{"id":4422,"date":"2022-05-16T14:16:44","date_gmt":"2022-05-16T14:16:44","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=4422"},"modified":"2022-05-16T14:16:44","modified_gmt":"2022-05-16T14:16:44","slug":"all-about-the-nbfc-non-banking-financial-corporation","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/all-about-the-nbfc-non-banking-financial-corporation\/","title":{"rendered":"All about the NBFC (Non-Banking Financial Corporation)"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d15f48258c1\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d15f48258c1\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-the-nbfc-non-banking-financial-corporation\/#All_about_the_NBFC_Non-Banking_Financial_Corporation\" title=\"All about the NBFC (Non-Banking Financial Corporation)\">All about the NBFC (Non-Banking Financial Corporation)<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-the-nbfc-non-banking-financial-corporation\/#NON-_Banking_Financial_Corporation_NBFC\" title=\"NON- Banking Financial Corporation (NBFC)\">NON- Banking Financial Corporation (NBFC)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-the-nbfc-non-banking-financial-corporation\/#Exclusions_from_the_NBFC_definition\" title=\"Exclusions from the NBFC definition\">Exclusions from the NBFC definition<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-the-nbfc-non-banking-financial-corporation\/#Meaning_of_Principal_Business\" title=\"Meaning of Principal Business:\">Meaning of Principal Business:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-the-nbfc-non-banking-financial-corporation\/#Kind_of_NBFCs_Non_Banking_Financial_Companies\" title=\"Kind of NBFCs (Non Banking Financial Companies):-\">Kind of NBFCs (Non Banking Financial Companies):-<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-the-nbfc-non-banking-financial-corporation\/#NBFC_FORMATION_PROCEDURE\" title=\"NBFC FORMATION PROCEDURE\">NBFC FORMATION PROCEDURE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/all-about-the-nbfc-non-banking-financial-corporation\/#Non-Banking_Financial_Company_needs_to_follow_Following_Guidelines\" title=\"Non-Banking Financial Company needs to follow Following Guidelines:\">Non-Banking Financial Company needs to follow Following Guidelines:<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"All_about_the_NBFC_Non-Banking_Financial_Corporation\"><\/span><span style=\"color: #000080;\"><strong>All about the NBFC (Non-Banking Financial Corporation)<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone  wp-image-4425\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/05\/NBFC..jpg\" alt=\"NBFC.\" width=\"1056\" height=\"703\" \/><\/p>\n<ul>\n<li>It is a company known as Non-Banking Financial Corporation\u00a0 incorporated under the Companies Act 1956 or 2013. As per the section 45\u2013 I (C) of the Reserve Bank of India Act, a \u00a0Company\u00a0 which carries on the business of a financial institution will be a Non-Banking Financial Company. Also NBFC must be engaged in the business of Acquisition of stocks, equities, business of advances and loans , debt, etc which is issued by the marketable securities or local authority or Govt.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"NON-_Banking_Financial_Corporation_NBFC\"><\/span><span style=\"color: #000080;\"><strong>NON- Banking Financial Corporation (NBFC)<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It is a company known as \u00a0Non Banking Financial Institution\/ Company, which \u00a0has a principal business of receiving deposits. NBFC ( Residuary non banking company) can receive deposits under any scheme or arrangement by any other mode.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Exclusions_from_the_NBFC_definition\"><\/span><span style=\"color: #000080;\"><strong>Exclusions from the NBFC definition<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>These are not included in the business of\u00a0 Non Banking Financial company :-<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Sale and Purchase of any goods excluding securities<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Industrial Activity<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Agricultural Activity<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Any immovable property including its sale, purchase and construction \u2013 providing of any services.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Meaning_of_Principal_Business\"><\/span><span style=\"color: #000080;\"><strong>Meaning of Principal Business:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Financial activity is the principal business to bring clarity to the business that will be regulated by the Reserve Bank of India. This criterion is also known as the 50-50 test and its as follows:<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The total assets of the company must be 50% to its financial assets.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 According to the guideines given by\u00a0 Ministry of Corporate affairs and Reserve Bank of India the income from financial assets must constitute 50% of the total income. RBI generate the license for the operation of NBFC and it is incorporated under the laws of the land as a company.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Total income must constitute 50% of its income to financial assets. It is governed by the Reserve Bank of India and also by the \u00a0Ministry of Corporate Affairs. The License for operation is obtained from the Reserve Bank of India and it is incorporated as a company under applicable laws of the land.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Kind_of_NBFCs_Non_Banking_Financial_Companies\"><\/span><span style=\"color: #000080;\"><strong>Kind of NBFCs (Non Banking Financial Companies):-<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The NBFCs are classified according to their liabilities and activities. NBFCs are classified as follows:<\/p>\n<p>NBFC Company\u2019s which need not to be registered with the Reserve Bank of India. These are the Non-Banking Financial companies which may \u00a0not be required to obtain any registration with the RBI with an idea that they are regulated by other regulators.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone  wp-image-4424\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/05\/Non-Banking-Financial-Company-needs-to-follow-Following-Guidelines..jpg\" alt=\"Non Banking Financial Company needs to follow Following Guidelines.