of the following (self-attested in BLUE INK):

Voters Identity Card
Passport
Driving License

Address Proof of all Directors (Should be in the name of respective person): - any one of the following (not older than 2 months)- self attested in BLUE INK

Electricity bill or
Telephone bill or
Mobile bill or
Bank statement

FOR OBTAINING NBFC LICENSE

Sr.No	DOCUMENTS
1.	Certified Copies of Certificate of Incorporation of the Company
2.	Certified Copies of Memorandum and Articles of Association of the Company. Extract of MOA containing clauses relating to financial business activity.
3.	Details of the Management of the Company
4.	Certified copy of PAN Allotted to the Company
5.	Certified copy of Board Resolution stating that the company is not carrying on any NBFC activity/stopped NBFC activity and will not carry on/commence the same before getting registration from RBI
6.	Certified copy of Board Resolution for formulation of Fair Practices Code as per RBI Guidelines
7.	Certified copy of Board Resolution to the effect that the company has not accepted public funds in the past/does not hold any public fund as on the date and will not accept the same in the future without the approval of Reserve Bank of India
8.	Certified copy of Board Resolution stating the Unincorporated Bodies in the group where the director holds substantial interest or otherwise has not accepted any public deposit in the past /does not hold any public deposit as on the date and will not accept the same in future
9.	Copy of Fixed Deposit receipt & Bankers certificate of no lien indicating balances in support of Net Owned Fund
10.	Brief profile of the Directors of the Company and signed by each Director
11.	CIBIL Data pertaining to Directors of the Company
12.	Details of Authorised Share Capital and latest shareholding pattern of the company including the percentages.
13.	Details of the bank balances/bank accounts/complete postal address of the branch/bank loan/credit facilities etc availed
14.	Self-attested Bank Statement/IT Returns etc.
15.	Source of the startup capital of the company substantiated with documentary evidence
16.	Statutory Auditors Certificate certifying that the Company is/does not accept/is not holding Public Deposit/is not carrying on any NBFC activity/Net Owned Fund as on the date of application
17.	Last three years Audited Balance Sheet and Profit & Loss account along with directors & auditors report or for such shorter period as are available (for companies already in existence.
18.	Business plan of the company for the next three years giving details of it’s (a) thrust of business, (b) market segment, and (c) projected balance sheets, cash flow statement, asset/income pattern statement without any element of public deposits.
19.	Banker’s report in respect of applicant company, its group/subsidiary/associate/holding company/related parties, directors of the applicant company having substantial interest in other companies The Banker’s report should be about the dealings of these entities with these bankers as a depositing entity or a borrowing entity. Note: Please provide bankers report from all the bankers of each of these entities and provide the report for all the entities. The details of deposits and loans balances as on the date of application and the conduct of the account should be specified.
20.	Any other documents as may be required by RBI

Procedure For NBFC Consultancy:

Basis of your requirements, the procedural aspect will follow. You are requested to connect with us at info@ccoffice.in to make us understand what you are looking forward to under NBFC consultancy. However, if you are looking forward to NBFC Registration, below is the content you should not miss out reading.

Sr. No

PARTICULARS

PROCEDURE

FORMATION OF COMPANY

The first step is to form a New Company registered under the Companies Act 2013. The name must reflect the character of an NBFC. Words such as Finance, Investment, Finvest, Finstock etc. may be used as part of the name. In general, RBI does not allow names which are not reflecting the characteristics of NBFC.

MINIMUM NET OWNED FUND

The requirement of Minimum Net Owned Fund has been increased from Rs 2 Crores to Rs 10 Crores (Vide RBI Circular DOR.CRE.REC.No.60/03.10.001/2021-22dated 22^nd October 2021. It must be ensured that the Authorised Capital of the NBFC is not less than Rupees Ten Crores.

