As the demand for credit nationwide continues to grow, NBFCs are proving their mettle by providing the required financial assistance to diverse clients. They walk in tandem with banks and major institutions to maintain the vigor of the financial sector in India. Their presence has ensured that credits are not only available to wealthy people or prosperous businesses. They have overcome a fundamental gap that prevents needy individuals from qualifying for a loan when it matters the most. That’s why NBFC has become the hottest business model in the current scenario. If you are keen to operate an NBFC in India, this blog can ease the way. Let’s dig into the legal nitties-gritties of securing an NBFC license in India.
Who Should Mandatorily Secure the NBFC License in India?
The following must apply for the NBFC license in India:
A: Asset Finance Company(AFC):
An Asset Finance Company offers financial services relating to automobiles and machinery, primarily serving industrial settings.
B: Investment Company:
An investment company’s primary business revolves around the acquisition of securities (shares/stocks/bonds / other financial securities).
C: Loan Company:
The primary business of a loan company leans toward facilitating making loans or advances, while bearing no resemblance to an Asset finance company.
D: Infrastructure Finance Company:
It is a non-banking finance company that uses 75% of the overall assets in infrastructure loans with an NOF equivalent to 300 crore while maintaining a mandatory credit rating of A. If the credit rating is not achieved, then these companies must maintaina Capital to Risk Assets Ratio of 15%.
E: Systemically Important Core Investment Company:
Systemically Important Core Investment Company sits on an asset size of over Rs. 100 crores. They can accept deposits and acquire shares and securities as a part of their principal business.
F: Infrastructure Debt Fund:
Infrastructure Debt Fund is a company that fuels infrastructure projects with long-term debt via the issuance of bonds having a maturity of 5 years.
G: Non-Banking Financial Company:
Technically known as non-deposit-taking NBFCs, these entities’ primary business revolves around facilitating microfinance services to eligible credit-seekers.
H: NBFC Factor:
NBFC factor, as the name suggests, refers to a non-deposit-taking NBFC whose primary business is to facilitate factoring services.
A Pre-Registration Requirements for an NBFC License
Applying for an NBFC license is a compliance-intensive process that requires an in-depth understanding of RBI regulations. The section below breaks down the pre-registration requirements that an applicant should meet without exception, as it is the only way to qualify for a license:
A: Meet Structure Norms & the “50-50” Test
Make sure your company qualifies as a financial entity before applying for an NBFC license. The Reserve Bank of India (RBI) is a prime regulator of NBFCs and other financial institutions in India. The companies applying for the NBFC license must fulfill the RBI’s Principal Business Test, which essentially means meeting the following requirements:
- Asset Test: The total assets must constitute over 50% of financial assets.
- Income Test: Income from financial assets must constitute over 50% of gross income.
- Corporate Structure: Companies registered under the Companies Act, 2013 (or 1956) can only apply for the license.
B: Fulfill Capital Requirements
The table below showcases the minimum NOF requirements corresponding to the respective role an NBFC intends to serve:
| NBFC Category | Minimum Net Owned Fund (NOF) |
| NBFC-ICC (Investment & Credit Company) | ₹10 Crore |
| NBFC-MFI (Micro Finance Institution) | ₹10 Crore |
| NBFC-Factor | ₹10 Crore |
| NBFC-P2P / Account Aggregator | ₹2 Crore |
| NBFC-IFC (Infrastructure Finance) | ₹300 Crore |
C: Meet Management Norms and Prove Source of Funds
- At least 1/3rd of directors must have 10+ years of experience in banking or finance.
- Directors and shareholders must have clean credit histories.
- You must prove that the capital is not “laundered” or borrowed from banks to start the NBFC.
D: Refer to the Scale-Based Regulation (SBR) Framework
RBI[1] is a unique approach for vetting companies intending to operate as NBFCs in India. It uses the Scale-Based Regulation (SBR) Framework that has four layers, each accommodating different NBFC types and distinct asset thresholds. Here’s what it looks like:
- Base Layer (NBFC-BL): Most new, non-deposit-taking NBFCs with assets below ₹1,000 Crore.
- Middle Layer (NBFC-ML): All deposit-taking NBFCs and non-deposit NBFCs with assets above ₹1,000 Crore.
- Upper Layer (NBFC-UL): Entities specifically identified by the RBI as systemically significant.
- Top Layer (NBFC-TL): Reserved for entities posing extreme systemic risk (currently empty).
