Whether NBFC required to get registered with RBI & Its Norms

In terms of Sec­tion 45-IA of the RBI Act, 1934, no Non-bank­ing Finan­cial com­pa­ny can com­mence or car­ry on busi­ness of a non-bank­ing finan­cial insti­tu­tion with­out a) obtain­ing a cer­tifi­cate of reg­is­tra­tion from the Bank and with­out hav­ing a Net Owned Funds of Rs. 25 lakhs (Rs two crore since April 1999). How­ev­er, in terms of the pow­ers giv­en to the Bank. to obvi­ate dual reg­u­la­tion, cer­tain cat­e­gories 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,Housing Finance Com­pa­nies reg­u­lat­ed by Nation­al Hous­ing Bank, Stock Exchange or a Mutu­al Ben­e­fit company.

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 com­ply with the following:

1. it should be a com­pa­ny reg­is­tered under Sec­tion 3 of the com­pa­nies Act, 1956 (Present­ly under Com­pa­nies Act 2013)

It should have a min­i­mum net owned fund of Rs 200 lakh. (The min­i­mum net owned fund (NOF) required for spe­cial­ized NBFCs like NBFC-MFIs, NBFC-Fac­tors, CICs is indi­cat­ed sep­a­rate­ly in the FAQs on spe­cial­ized NBFCs)

pro­ce­dure for appli­ca­tion to the Reserve Bank for Registration

The appli­cant com­pa­ny is required to apply online and sub­mit a phys­i­cal copy of the appli­ca­tion along with the nec­es­sary doc­u­ments to the Region­al Office of the Reserve Bank of India. The appli­ca­tion can be sub­mit­ted online by access­ing RBI’s secured web­site https://cosmos.rbi.org.in . At this stage, the appli­cant com­pa­ny will not need to log on to the COSMOS appli­ca­tion and hence user ids are not required.. The com­pa­ny can click on “CLICK” for Com­pa­ny Reg­is­tra­tion on the login page of the COSMOS Appli­ca­tion. A win­dow show­ing the Excel appli­ca­tion form avail­able for down­load would be dis­played. The com­pa­ny can then down­load suit­able appli­ca­tion form (i.e. NBFC or SC/RC) from the above web­site, key in the data and upload the appli­ca­tion form. The com­pa­ny may note to indi­cate the cor­rect name of the Region­al Office in the field “C‑8” of the “Annex-Iden­ti­fi­ca­tion Par­tic­u­lars” in the Excel appli­ca­tion form. The com­pa­ny would then get a Com­pa­ny Appli­ca­tion Ref­er­ence Num­ber for the CoR appli­ca­tion filed on-line. There­after, the com­pa­ny has to sub­mit the hard copy of the appli­ca­tion form (indi­cat­ing the online Com­pa­ny Appli­ca­tion Ref­er­ence Num­ber, along with the sup­port­ing doc­u­ments, to the con­cerned Region­al Office. The com­pa­ny can then check the sta­tus of the appli­ca­tion from the above men­tioned secure address, by key­ing in the acknowl­edge­ment number.

Essen­tial doc­u­ments required to be sub­mit­ted along with the appli­ca­tion form

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

 

