The basics of Non banking financial institutions, and how to establish them.

1. NON - BANKING
FINANCIAL
INSTITUTION
(NBFC)
-BY DHEERAJ MUNDRA
&
GAURAV GUNDECHA

2. LEGAL DEFINITION
Section 45I (f) of RBI act, 1934
“Non‐banking financial company” means –
• A “Financial Institution” which is a company;
• A Non‐Banking Institution which is a company and which has as its Principal
Business the receiving of deposits, under any scheme or arrangement or in any
other manner, or lending in any manner;
• such other Non‐Banking Institution or class of such institutions, as RBI specifies
- By Dheeraj Mundra & Gaurav
Gundecha

3. Types of NBFCs
Liabilities Based Asset Based Size Based
NBFCs having
public deposits
NBFCs not
having public
deposits
• Investment Company
• Loan Company
• Core Investment Companies
• Infrastructure Finance Companies
• Micro Finance Institutions
• Infrastructure Debt Funds
non‐deposit taking NBFCs with
assets of Rs. 100 crore and above
- By Dheeraj Mundra & Gaurav
Gundecha

4. WHAT IS DIFFERENCE BETWEEN BANKS & NBFCS
• NBFC cannot accept demand deposits;
• NBFCs do not form part of the payment and settlement system and cannot
issue cheques drawn on itself;
• Deposit insurance facility of Deposit Insurance and Credit Guarantee
Corporation is not available to depositors of NBFCs, unlike in case of banks.
REQUIREMENT FOR OBTAINING NBFC LICENSE
• A Company Registered in India (Private Limited Company or Limited Company);
• The company must have minimum Net Owned Fund of Rs.200 lakhs.
- By Dheeraj Mundra & Gaurav

5. FORMATION PROCEDURE
• A company with main object clause/ancillary clause for carrying out NBFI activities
(check object clause)
• Obtain checklist of requirements from RBI website https://cosmos.rbi.org.in
• Fill up prescribed form, available on RBI website, according to instructions with
the requirements NBFC FORM.PDF
• Fill up the e‐form provided in excel format from RBI website
https://cosmos.rbi.org.in
• Get the required certifications of the statutory auditors/chartered accountants (as
the case may be)
• Submit softcopy on RBI website before submission of the hard copy.
- By Dheeraj Mundra & Gaurav
Gundecha

6. FORMATION PROCEDURE CONTD…
• Obtain the printout of successful submission of the softcopy.
Mention the date of submission on the print if date is not appearing
on print.
• Submit the hardcopy application in duplicate to regional office of
RBI
• Each page in the application file should be numbered
• Prepare the application in triplicate so that a replica is with the
applicant for future reference.
- By Dheeraj Mundra & Gaurav
Gundecha

7. DOCUMENTS REQUIRED FOR REGISTRATION AS
TYPE I - NBFC
• Certified copies of Certificate of Incorporation
Board resolution stating that:
• a) the company is not carrying and will not carry NBFI activities before getting
registration from RBI
• b) the UIBs in the group where the director holds substantial interest or otherwise has
not accepted any public deposit in the past /does not hold any public deposit as on
the date and will not accept the same in future
• c) the company has formulated “Fair Practices Code” as per RBI Guidelines
• d) the company has not accepted public funds, does not hold any public fund and any
customer interface as on the date and will not accept public deposits and will not
have any customer interface without the approval of Reserve Bank of India
- By Dheeraj Mundra & Gaurav
Gundecha

8. • Certified copies of extract of only the main object clause in the MOA relating to the
financial business.
• Copy of Fixed Deposit receipt & bankers certificate of no lien indicating balances in
support of NOF
• For companies already in existence, the Audited balance sheet and Profit & Loss
account along with directors & auditors report or for the entire period the company is
in existence, or for last three years , whichever is less, should be submitted.
• Banker’s report in respect of applicant company, its
group/subsidiary/associate/holding company/related parties, directors of the
applicant company having substantial interest in other companies The Banker’s report
should be about the dealings of these entities with these bankers as a depositing
entity or a borrowing entity.
DOCUMENTS REQUIRED FOR REGISTRATION AS
TYPE I - NBFC
- By Dheeraj Mundra & Gaurav
Gundecha

9. EXTRA DOCUMENTS REQUIRED FOR REGISTRATION AS
TYPE II – NBFC OTHER THAN ABOVE
• Copy of the certificate of highest educational and professional qualification in
respect of all the directors
• Copy of experience certificate, if any, in the Financial Services Sector (including
Banking Sector) in respect of all the directors
Documents required.PDF
- By Dheeraj Mundra & Gaurav
Gundecha

10. COMPLIANCES ‐ COMPANIES ACT, 2013
• Passing of Board Resolution under Section 179 of the Companies Act, 2013
• Shareholders Resolution under Section 180(1)(a) and Section 180(1)(c) of the
Companies Act, 2013
• Preferential issue – Section 42 of the Companies Act, 2013 and Rules made there
under
• Compliance under Companies (Acceptance of Deposits) Rules, 2013 (yet to be
notified) – will not be applicable if NBFC is a borrower.
- By Dheeraj Mundra & Gaurav
Gundecha

11. COMPLIANCES ‐ SEBI LAWS
• Compliance with applicable rules & regulations of recognized stock exchange in
India
• Compliance with the SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009
• Compliance with the SEBI (Issue and Listing of Debt Securities) Regulations, 2008
• Compliance with SEBI (Debenture Trustee) Regulations, 1993
- By Dheeraj Mundra & Gaurav
Gundecha

12. COMPLIANCES ‐RBI LAWS
• Issuance of Non‐Convertible Debentures (Reserve Bank) Directions, 2010, as
issued by the RBI (applicable if maturity period is upto 1 year)
• RBI Circular dated July 27, 2013 (Raising Money through Private Placement by
NBFCs‐Debentures etc.)
• Non‐Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)
Directions, 1998
• Master Circular on ECB Guidelines dated
• Consolidated FDI Policy 2013 issued by DIPP
- By Dheeraj Mundra & Gaurav
Gundecha

13. THANK YOU
-By Dheeraj Mundra
&
Gaurav Gundecha