NBFC license

admin 24-04-2025

Today, NBFCs are one of the main drivers of credit availability and inclusion across the Indian financial country. NBFCs provide most of the services like banks in terms of lending, investing, asset financing, and microfinance, without holding any banking license. The increasing interest among entrepreneurs and financial firms to enter the sector raises one regularly asked question: how to get an NBFC license in India?

 

This blog is intended to explain nbfc licensing-from meaning and eligibility to step by step processing, required documents, compliance, and the role of Chartered Accountants in the registration journey.

 

What is NBFC Importance?

Understanding the term in breadth, NBFC refers to a non-banking financial company. This company performs all the activities that a bank does, but it doesn't accept demand deposits. Such institutions are registered under the Companies Act and provided with all financial services like that of a bank. Regulated by RBI, NBFCs are critical in financing segments like MSME, retail trade, infrastructure, and personal lending.

 

If banks form the formal credit market, then NBFCs reach out to those sectors which are underbanked. They are one of the important components of the financial system in India, as they operate under RBI's guidelines and licenses, without which they cannot engage in any financing activity.

 

Who Can Apply for NBFC License in India?

A company intending to apply for an NBFC license must first be registered under the Companies Act, 2013. The RBI has further stipulated certain eligibility criteria:

Minimum Net Owned Fund (NOF): The company should have a minimum NOF of Rs. 2 crore.

Qualified Directors: one-third of the overall directors should have experience with financial services.

Clean Record: There's no criminal and financial background for promoters and directors.

Main Business Activity: More than 50 percent of the total assets and income of the company should come from financial activities.

Not Accepting Public Deposits: The company should not accept public deposits except when making an application to become a deposit-taking NBFC as such has stricter norms.

All these ensure that the financial segment's sensitive market is only entered by the genuine and able institutions.

 

Types of NBFCs in India

Be sure that the pertinent form of NBFC that suits your objectives is known before applying. Some common ones include:

Loan Company (LC): A loan and advance provider.

Asset Finance Company (AFC): Financier of physical assets such as vehicles and machinery.

Investment Company (IC): Deal with the acquisition of securities.

Micro Finance Institution (MFI): Make a small loan to marginalized sections of society.

Infrastructure Finance Company (IFC): Investors in infrastructure projects.

Each will have its own compliance and documentation requirements, as laid out by the RBI.

 

A Stepwise Process to Act in Pursuit of the NBFC License

The NBFC licensing process, although elaborate, can be handled smoothly if rightly approached:

1.          Company Registration: Registration as a private or public limited company with the Ministry of Corporate Affairs is the first step.

2.          Net Owned Funds to Be Secured: A minimum of ?2 crore has to be deposited as NOF in the company's bank account.

3.          Document Preparation: All necessary documents including MOA, AOA, Board Resolutions, KYC of directors, financial statements, and the business plan should be collected.

4.          Online Application through the RBI portal: Online application through the RBI portal COSMOS-the central registration system for NBFCs.

5.          Hard Copies Submission: Hard copies of the application and attachment must be sent to the Regional RBI Office after submission in online mode.

6.          Inspection by RBI: The RBI can ask for further information or clarifications; when satisfied, consider giving a CoR for undertaking NBFC activities.

It might take about 4-6 months based on the completeness and compliance level of the application.

 

Documents Required in Applying for an NBFC License

It is essential to ensure that all the documents are accurate and up to date. Other things that would be generally required include:

•            Certificate of Incorporation

•            PAN and CIN of the company

•            Self-KYC documents of the Directors along with educational qualifications

•            Comprehensive business plan and financial projections

•            Board resolution to accept registration as NBFC

•            Statutory Auditor's Certificate for confirming on NOF

•            Audited financial statements

•            Bankers Report

Any documents that are short or incorrectly made may delay the approval process or lead to rejection.

 

Compliances After Getting an NBFC License

Once NBFCs are registered, they are required to comply with certain regulations:

•            Returns could be regular filing, like NBS-1, NBS-9, and ALM statements.

•            Audits: Annual Statutory Audits of the financials as laid down by RBI norms.

•            Prudential Norms: These are capital adequacy, provisions for bad loans, and exposure limits.

•            Fair Practices Code: The code will have to be actively implemented in dealing with customers and reported to the RBI.

•            No Public Deposits: Unless registered as a deposit-taking NBFC, you will not be able to accept funds from the public.

Noncompliance may lead to a penalty or cancellation of the license by RBI.

 

Common Challenges Faced in NBFC Registration

Difficulties do abound in getting an NBFC license:

•            Understanding the complex RBI guidelines.

•            Get the correct documentation collated and submitted.

•            Delay arising due to missing papers or incompleteness in business objectives.

•            High cost of statutory compliance and maintenance.

This is where help from professionals will be required.

 

How a Chartered Accountant Can Be of Assistance

A chartered accountant helps in a simplified process regarding assignments. Here is how:

•            Regulatory Advice: Assist in interpreting RBI guidelines with reference to your type of NBFC.

•            Documentation Preparation: Help with preparing financial statements, projections and filings.

•            Licensing Support: Manages the whole application process and communication with RBI.

•            Compliance Management: All post-registration compliance is done properly.

•            Audit & Tax Advisory: Help with annual audits, tax returns and financial governance.

Choosing the right CA firm generally ensures that your experience in registration is smooth, quick and legally compliant.

 

 FAQs on NBFC Licensing in India

 Q1: Can I apply for an NBFC license without ?2 crore capital?

 No, RBI mandates minimum ?2 crore net owned fund.

 Q2: How much time does it usually take to register an NBFC?

 Normally, it takes about 4 to 6 months if the application is complete and well-documented.

Q3: Does NBFC take deposits from the public?

Only “deposit-taking” NBFCs can accept public deposits under strict RBI norms.

Q4: What is the cost of NBFC registration?

 Government fees are small, but the total cost for professional and compliance fees could reach the level of ?4-5 lakh.

 Q5: What if I carry on business without holding the NBFC license?

Conducting any business activity without holding a valid NBFC license is illegal and would attract penalties, prosecution, and shutting down the business.

 

Conclusion:

 Begin the Proper Way for Your NBFC Setting up your NBFC is the best way to not just have a business that will realize profit but more so participate actively in India's maturing financial system. It involves the cost of registration and compliance that required financial discipline, regulatory knowledge, as well as expert assistance. In case you want to apply for an NBFC license in India, keep documentation and guidance ready.