Non-Banking Financial Companies play a critical role in the indian financial system, offering credit investment and providing all kinds of financial services without the banking system. Operating an NBFC without regulatory approval is not permitted. Even entities that engage in non-banking financial business must comply with the RBI-mandated NBFC registration process in India.
This article explains the entire NBFC License Registration Process in India, covering the key eligibility requirements, the necessary paperwork, those pesky registration fees, the step-by-step process itself, and the all-important post-registration obligations with RBI’s rules and regulations.
Understand the Importance of NBFC Licence
Getting an NBFC licence from the RBI is not merely a formality; It’s written into law through Section 45-IA of the RBI Act of 1934. Running such operations without the proper registration certificate means breaking that rule. No company can continue non-banking financial business without securing a Certificate of Registration (CoR) from the RBI.
The importance of the NBFC licensing lies in the following aspects:
- Maintain financial consistency and public confidence.
- Secure borrowers and investors through regulatory management
- Permit the lawful conduct of lending and investment activities
- Improve credibility with banks, investors, and regulators
- Prevents unauthorized financial operations
The RBI[1] reviews NBFC applications to permit only financially sound and properly governed entities to operate.
Who Can Apply for an NBFC Licence in India?
Only specific legal entities are eligible to apply for an NBFC licence in India. The RBI allows only companies incorporated under the Companies Act to seek registration.
Eligible applicants include:
- Private Limited Companies
- Public Limited Companies
Entities not eligible for NBFC registration include:
- Limited Liability Partnerships (LLPs)
- Partnership firms
- Proprietorships
- Trusts and societies
The applicant company must be incorporated in India and must intend to carry on financial activities as its principal business.
Eligibility Criteria for NBFC Licence
Before starting the full NBFC registration and licensing process in India, applicants have to sort out whether they qualify under the checklist laid out by the Reserve Bank of India
Principal Business Criteria
The company must satisfy the RBI’s 50-50 principal business test, which means:
- At least 50% of total assets should be financial assets, and
- At least 50% of gross income should be derived from financial activities
Only companies meeting this condition are classified as NBFCs under RBI norms.
Net Owned Funds (NOF)
The applicant must maintain the minimum Net Owned Funds as specified by the RBI. The NOF requirement varies depending on the category of NBFC. For most NBFC categories, such as Investment and Credit Companies, RBI currently prescribes a minimum NOF of ₹10 crore, while certain specialised NBFCs have different thresholds.
Fit and Proper Management
The directors and promoters must meet RBI’s fit and proper criteria, which include:
- Clean credit history
- No criminal background
- Relevant experience in finance or management
- No adverse regulatory records
Proper Business Model
RBI evaluates the viability, sustainability, and risk management framework of the proposed NBFC business before granting approval.
Documents and Charges
Documents Required
The documentation stage is one of the most critical parts of the NBFC license registration process in India. The following documents are typically required:
- Certificate of Incorporation issued by RoC
- Memorandum and Articles of Association with financial objects
- Board resolution approving NBFC registration
- Directors’ identity, address proof, and PAN
- Directors’ credit (CIBIL) reports
- Net Owned Funds certificate issued by a Chartered Accountant
- Banker’s certificate confirming capital funds
- Detailed five-year business plan and financial projections
- Internal policies on KYC, AML, and risk management
Incomplete or inconsistent documentation often leads to delays or rejection.
Fees and Charges
RBI does not charge a fixed public fee for NBFC registration, but applicants should account for:
- Professional fees (CA, CS, legal consultants)
- Documentation and certification costs
- Compliance and audit setup expenses
The total cost varies depending on the complexity of the NBFC structure and professional involvement.
Step-by-Step Registration Process
The complete NBFC registration and licensing process in India follows a structured approach:
Step 1: Company Incorporation
Form a company under the Companies Act and ensure that the primary object clause in the MoA clearly mentions financial activities.
Step 2: Capital Infusion
Transfer the prescribed Net Owned Funds into the company’s bank account and obtain necessary CA and bank certifications.
Step 3: Business Plan Preparation
Prepare a detailed business plan covering:
- Nature of financial services
- Intended customer base
- Operational approach
- Risk management systems
- Financial projections performance
Step 4: Online Application to RBI
Submit the application online on RBI’s COSMOS portal; after submission, the system generates the Company Application Reference Number (CARN) for tracking and future correspondence.
Step 5: Physical Submission
After online submission (CARN generation), submit the prescribed/required hard copies of the application and supporting documents to the concerned RBI Regional Office, as applicable.
Step 6: RBI Review Process
The RBI reviews the application, verifies background details, and may raise queries, so timely responses are crucial.
Step 7: Grant of Certificate of Registration
Once the RBI is satisfied, it issues the Certificate of Registration (CoR), allowing the company to commence NBFC operations.
Post Registration Responsibilities
Once the NBFC licence has been granted, the company has to keep complying with all sorts of regulatory obligations set out by the Reserve Bank of India, including:
- Getting statutory returns and regulatory statements filed on time
- Keeping on top of capital adequacy and prudential requirements at all times
- Following the guidelines for Know Your Customer (KYC) and Anti-Money Laundering (AML)
- Proper risk management systems and internal controls
- Getting in the statutory auditors and fulfilling the disclosure requirements that are required
Failure to meet post-registration obligations may invite regulatory action, including monetary penalties or cancellation of the NBFC licence.
Conclusion
Navigating the NBFC license registration process can be challenging, but with the right preparation and understanding of RBI requirements, you can avoid common mistakes and ensure a smooth approval.
Consulting firms like Advisou can assist with NBFC license registration, documentation, and compliance management, reducing errors and delays while allowing directors to focus on business growth and strategy.
Also Read: PSARA License Registration for Security Agencies in India