After the incorporation of a new Company the Paid-up Equity Capital of the Company should suitably rose either at par or premium so as to attain a minimum Net Owned Fund. The Capital to be raised here should be Equity Share Capital and not Preference Share Capital. RBI vide its Notification dated 22^nd October 2021, has brought changes in regulatory minimum net owned fund (which shall be effective from 01^st October 2022)

NBFCs	Current NOF	By March 31,2025	By March 31,2027
NBFC-ICC	₹2 crore	₹5 crore	₹10 crore
NBFC-MFI	₹5 crore (₹2 crore in NE Region)	₹7 crore (₹5 crore in NE Region)	₹10 crore
NBFC -FACTORS	₹5 crore	₹7 crore	₹10 crore

But for NBFC-P2P, NBFC-AA, and NBFCs with no public funds and no customer interface, the NOF shall continue to be ₹2 crore. Also there is no change in the existing regulatory minimum NOF for NBFCs - IDF, IFC, MGCs, HFC, and SPD.

The Net Owned Funds would be calculated based on the last audited balance sheet of the Company. Net owned Fund will consist of paid up equity capital, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of assets but not reserves created by revaluation of assets. From the aggregate of items will be deducted accumulated loss balance and book value of intangible assets, if any, to arrive at owned funds. Further, investments in shares of other NBFCs and in shares, debentures of subsidiaries and group companies in excess of ten percent of the owned fund mentioned above will be deducted to arrive at the Net Owned Fund.

OPENING OF A BANK ACCOUNT

The entire sum of Rs 2 crores should be kept in a bank in a Deposit Account free from all liens. Normally funds are kept in Fixed Deposit. The RBI at the time of considering the application for the grant of Certificate of Registration verifies the deposits held by the Company with the Bankers.

APPLYING ON-LINE TO RBI

a) The applicant Company is required to apply online and submit a physical copy of the application along with the necessary documents to the Regional Office of the Reserve Bank of India. The application can be submitted online by accessing RBI’s secured website https://cosmos.rbi.org.in. At this stage, the applicant company will not need to log on to the COSMOS Application and hence user ids are not required.

b) The company can click on “CLICK” for Company Registration on the login page of the COSMOS Application. A window showing the Excel application form available for download would be displayed.

c) The company can then download suitable application form (i.e. NBFC or SC/RC) from the above website, key in the data and upload the application form.

d) The company may note to indicate the correct name of the Regional Office in the field “C-8” of the “Annex-Identification Particulars” in the Excel application form.

e) The company would then get a Company Application Reference Number for the CoR application filed on-line. Thereafter, the company has to submit the hard copy of the application form (indicating the online Company Application Reference Number) along with the supporting documents, to the concerned Regional Office. The company can then check the status of the application from the above mentioned secure address, by keying in the acknowledgement number.

FILING OF SOME ADDITIONAL DOCUMENTS

In addition to the documents required to be enclosed along with Application Form, the following should also be enclosed:

a) Copy of E-Form Spice 32

b) Experience Certificate or Details of Experience of Directors, if any, in NBFC Business

c) Banker’s Report in the format prescribed by RBI with the request to Bank that original should be directly sent to RBI

d) Banker’s Report of all the Firms/Company/Proprietorship Concern in which the director holds substantial interest

e) Board Resolutions in the matter of Application for granting Certificate of Registration, Non-Acceptance of Public Deposits and Non carrying business of Non-Banking Financial Institution without Certificate of Registration.

f) Board Resolution adopting a Fair Practices Code and a copy of the said Code.

g) Declaration from Directors to give effect that they are not associated with unincorporated bodies u/s 45-S of RBI Act,1934

The application is to be filed with the Regional Office of RBI whose jurisdiction; the registered office of the Company falls.

GRANTING OF CERTIFICATE

After the same is filed, the same is examined by RBI and further documents and clarifications may be sought from time to time. Finally, if RBI considers that the application is complete in all respects and all required formalities and compliances are met, the RBI issues Certificate of Registration.

