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NBFC

RBI Directions:

RBI has notified following directions applicable to NBFCs

  • NBFCs acceptance of pubic deposits (RBI) Directions, 1998
  • Non Banking Financial Companies Prudential Loans (RBI) Directions 1998
  • Non Banking Financial Companies Auditors Report (RBI) Directions 1998

Broad classification of NBFCs

  • NBFCs accepting public deposits
  • NBFCs not accepting public deposits

Procedure For NBFC

Steps to form a NBFC

Incorporating
Company with Roc
Fulfilling
RBI Directions
Documents
to Be Submitted To RBI
Registration
Certificate

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Procedure

Regulation for NBFCs not accepting Public Deposits

NBFCs not accepting public deposits can be further classified in 2 categories

  • NBFCs engaged in Loan Investment, Hire Purchase Finance and Equipment Leasing
  • NBFC which acquires shares or securities of their group companies

What is Public Deposits?

"Public deposits" means any receipt of money by way of deposit or loan or in any other form but however which excludes the following,

  • Amount received by way of share capital
  • Amount contributed as a capital by partners of firm
  • Amount received from bank or financial institutions
  • Amount received in the ordinary course of business by way of security deposits, dealership deposits, earnest money and advances against order of goods or properties or services
  • Amount received from a registered money lender (not being a company)
  • Amount received from Government or Semi Government Bodies
  • Any amount received by company from any other company (inter corporate deposits)
  • Amount' received from a director or shareholder by a Private company (subject to furnishing a declaration that amount has not been given out of borrowed funds)
  • Amount raised by issue of bonds or debentures j. Amount brought in by promoters by way of unsecured loans in pursuance or in accordance with lending institution k. Amount received from a relative of a Director

Documents

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

  • Minimum NOF requirement INR 2 Crore
  • Application to be submitted in two separate sets tied up properly in two separate files.
  • Annex II to be submitted duly signed by the director/Authorized signatory and certified by the statutory auditors.
  • Annex III (directors’ profile) to be separately filled up for each director. Care should be taken to give details of bankers in respect of firms/companies/entities in which directors have substantial interest.
  • In case the directors are associated or have substantial interest in other companies, indicate clearly the activity of the companies (whether NBFC or not).
  • Board Resolution specifically approving the submission of the application and its contents and authorizing signatory.
  • 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.
  • 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.
  • Auditors Certificate certifying that the company is/does not accept/is not holding Public Deposit.
  • Auditors Certificate certifying that the company is not carrying on any NBF Cactivity.
  • Net owned fund as on date.
  • Certifying compliance with section 45S of Chapter IIIC of the RBI Act, 1934 in which director/s of the company has substantial interest.
  • Details of changes in the Memorandum and Articles of Association duly certified.
  • Last three years Audited balance sheet along with directors & auditors report.
  • Details of clauses in the memorandum relating to financial business.
  • Details of change in the management of the company during last financial year till Date if any and reasons thereof.
  • Details of acquisitions, mergers of other companies if any together with supporting Documents.
  • Details of group companies/associate concerns/subsidiaries/holding companies.
  • Details of infusion of capital if any during last financial year together with the copy Of return of allotment filed with Registrar of Companies.
  • Details of the bank balances/bank accounts/complete postal address of the Branch/bank, loan/credit facilities etc. availed.
  • Business plan for next three years indicating market segment to be covered without any element of public deposits.
  • Cash flow statement, asset/income pattern statement for next three years.
  • Brief background note on the activities of the company during the last three years and the reasons for applying for NBFC registration.
  • II(b) 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
  • 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 thereof. Note on Non Banking Finance Company 5
  • 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.
  • Whether the company was granted any permission by ECD to function as Full-fledged Money Changers?
  • Whether the company was/is authorised by ECD to accept deposits from NRIs.
  • Whether “Fit and Proper” Norms for Directors have been fulfilled.
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