Sr. No	Require­ments to be com­plied with and doc­u­ments to be sub­mit­ted to RBI by Com­pa­nies for obtain­ing cer­tifi­cate and Reg­is­tra­tion from RBI as NBFC	Page no. in the file
1.	Min­i­mum NOF require­ment Rs. 200 lakh.
2.	Appli­ca­tion to be sub­mit­ted in two sep­a­rate sets tied up prop­er­ly in two sep­a­rate files and prop­er­ly page numbered.
3	Iden­ti­fi­ca­tion par­tic­u­lars (Annex I).
4	State­ment on pru­den­tial norms (Annex II).
5	Infor­ma­tion about the man­age­ment (Annex III)
6	Details of change in the man­age­ment of the com­pa­ny dur­ing last finan­cial year till date if any and rea­sons thereof.
7	Cer­ti­fied copies of Cer­tifi­cate of Incor­po­ra­tion and Cer­tifi­cate of Com­mence­ment of Busi­ness in case of pub­lic lim­it­ed companies.
8	Cer­ti­fied copies of up-to-date Mem­o­ran­dum and Arti­cles of Asso­ci­a­tion of the company.
9	Details of claus­es in the mem­o­ran­dum relat­ing to finan­cial business.
10	Details of changes in the Mem­o­ran­dum and Arti­cles of Asso­ci­a­tion duly certified.
11	Copy of PAN/CIN alot­ted to the company.
12	Annex II to be sub­mit­ted duly signed by the director/Authorized sig­na­to­ry and cer­ti­fied by the statu­to­ry auditors.
13	Annex III (direc­tors’ pro­file) to be sep­a­rate­ly filled up and signed by each direc­tor. Care should be tak­en to give details of bankers in respect of firms/companies/entities in which direc­tors have sub­stan­tial interest.
14	In case the direc­tors are asso­ci­at­ed with or with­out sub­stan­tial inter­est (indi­cate %of hold­ing in each com­pa­ny firm) in oth­er com­pa­nies, indi­cate clear­ly the activ­i­ty of the com­pa­nies and details of their reg­u­la­tors if any.
15	Cer­tifi­cate from the respec­tive NBFC/s where the Direc­tors have gained NBFC experience.
16	Copy of PAN and DIN allot­ted to the Directors.
17	CIBIL Data per­tain­ing to Direc­tors of the company
18	Finan­cial State­ments of the last 2 years of Unin­cor­po­rat­ed Bodies,if any,in the group where the direc­tors may be hold­ing direc­tor­ship with/without sub­stan­tial interest.
19	Cer­tifi­cate of com­pli­ance with sec­tion 45S of Chap­ter IIIC of the RBI Act, 1934 regard­ing unin­cor­po­rat­ed bod­ies with which director/s of the com­pa­ny are associated.
20	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.
21	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.
22	Board Res­o­lu­tion specif­i­cal­ly approv­ing the sub­mis­sion of the appli­ca­tion and its con­tents and autho­ris­ing signatory.
23	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.
24	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.
25	Cer­ti­fied copy of Board res­o­lu­tion for for­mu­la­tion of “Fair Prac­tices Code”
26	Statu­to­ry Audi­tors Cer­tifi­cate cer­ti­fy­ing that the com­pa­ny is/does not accept/is not hold­ing Pub­lic Deposit.
27	Statu­to­ry Audi­tors Cer­tifi­cate cer­ti­fy­ing that the com­pa­ny is not car­ry­ing on any NBFC activity.
28	Statu­to­ry Audi­tors Cer­tifi­cate cer­ti­fy­ing net owned fund as on date of the application.
29	Details of Autho­rised Share Cap­i­tal and lat­est share­hold­ing pat­tern of the com­pa­ny includ­ing the per­cent­ages. Doc­u­men­tary evi­dence for change in share­hold­ing pattern,if under­gone. If there are any NBFC cor­po­rate share hold­ers, cer­tifi­cates from their statu­to­ry audi­tors regard­ing the ade­qua­cy of statu­to­ry NOF post invest­ment. Also, pro­vide details about the line of activ­i­ty of oth­er cor­po­rate stake holders.
30	Copy of Fixed Deposit receipt & bankers cer­tifi­cate of no lien indi­cat­ing bal­ances in sup­port of NOF
31	Details of infu­sion of cap­i­tal if any dur­ing last finan­cial year togeth­er with the copy of return of allot­ment filed with Reg­is­trar of Companies.
32	Details of the bank balances/bank accounts/complete postal address of the branch/bank, loan/credit facil­i­ties etc. availed.
33	Details of unse­cured loans if any, raised by the com­pa­ny from oth­ers (includ­ing the direc­tors) dur­ing the year and if these fall in the exempt­ed cat­e­go­ry of Pub­lic deposits cer­ti­fied by the Auditor.