Note: As of April 1, 2026, Type I NBFCs (those with no public funds and no customer interface) with an asset size of less than ₹1,000 Crore may be exempted from mandatory registration. However, if you plan to lend to the public or use bank finance, you must obtain a license.
Mandatory Document Checklist for NBFC Registration
- Details about management
- Certified copies of Certificate of Incorporation and Certificate of Commencement of Business for public limited companies, if applicable.
- Updated Memorandum and Articles of Association of the company, highlighting clauses related to financial activities.
- PAN/CIN copy issued to the company.
- Individual profiles of directors, duly completed and signed.
- Certification from respective NBFCs where directors have acquired experience.
- CIBIL data of company directors.
- Financial statements of any unincorporated bodies in the group where directors hold directorship, for the last 2 years.
- Board resolution approving the application submission and authorizing the signatory.
- Board resolution confirming no past or current acceptance of public deposits without RBI[1] approval.
- Board resolution affirming cessation or non-engagement in NBFC activities without RBI registration.
- Certified board resolution for “Fair Practices Code” formulation.
- Auditor’s certificate regarding acceptance or non-acceptance of Public Deposits.
- Auditor’s certificate affirming absence of NBFC activities.
- Auditor’s certificate confirming net owned fund as of the application date.
- Authorized Share Capital details and latest shareholding pattern, including percentages.
- Copy of Fixed Deposit receipt & banker’s certificate of no lien supporting Net Owned Funds.
- Bank account details, loan/credit facilities availed, and branch/bank address.
- Last three years’ audited balance sheet, Profit & Loss account, directors & auditors report.
- Business plan for the next three years, outlining the thrust of the business, market segment, projected balance sheets, cash flow statement, asset/income pattern statement without public deposits.
- Documentation evidencing the startup capital source.
- Self-attested Bank Statement/IT returns, etc.
How to Secure an NBFC License in 2026: A Step-by-Step Guide
The step below will help you secure the NBFC license in India seamlessly, no matter which state your business belongs to:
Step 1: Contact a Seasoned Consultant
Undoubtedly, applying for an NBFC license won’t be an easy ride, especially if you are new to the financial domain. That’s where a seasoned consultant like Advisou comes into play. Partner with them to enjoy seamless company setup and RBI’s approval.
Step 2: Incorporate your company
The next essential step is to register your company either as a private limited company or a public limited company. Whatever structure you choose, drafting a Memorandum of Association (MoA) is mandatory. Ensure it must entail the “Main Object” clause that clearly indicates that your company is in the financial domain and intended to pursue NBFC activities. The consultant can help you meet this requirement seamlessly if required.
Step 3: Capital Infusion
This is the critical stage of the process that requires submitting the minimum NOF (e.g., ₹10 Crore) in a fixed deposit in a designated bank. Ensure that there is no lien or encumbrance tied to this amount; otherwise, the RBI may reject your application. You will need a Statutory Auditor’s Certificate confirming this.
Step 4: File an Online Application
The consultant will head to the RBI’s PRAVAAH portal on your behalf. Upon successful filing, the portal will generate the Company Application Reference Number (CARN).
Step 5: Submission of Hard Copies
If required, the consultant will file the hard copy of the application and documents with the Department of Non-Banking Supervision (DNBS).
Step 6: Scrutiny and “Fit & Proper” Test
Once an application reaches the respective department, the RBI conducts rigorous background checks. Any inaccuracy or factual error in an application or documents can result in rejection. Fortunately, with a consultant like Advisou at your side, you do not have to worry about that.
Mandatory Post-Registration Compliance for NBFCs in India
| Compliance Type | Frequency | Particulars / Form Name | Deadline / Due Date |
| Statutory Reporting | Monthly | FIU-IND Reporting: Filing of Cash Transaction Reports (CTR) and Suspicious Transaction Reports (STR). | By the 15th of the succeeding month. |
| Credit Reporting | Monthly | CIC Data Submission: Uploading customer credit information to CIBIL, Equifax, Experian, and CRIF High Mark. | Within 7–10 days of the month-end. |
| RBI Returns | Quarterly | DNBS-01 & DNBS-03: Returns on Financial Indicators (Assets/Liabilities) and Prudential Norms (Capital Adequacy). | Within 15 days of the quarter-end. |
| Liquidity Risk | Quarterly | DNBS-04A: Short-term dynamic liquidity statement to monitor maturity mismatches. | Within 15 days of the quarter-end. |
| External Audit | Annual | Statutory Auditor Certificate (SAC): Certificate confirming the company continues to meet the “Principal Business Test” (50-50 criteria). | On or before June 30th. |
| Internal Governance | Annual | Board Resolution: A formal resolution stating the company has not accepted and will not accept public deposits. | Within one month of the new FY. |
| Cybersecurity | Annual | IT Strategy & Audit: Submission of an IT examination report or Cybersecurity audit as per RBI’s 2026 IT Framework. | As per the internal audit cycle. |
| Customer Protection | Ongoing | Ombudsman Compliance: Appointment of an Internal Ombudsman (IO) and display of the Integrated Ombudsman Scheme. | Immediately upon CoR receipt. |
| Digital Onboarding | Event-based | CKYC & CERSAI: Uploading KYC data for new customers and registering security interests (charges) on assets. | Within 10 days of onboarding/loan. |
Conclusion
Getting an NBFC license in 2026 is not an easy ride. In fact, it is a roadmap filled with regulatory challenges and tons of legal requirements, which you may find cumbersome to fulfil. That’s where you need a reliable partner like Advisou, who can help navigate the process like no other.
