What are the requirements for registration with RBI?

What are the requirements for registration with RBI?

A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should have a minimum net owned fund of Rs 25 lakh (raised to Rs 2 crore from April 21, 1999).

The company is required to submit its application for registration in the prescribed format alongwith necessary documents for bank's consideration. The bank issues certificate of registration after satisfying itself that the conditions as enumerated in Section 45-IA of the RBI Act, 1934 are satisfied.

Where one can find a list of registered NBFCs and instructions issued to NBFCs?

The list of registered NBFCs is available on the web site of Reserve Bank of India [ Get Quote ] and can be viewed at www.rbi.org.in. The instructions issued to NBFCs from time to time are also hosted at the above site. Besides, instructions are also issued through Official Gazette notifications. Press releases are also issued to draw attention of the public/NBFCs.

Is it necessary that every NBFC should be registered with RBI?

Is it necessary that every NBFC should be registered with RBI?

In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to commence or carry on any business of non-banking financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934.

However, to obviate dual regulation, certain category of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. venture capital fund/merchant banking companies/stock broking companies registered with Sebi, insurance company holding a valid certificate of registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or housing finance companies regulated by National Housing Bank.

What are the different types of NBFCs registered with RBI?

The NBFCs that are registered with RBI are:

• (i) equipment leasing company;
• (ii) hire-purchase company;
• (iii) loan company;
• (iv) investment company.

With effect from December 6, 2006 the above NBFCs registered with RBI have been reclassified as

• (i) Asset Finance Company (AFC)
• (ii) Investment Company (IC)
• (iii) Loan Company (LC)

AFC would be defined as any company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive / economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines.

Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising therefrom is not less than 60% of its total assets and total income respectively.

The above type of companies may be further classified into those accepting deposits or those not accepting deposits.

Besides the above class of NBFCs the Residuary Non-Banking Companies are also registered as NBFC with the Bank.

Definition of NON-BANKING FINANCIAL COMPANY

What is a non-banking financial company (NBFC)?

A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business, but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property.

A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (residuary non-banking company).

NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?

NBFCs are doing functions akin to that of banks, however there are a few differences:

• (i) a NBFC cannot accept demand deposits (demand deposits are funds deposited at a depository institution that are payable on demand -- immediately or within a very short period -- like your current or savings accounts.)
• (ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and
• (iii) deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.

Requirements to be complied with and documents to be submitted to RBI by NBFCs for obtaining certificate and Registration from RBI

Requirements to be complied with and documents to be submitted to RBI by NBFCs for obtaining certificate and Registration from RBI

An indicative list of documents/information to be furnished along with the application. All documents/information is to be submitted in duplicate.

1.	Minimum NOF requirement Rs. 200 lakh.
2.	Application to be submitted in two separate sets tied up properly in two separate files.
3.	Annex II to be submitted duly signed by the director/Authorized signatory and certified by the statutory auditors.
4.	Annex III (directors’ profile) to be separately filled up for each director. Care should be taken to give details of bankers in respect of firms/companies/entities in which directors have substantial interest.
5.	In case the directors are associated or have substantial interest in other companies, indicate clearly the activity of the companies (whether NBFC or not).
6.	Board Resolution specifically approving the submission of the application and its contents and authorising signatory.
7.	Board Resolution to the effect that the company has not accepted any public deposit, in the past (specify period)/does not hold any public deposit as on the date and will not accept the same in future without the prior approval of Reserve Bank of India in writing.
8.	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.
9.	Auditors Certificate certifying that the company is/does not accept/is not holding Public Deposit.
10.	Auditors Certificate certifying that the company is not carrying on any NBFC activity.
11.	Net owned fund as on date.
12.	Certifying compliance with section 45S of Chapter IIIC of the RBI Act, 1934 in which director/s of the company has substantial interest.
13.	Details of changes in the Memorandum and Articles of Association duly certified.
14.	Last three years Audited balance sheet along with directors & auditors report.
15.	Details of clauses in the memorandum relating to financial business.
16.	Details of change in the management of the company during last financial year till date if any and reasons thereof.
17.	Details of acquisitions, mergers of other companies if any together with supporting documents.
18.	Details of group companies/associate concerns/subsidiaries/holding companies.
19.	Details of infusion of capital if any during last financial year together with the copy of return of allotment filed with Registrar of Companies.
20.	Details of the bank balances/bank accounts/complete postal address of the branch/bank, loan/credit facilities etc. availed.
21.	Business plan for next three years indicating market segment to be covered without any element of public deposits.
22.	Cash flow statement, asset/income pattern statement for next three years.
23.	Brief background note on the activities of the company during the last three years and the reasons for applying for NBFC registration.
24.	II(b) is the company engaged in any capital market activity? If so, whether there has been any non-compliance with SEBI Regulations? (Statement to be certified by Auditors).
25.	Whether any prohibitory order was issued in the past to the company or any other NBFC/RNBC with which the directors/promoters etc. were associated? If yes, details there of.
26.	Whether the company or any of its directors was/is involved in any criminal case, including under section 138(1) of the Negotiable Instruments Act? If yes, details thereof.
27.	Whether the company was granted any permission by ECD to function as Full-fledged Money Changers?
28.	Whether the company was/is authorised by ECD to accept deposits from NRIs.
29.	Whether “Fit and Proper” Norms for Directors have been fulfilled.