Features Of NBFC Consultancy

Revised Scale Based Regulatory Framework For Nbfcs:

Reserve Bank of India vide its Notification RBI/2021-22/112 DOR.CRE.REC.No.60/03.10.001/2021-22 on 22nd October 2021 brought a new regulatory structure for NBFCs i.e Scale Based Regulation (SBR) whose guidelines will be effective from 1st October 2022.

Four Layers Of Nbfcs:

References To Nbfcs W.e.f 01st October 2022):

It is clarified that existing NBFC-ND-SIs having asset size of ₹500 crore and above but below ₹1000 crore (except those necessarily featuring in Middle Layer) will be known as NBFC-BL.

Changes In Net Owned Fund For All Layers Of Nbfcs:

NBFCs	CURRENT NOF	BY MARCH 31,2025	BY MARCH ,2027
NBFC- Micro Finance Institution	₹5crore (₹2 crore in NE Region)	₹7crore (₹5 crore in NE Region)	₹10crore
NBFC-ICC	₹2crore	₹5crore	₹10crore
NBFC-Factors	₹5crore	₹7crore	₹10crore

For NBFC-P2P, NBFC-AA, and NBFCs with no public funds and no customer interface, the NOF shall continue to be ₹2 crore. It is clarified that there is no change in the existing regulatory minimum NOF for NBFCs – IDF, IFC, MGCs, HFC, and SPD.

There shall be no difference in the NOF Requirement for NBFCs registered in the NE Region.

Changes In Npa Classification:

The extant NPA classification norm stands changed to the overdue period of more than 90 days for all categories of NBFCs. A glide path is provided to NBFCs in Base Layer to adhere to the 90 days NPA norm as under –

NPA Norms	Timeline
>150 days overdue	By March 31, 2024
>120 days overdue	By March 31, 2025
> 90 days overdue	By March 31, 2026

Explanation: The glide path will not be applicable to NBFCs which are already required to follow the 90-day NPA norm.

Frequently Asked Questions

What is the effective date of Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs?

The effective date of the Guidelines is 1st October 2022 except the ceiling of ₹1 crore per borrower for financing subscription to Initial Public Offer (IPO). NBFCs can fix more conservative limits shall come into effect from 1st April, 2022.

What are the regulatory guidelines for NBFCs in Base Layer?

NBFCs Base Layer (NBFC-BL) shall be subject to regulations as currently applicable to NBFC-ND, except for the changes mentioned i.e Net Owned Fund and NPA Classification. NBFC-P2P, NBFC-AA, and NOFHC shall be subject to extant regulations governing them.

What are the regulatory guidelines for NBFCs in Middle Layer?

NBFCs Middle Layer (NBFC-ML) shall be subject regulations as currently applicable for NBFC-ND-SIs, NBFC-Ds, CICs, SPDs and HFCs, as the case may be, except for the changes mentioned i.e. Net Owned Fund and NPA Classification.

What are the regulatory guidelines for NBFCs in Upper Layer?

NBFCs lying in the Upper Layer (NBFC-UL) shall be subject to regulations applicable to NBFC-ML in addition to the changes mentioned i.e Net Owned Fund and NPA Classification.

What does progressive application of regulations mean?

Regulatory revisions applicable to lower layers of NBFCs will automatically be applicable to NBFCs residing in higher layers, unless stated otherwise.

HOW COMPLIANCE CALENDAR LLP CAN HELP YOU?

RBI has brought many changes in the regulatory framework for NBFCs. The NBFCs Regulations governing NBFCs (Non-Banking Financial Companies) are too vast and complex for which one would require experienced NBFC Consultant who can provide you legal guidance and knowledge regarding understanding the complex structure of NBFCs i.e NBFC Company Registration, Different kinds of NBFCs, Compliance of RBI Regulations, Companies Act Compliances, RBI Returns etc. We at Compliance Calendar LLP has a team of professionals who can provide you proper consultation in understanding and complying the laws, rules & regulations governing NBFCs in an efficient and time saving manner. If you are looking for NBFC Consultancy, you are welcome to connect with us at info@ccoffice.in or call us at +91-9988424211 to book your one-time free consultation and we will be more than happy to help you out.

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