\" width=\"791\" height=\"470\" \/><\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Core Investment Companies \u2013 (Public funds are not taken or assets are less than 100 crore)<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Merchant Banking Companies<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Chit fund company as specified under the section 2 clause (b) of the chit fund Act, 1982<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Insurance Companies holding \u00a0a certificate of registration issued by Insurance Regulatory and Development Authority<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Nidhi Company as defined under Section 620(A) of the Companies Act 1956<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Housing Finance Companies<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Companies that are engaged in the business of Venture Capital.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Companies that are occupied in the business stockbrokinging<\/p>\n<h3><span class=\"ez-toc-section\" id=\"NBFC_FORMATION_PROCEDURE\"><\/span><span style=\"color: #000080;\">NBFC FORMATION PROCEDURE<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone  wp-image-4423\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/05\/NBFC-FORMATION-PROCEDURE.png\" alt=\"NBFC FORMATION PROCEDURE\" width=\"865\" height=\"607\" \/><\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Firstly, a Company should be registered under the Companies Act 1956 or also under the Companies Act 2013 as either a public limited or a private limited company.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 At least INR 2 crore should be owned by the company as its minimum funds.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Company has to keep its CIBIL record clean.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 At least 1\/3 of the directors of\u00a0 a company must posses finance experience.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 A Business plan of five years has to be made by the company for future.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Company must comply with the requirements for Foreign Exchange\u00a0 Management Act Notification and capital compliances<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 After fulfilling \u00a0all these conditions the online application\u00a0 on the website of Reserve Bank of India should be fulfilled and submitted along with the requisite documents<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 A CARN number will be generated<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Also a hard copy of the application has to be sent to The\u00a0 Regional Branch of the RBI<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 A license will be given to the company after proper scrutinization \u00a0of the application<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Non-Banking_Financial_Company_needs_to_follow_Following_Guidelines\"><\/span><span style=\"color: #000080;\"><strong>Non-Banking Financial Company needs to follow Following Guidelines:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone  wp-image-4426\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/05\/download.jpg\" alt=\"NBFC India \" width=\"875\" height=\"460\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/05\/download.jpg 310w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2022\/05\/download-300x158.jpg 300w\" sizes=\"(max-width: 875px) 100vw, 875px\" \/><\/p>\n<p>After getting the license a company has to adhere the following guidelines<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 NBFC cannot receive the deposits\u00a0 that are payable on demand<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 There is a time limit of minimum period of 12 months and maximum period of 60 months\u00a0 for the public deposit of the company.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Reserve Bank of India has a prescribed ceiling limit for the chargeability of interest which the company cannot exceed.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Reserve Bank of India will not take any guarantee for repayment of loan taken by company.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Company has to furnish all information to the Reserve Bank of\u00a0 India about any changes in the composition of the company.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Unsecured deposits will be taken by public.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Apart from this, the said would be required to submit their Audited Balance sheet at the end of every financial year.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 In form NBS \u2013 1 a statutory return on the deposits taken by the company has to be furnished \u00a0every year.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The Company has to furnish its quarterly return on the liquid assets<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 To shows that the company is in a position to pay back all the money taken from the public and to pay back all the deposits\u00a0 a certificate from auditor is needed.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Company has to give a half \u2013 yearly Asset Liability Management (ALM ) return \u00a0which shows asset worth Rs. 100 Crore and above and has a public deposit of Rs. 20 Crore and above.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 At the end of every 6 months a credit ratings has to be taken and submitted to the Reserve Bank of India.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 A Company has to maintain a minimum level of 15% of the Public Deposits\u00a0 in its liquid assets.<\/p>\n<p>\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 In case if the Non Banking Financial Company fails to make payment of any amount taken, than the consumer can go to the Consumer Forum or to the National Company Law Tribunal to file a suit against the Company.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>All about the NBFC (Non-Banking Financial Corporation) It is a company known as Non-Banking Financial Corporation\u00a0 incorporated under the Companies Act 1956 or 2013. As per the section 45\u2013 I (C) of the Reserve Bank of India Act, a \u00a0Company\u00a0 which carries on the business of a financial institution will be a Non-Banking Financial Company. &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[753],"tags":[886],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/4422"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=4422"}],"version-history":[{"count":2,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/4422\/revisions"}],"predecessor-version":[{"id":4428,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/4422\/revisions\/4428"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=4422"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=4422"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=4422"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}