Get Online NBFC Registration in India
Although it offers financial services and products, a non-banking financial company, sometimes referred to as a non-banking financial institution, is not recognized as a bank with an official banking license. Although they do not function as banks, NBFCs do engage in lending as well as other operations including advances and loans, credit facilities, savings and investment products, money market trading, stock portfolio management, money transfers, and so forth. The NBFC has taken the road of mainstream institutions when it comes to availing financial services in India.
Right Business Model to Choose for NBFC Registration
There are different forms of Business Models to choose under the law when it comes to NBFC Registration. Choosing the right model for the business is equally important for registration as the business structure decides many factors such as taxation slabs, leverages, regulatory statutes, etc. There are major three categorizations of NBFCs based on Size, Liabilities, and activities:
NBFCs based on Liabilities
1. Deposit Accepting NBFCs
Deposit-accepting NBFCs are such NBFCs that are open to accepting deposits from the general public. Moreover, this form of NBFC has also to comply with the statutory liquidity requirements laid down within the RBI guidelines.
NBFCs accepting public deposits with total assets of at least Rs 100 crore must furnish monthly return on capital market exposure. NBFCs are required to maintain a minimum level of liquid assets of 15% of outstanding public deposits as of the final business day of the quarter before.
2. Non-Deposit Accepting NBFCs
Non deposit-accepting NBFCs are NBFCs that do not accept deposits from the general public. Non-deposit-taking non-bank financial institutions (NBFCs) with assets over Rs. 50 crore but under Rs. 100 crore must file a quarterly return covering key financial metrics. Non-deposit-taking NBFCs with asset sizes between Rs. 50 crore and Rs 100 crore must disclose basic information every quarter, such as the company name, address, NOF, and profit or loss for the last three years.
NBFCs based on Asset Size
1. Systematically Important NBFCs [NBFC-ND-SI]
Systematically important NBFCs or NBFC-SI are those NBFCs possessing net assets of Rs 500 crore or more as per the latest audited balance sheet.
2. Non-systematically Important NBFCs
Non-systematically important NBFCs are NBFCs that possess net assets up to Rs 500 crore as per the latest audited balance sheet.
NBFCs based on Activities
1. Asset Finance Company (AFC)
It is a financial institution that primarily engages in financing physical assets supporting economic and productive activity. The range of assets includes tractors, cars, lathe machines, earth moving, generator sets, material handling equipment, self-powered vehicles, and general-purpose industrial machines.
For this definition, the company’s principal business is the totality of financing real and physical assets that support economic activity and the income generated from such activities, which accounts for at least 60% of the company’s total assets and income.
2. Investment Company (IC)
An investment company or IC refers to any such company acting as a financial institution that carries the acquisition of securities as its primary business.
3. Loan Company (LC)
LC refers to any financial organization that does lending, advances, or other forms of financing for businesses other than its own as its primary operation; asset finance companies are not included in this definition.
4. Infrastructure Finance Company (IFC)
As a non-banking finance business, IFC offers services related to infrastructure loans to fund at least 75% of its total assets. It must have a minimum Net Owned Funds of ₹ 300 crore along with a minimum credit rating of ‘A’ (or equivalent), and a 15% CRAR.
5. Systemically Important Core Investment Company (CIC-ND-SI)
With an asset size of Rs 100 crore (or more), CIC-ND-SI is an NBFC that accepts public funds and engages in the business of acquiring shares and securities that meet a variety of requirements. The requirements state that it must own debt, loans, preference shares, equity shares, or other investments in group firms for at least 90% of its total assets. Furthermore, at least 60% of its total assets are made up of its investments in group company equity shares (including instruments that are mandatory convertible into equity shares within a maximum of ten years from the date of issue).
It only engages in block sales to dilute or disinvest its investments in shares, debt, or loans in group firms. Furthermore, it must refrain from engaging in any other financial activity covered by Sections 45I(c) and 45I(f) of the RBI Act, 1934, except investing in government securities, bank deposits, money market instruments, loans to group companies, and guarantees issued on their behalf.
6. Infrastructure Debt Fund- Non-Banking Financial Company (IDF-NBFC)
it is a form of business structure that was established to help long-term debt flow into infrastructure projects. It is registered as an NBFC. IDF-NBFC raises capital by issuing bonds with a minimum five-year maturity denominated in dollars or rupees. IDF-NBFCs can only be sponsored by companies like Infrastructure Finance Companies (IFC).
7. Non-Banking Financial Company– Factors (NBFC-Factors)
The primary activity of NBFC-Factor, an NBFC that does not accept deposits, is factoring. A factoring company’s financial assets should make up at least half of its total assets, and the revenue it receives from factoring should equal at least half of its gross revenue.
8. Mortgage Guarantee Companies (MGC)-
Financial institutions known as MGC have net owned funds of ₹ 100 crore and at least 90% of their business turnover comes from mortgage guarantee business or mortgage guarantee business at least 90% of the gross income comes from.
9. NBFC- Non-Operative Financial Holding Company (NOFHC)
NOFHC will allow promoters or promoter groups to establish a new bank. To an extent that is permitted by the relevant regulatory prescriptions, the bank and all other financial services businesses governed by the RBI or other financial sector authorities will be held by the wholly-owned Non-Operative Financial Holding Company (NOFHC).
10. (NBFC-MFI)
At least 85% of the assets held by NBFC-MFI, a non-deposit accepting NBFC, are qualifying assets that satisfy several criteria. To be eligible for a loan from an NBFC-MFI, a borrower must meet certain conditions, such as having an annual family income in rural areas of no more than ₹1,00,000 or an income in urban or semi-urban areas of no more than ₹1,60,000. Furthermore, the maximum loan amount in the first cycle is ₹50,000, and in the subsequent cycles, it is ₹1,00,000.
In addition, the borrower’s total debt cannot be more than ₹1,00,000, and the loan period cannot be shortened to less than 24 months without incurring penalties for early repayment if the loan amount exceeds ₹15,000. Furthermore, the loan must be issued without collateral and must account for at least 50% of the total loans made by MFIs to be granted to generate revenue. It is important to remember that the borrower may choose to return the loan in weekly, fortnightly, or monthly installments.
Summary
Although it offers financial services and products, a non-banking financial company, sometimes referred to as a non-banking financial institution, is not recognized as a bank with an official banking license. Although they do not function as banks, NBFCs do engage in lending as well as other operations including advances and loans, credit facilities, savings and investment products, money market trading, stock portfolio management, money transfers, and so forth. The NBFC has taken the road of mainstream institutions when it comes to availing the financial services in India. https://www.registerkaro.in/
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