With years of experience under its belt and thousands of satisfied clients nationwide, Advisou stands tall as a top-rated partner for RBI’s licensing needs. Whether you are looking to operate as an account aggregator or an investment company, Advisou will help you meet every goal with precision and unmatched professionalism. Contact us now to book a free consultation.
Also Read: CDSCO License: Complete Guide to Registration, Process, and Fees in India
FAQs
1. Can I start lending while my RBI application is “In-Process”?
Absolutely not. Commencing any financial activity before receiving the Certificate of Registration (CoR) is a serious violation of Section 45-IA of the RBI Act. Doing so can lead to a permanent ban on the promoters from entering the financial sector and heavy monetary penalties.
2. What is the “Type I” vs. “Type II” distinction in the 2026 framework?
Type I: NBFCs that do not accept public funds and have no customer interface (e.g., a group investment holding company).
Type II: NBFCs that either use public funds (like bank loans/CPs) or interact with customers (lending to the public).
As of 2026, Type I NBFCs with assets below ₹1,000 Crore may enjoy registration exemptions, but most commercial lenders fall under Type II and require a full license.
3. Is there a “lock-in period” for the promoters’ equity after getting the license?
Yes. RBI generally expects the initial promoters to remain in control for at least three years post-registration. Any major change in shareholding (26% or more) or management (30% or more) during this period requires prior written approval from the RBI.
4. Can an Indian NBFC be 100% foreign-owned in 2026?
Yes, under the current Automatic Route, 100% Foreign Direct Investment (FDI) is permitted in “Other Financial Services” (including NBFCs), provided the entity is regulated by a financial regulator like the RBI. Note that foreign-owned NBFCs may face stricter “fit and proper” scrutiny for their global directors.
5. What is the “Principal Business Test” (50-50 Test) and how is it calculated?
To remain an NBFC, you must ensure:
- Financial Assets are > 50% of your total assets.
- Income from Financial Assets is > 50% of your gross income.
- If you fail this test for two consecutive years, you are legally required to surrender your NBFC license.
6. Does the ₹10 Crore NOF need to be in cash, or can it be invested?
At the time of application, the NOF must be in the form of unencumbered Fixed Deposits (FDs) in a bank to prove liquidity. Once the license is granted, you can “break” the FD and deploy that capital into your lending or investment business.
7. Can an NBFC switch from a Base Layer (BL) to a Middle Layer (ML) automatically?
Yes. Under the Scale-Based Regulation (SBR), if your asset size crosses the ₹1,000 Crore threshold, you are automatically moved to the Middle Layer. This triggers stricter compliance, such as mandatory Internal Audit and more frequent RBI reporting.
8. Is “Credit Guarantee” (DICGC) available to NBFC depositors?
No. Unlike banks, where deposits up to ₹5 lakh are insured by the DICGC, NBFC deposits (if the NBFC is deposit-taking) carry no such guarantee. This is why RBI is extremely restrictive in granting “Deposit-taking” status to new NBFCs.
9. Can I buy an “Existing” NBFC license instead of applying for a new one?
Yes, this is known as an NBFC Takeover. It is often faster than a fresh application but requires “Prior Approval” from the RBI. The buyer must undergo the same “Fit & Proper” test as a new applicant, and a 30-day public notice must be issued in newspapers before the transfer.
10. What happens if my application is rejected? Is there a cooling-off period?
If the RBI rejects your application, you generally cannot reapply for a period of one year from the date of rejection. It is vital to ensure your 5-year business plan and “source of funds” documentation are flawless in the first attempt.