34	A cer­tifi­cate of Char­tered Accoun­tant regard­ing details of group/associate/subsidiary/holding/related com­pa­nies is submitted. (‘Com­pa­nies in the group” have  been exhaus­tive­ly defined in para 3(1) b of Noti­fi­ca­tion No. DNBS.(PD) 219/CGM (US)-2011 dat­ed Jan­u­ary 05, 2011 as an arrange­ment involv­ing two or more enti­ties relat­ed to each oth­er through any of the fol­low­ing rela­tion­ships, viz; sub­sidiary-par­ent (defined in terms of AS-21), Joint Ven­ture (defined in terms of  AS 27), Asso­ciate (defined in terms of AS 23), pro­mot­er-pro­mo­tee (as pro­vid­ed in the SEBI-Acqui­si­tion of shares and takeover) Reg­u­la­tions, 1997) for list­ed com­pa­nies, a relat­ed par­ty (defined in terms of AS 18) Com­mon brand name, and invest­ment in equi­ty shares of 20% and above.) Details should include names of the com­pa­ny, its activ­i­ty, whether it is an NBFC or have oth­er reg­u­la­tors like SEBI/IRDA/FMC/NHB/Foreign Reg­u­la­tors. If they are unreg­u­lat­ed give the details of their activ­i­ties, prin­ci­pal banker’s name, address, account no. Whether the names of these com­pa­nies are appear­ing in the bal­ance sheet of the appli­cant com­pa­ny. If not, indi­cate why they are not appear­ing. Whether over­seas group com­pa­nies were estab­lished under gen­er­al per­mis­sion route or under approval from appro­pri­ate author­i­ty if any. If there are oth­er NBFCs in the group, jus­ti­fi­ca­tion of hav­ing anoth­er NBFC.
35	Brief back­ground note on the activ­i­ties of the com­pa­ny dur­ing the last three years and the rea­sons for apply­ing for NBFC registration.
36	Whether the com­pa­ny has applied to RBI in the past for registration,if rejected,give full details. If not applied to RBI ear­li­er, whether the com­pa­ny was doing NBFI activ­i­ties with­out CoR.If yes, indi­cate rea­sons for same.Whether they have com­plete­ly stopped NBFI activ­i­ties now and whether that has been cer­ti­fied by their audi­tor. Also, sub­mit a let­ter seek­ing to be con­doned for vio­la­tion of Sec 45 IA if the com­pa­ny had con­duct­ed NBFI busi­ness detail­ing the circumstances.
37	Last three years Audit­ed bal­ance sheet and Prof­it & Loss account along with direc­tors & audi­tors report or for such short­er peri­od as are avail­able (for com­pa­nies already in existence).
38	Busi­ness plan of the com­pa­ny for the next three years giv­ing details of its (a) thrust of busi­ness; (b) mar­ket seg­ment; and (c) pro­ject­ed bal­ance sheets, Cash flow state­ment, asset/income pat­tern state­ment with­out any ele­ment of pub­lic deposits.
39	Source of the start­up cap­i­tal of the com­pa­ny sub­stan­ti­at­ed with doc­u­men­tary evi­dence. Pro­vide Self attest­ed Bank Statement/IT returns etc.
40	Details of merg­ers and acqui­si­tion with/of oth­er com­pa­nies if any togeth­er with sup­port­ing documents.
41	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).
42	Whether the com­pa­ny was grant­ed any per­mis­sion by FED to func­tion as Full-fledged Mon­ey Chang­ers? If so, copy of the RBI let­ter grant­i­ng the permission.
43	If there is FDI in the com­pa­ny, its per­cent­age (sub­mit FIRC in sup­port there­of) and whether it ful­fills the min­i­mum cap­i­tal­iza­tion norms or not (also sub­mit FC_GPRs). (i) Has the FDI been brought in with FIPB approval (Copy of approval to be submitted)? (ii) Is the for­eign enti­ty con­tribut­ing the FDI sub­ject to super­vi­sion in its home coun­try (if yes, name, address and email id of the regulator). (iii) If not, men­tion legal sta­tus, viz, statutes under which it was estab­lished, its statu­to­ry oblig­a­tions, pro­ce­dures under which it was estab­lished, whether list­ed on stock exchange etc. (iv) The par­tic­u­lars of approval of For­eign Exchange Depart­ment (FED) if any obtained/copies of For­eign Inward Remit­tance Cer­tifi­cate in r/o For­eign Direct Invest­ment if any, received by the appli­cant com­pa­ny are furnished. (v) Activ­i­ties under­tak­en, details of reg­u­la­tor of group/associate com­pa­nies doing finan­cial activ­i­ties which are reg­u­lat­ed either in the home coun­try or else­where, if any. (v) If any group/ asso­ciate com­pa­ny is oper­at­ing in India, details such as its activ­i­ties, its part­ners or asso­ciates, regulator/s etc. may be furnished.
44	Dec­la­ra­tion  by the com­pa­ny to own elec­tron­ic infra­struc­ture and its capa­bil­i­ty regard­ing elec­tron­ic sub­mis­sion of data through the inter­net as and when required by Reserve Bank of India. Email id of the com­pa­ny should also be provided.
45	Are there are any inci­dents of non-com­pli­ance with the direc­tions of Rev­enue Author­i­ties or any oth­er statu­to­ry  author­i­ty by the appli­cant com­pa­ny, its hold­ing company/ sub­sidiaries, If yes, give par­tic­u­lars, else report “Nil”

Note: (1) The Above Check­list is indica­tive and not exhaus­tive. Bank can,if nec­es­sary, call for any fur­ther doc­u­ments to sat­is­fy them­selves on the eli­gi­bil­i­ty for obtain­ing reg­is­tra­tion as NBFC.

(2) In the event of the Bank call­ing for fur­ther doc­u­ments in addi­tion to those men­tioned above, the appli­cant com­pa­ny is sup­posed to respond with­in a stip­u­lat­ed time of one month fail­ing which the orig­i­nal CoR appli­ca­tion may be returned to the com­pa­ny for resub­mis­sion afresh with the required information/documents.