By Prakash Bhatt
B. Com, CS & LLB
Delve Consultancy Services
R-109, Sector-21, Noida
Exempted from registration requirement
Returns to be submitted
Reserve Bank of India is regulator of the Non-Banking
Financial Companies under the provisions of Chapter III B
of the Reserve Bank of India Act, 1934.
With the amendment of the Reserve Bank of India Act,
1934 in January 1997, in terms of Section 45 IA of the Act,
all Non-Banking Financial Companies have to be
mandatorily registered with the Reserve Bank of India.
Clause (3) of section 45-IA RBI Act 1934:
A Non Banking Financial Company (NBFC) is a Company registered
under the Companies Act, 1956 and which is engaged in the business
Loans & advances
Acquisition of shares and securities
Nidhi Companies (Mutual Benefit Companies)
List of registered NBFC is available at the website of RBI & MCA
DEFINITION OF PRINCIPAL BUSINESSDEFINITION OF PRINCIPAL BUSINESS
RBI Press Release Dt. April 8, 1999
If 50% or more of a company’s total assets (netted
off by intangible assets) are financial assets
If 50% or more of a company’s gross income is
from financial assets
then the Principal Business of the Company is of a NBFC
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)
(iv) Core Investment Company (CIC)
(v) Residuary Non Banking Finance Company, a class of
NBFC not being Investment, Asset Financing, Loan
(vi) Nhidis Company (Mutual Benefit Finance Co)
(vii) Chit Fund (Misc NBFC)
Insurance Companies registered under Insurance Act,
Nidhi Companies notified under Section 620A of the
Companies Act, 1956;
Chit fund companies regulated by State Govt.
Stock Broking Companies / Merchant Banking Companies
registered with Securities & Exchange Board of India Act;
Housing Finance Companies being regulated by the
National Housing Bank (NHB)
CIC’s are exempted from registration with RBI subject to the
compliance with the following criteria as on date of last audited
It holds not less than 90% of its net assets in the form of investment in
Group Companies (subsidiaries, Associates and JVs).
It holds investment in equity shares in group companies not less than
60% of its net assets.
It is not trading in those shares (except for block sale)
It does not carry any other NBFI activities except investment in Bank
Deposits, Govt. Securities, Bonds, debentures or loans in group
Its total assets are less than 100 Crores.
PRE-REQUSITE FOR CARREYING ON NBFC ACTIVITIES
Require registration with RBI under section 45 IA of RBI
Act, 1934 to commence / carry on business of NBFC.
Minimum NOF Rs 200 Lacs( earlier Rs. 25 Lacs)
PAID UP SHARE CAPITAL + FREE RESERVE (created through an allocation of profits)
DEDUCT: a) Accumulated balance of losses
b) Deferred revenue expenditure
c) Other intangible assets
DEDUCT : If the following are in excess of 10% of the above
a). Investment in shares in shares of
b). subsidiaries, cos., in the same group and other NBFCs
c). Book value of debentures, bonds, loans & advances to subsidiaries and cos. in
the same group Deposits with subsidiaries and cos. in the same group
For the purpose on monitoring / compliances NBFC are
Deposit taking NBFC (NBFC-D) - Category –A
Non-Deposit taking NBFC (NBFC-ND)- Category- B
CIC-ND-SI – Category –C
Separate guidelines / regulation has been formulated by RBI for each above class
I. NBFC Acceptance Of Public Deposit Directions, 1998.
II.NBF (Deposit Accepting or Holding) Companies Prudential Norms
III.NBFC Advertisement Rules,1977.
IV.Circulars issued form time to time.
Regulated deposits and exempt deposits
Quantum of deposit
Advertisement/ Statement in lieu of Advertisement
Period of deposit
Rate of interest
Rate of brokerage
Repayment of deposit
Regularization of excess deposit
Premature payment of deposits
Loan against deposit
Default in payment of deposit or interest thereon
Interest on overdue deposits
Deposit Register & Deposit Receipts
Percentage of Liquid assets
Nature of liquid assets
Mode of liquid assets
Safe custody of approved securities
Floating charge on liquid assets in favour of depositors
I. NBFC (Non-Deposit Accepting or Holding ) Companies
Prudential Norms Directions, 2007.
II. Additional requirements for NBFCs-ND-SI (having total
assets of Rs.100 Crores and above as shown in the
last audited Balance Sheet).
III. Circulars issued form time to time.
Accounting of Investment
Policy on investment and disclosure
Capital adequacy requirement (Tier i &Tier ii)
Disclosure in balance sheet
Policy for demand / call loans
Concentration of Loans / investment with reference to single
borrower / group. 15% (single borrower) / 25% (group)
(lend + invest 25 % single/ 40% group)
NBFC Schedule is to be appended to Balance sheet.
Constitution of Audit committee.
Submission of auditors certificate
Intimation of change of directors, address, principal
officer, auditors etc.
Special Report to the Board of Directors of the co. in terms of Para 2
of NBFC Auditors Report ( RB) Directions, 2008.
Exceptional Report to the RBI in specific circumstances in terms of
Para 5 of NBFC Auditors Report( RB) Directions, 2008.
Schedule to the Balance sheet in terms of Prudential Norms
Periodical Certified Returns to RBI.
All NBFC are prohibited from granting loans against
their own shares.
NBFC Not to be partner in partnership firm.
A large number of NBFCs are working without
Companies working without registration and Companies
rejected by RBI still operating.
Imprisonment of 1 to 5 Years and
Fine of Rs. 1 Lakh to 5 Lakhs.